PROVIDENTMUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT
485BPOS, 1998-05-01
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<PAGE>   1
 
   
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
    
 
                                                               FILE NO. 33-65512
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                    FORM N-4
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933                        [ ]
                          PRE-EFFECTIVE AMENDMENT NO.                        [ ]
                         POST-EFFECTIVE AMENDMENT NO. 5                      [X]
 
                                     AND/OR
 
                          REGISTRATION STATEMENT UNDER
                       THE INVESTMENT COMPANY ACT OF 1940                    [ ]
                                AMENDMENT NO. 10                             [X]
 
                            PROVIDENTMUTUAL VARIABLE
                            ANNUITY SEPARATE ACCOUNT
                           (EXACT NAME OF REGISTRANT)
 
                        PROVIDENTMUTUAL LIFE AND ANNUITY
                               COMPANY OF AMERICA
                              (NAME OF DEPOSITOR)
 
                             300 CONTINENTAL DRIVE
                                NEWARK, DE 19713
              (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
 
       DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (302) 454-5260
 
                             ---------------------
 
   
                         ADAM SCARAMELLA, ESQ., COUNSEL
    
   
                                PROVIDENT MUTUAL
    
   
                             LIFE INSURANCE COMPANY
    
                              1050 WESTLAKES DRIVE
                                BERWYN, PA 19312
                    (NAME AND ADDRESS OF AGENT FOR SERVICE)
                                    COPY TO:
                             STEPHEN E. ROTH, ESQ.
                      SUTHERLAND, ASBILL & BRENNAN, L.L.P.
                         1275 PENNSYLVANIA AVENUE, N.W.
                              WASHINGTON, DC 20004
                                 (202) 383-0158
 
                             ---------------------
 
     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 Flexible Individual Flexible Premium Deferred Variable Annuity
                                   contracts.
    
 
================================================================================
<PAGE>   2
 
                             CROSS REFERENCE SHEET
 
                              PURSUANT TO RULE 495
 
     Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required By Form N-4.
 
                                     PART A
 
   
<TABLE>
<CAPTION>
                  ITEM OF FORM N-4                            PROSPECTUS CAPTION
                  ----------------                            ------------------
<C>  <S>                                          <C>
 1.  Cover Page.................................  Cover Page
 2.  Definitions................................  Definitions
 3.  Synopsis...................................  Table of Expenses; Summary
 4.  Condensed Financial Information............  Condensed Financial Information; Yields and
                                                    Total Returns
 5.  General Description of Registrant,
       Depositor and Portfolio Companies........  The Company, Variable Account and Funds
     a. Depositor...............................  The Company, Variable Account and Funds
                                                    --Providentmutual Life and Annuity
                                                    Company of America
     b. Registrant..............................  The Company, Variable Account and Funds
                                                    --The Providentmutual Variable Annuity
                                                    Separate Account
     c. Portfolio Company.......................  The Company, Variable Account and Funds
     d. Fund Prospectus.........................  The Company, Variable Account and Funds
     e. Voting Rights...........................  The Company, Variable Account and Funds
                                                    --Voting Rights
     f. Administrators..........................  Administrative Charges
 6.  Deductions and Expenses....................  Charges and Deductions
     a. General.................................  Charges and Deductions
     b. Sales Load %............................  Charges and Deductions--Surrender Charge
     c. Special Purchase Plan...................  N/A
     d. Commissions.............................  Distribution of Contracts
     e. Expenses--Registrant....................  Charges and Deductions
     f. Fund Expenses...........................  Charges and Deductions--Other Charges
                                                    Including Investment Advisory Fees of the
                                                    Funds
     g. Organizational Expenses.................  N/A
 7.  General Description of Variable Annuity
       Contracts................................  Description of Annuity Contract
     a.  (i) Allocation of Premium Payments.....  Premiums; Allocation of Premiums
     (ii) Transfers.............................  Description of Annuity Contract--Transfer
                                                    Privilege; Payments
     (iii) Exchanges............................  Special Exchange Program
     b. Changes.................................  Description of Annuity Contract
                                                    --Modification
     c. Inquiries...............................  Description of Annuity Contract--Contract
                                                    Inquiries
 8.  Annuity Period.............................  Payment Options
 9.  Death Benefit..............................  Description of Annuity Contract--Death
                                                  Benefit Before Maturity Date; Payments
</TABLE>
    
<PAGE>   3
 
<TABLE>
<CAPTION>
                  ITEM OF FORM N-4                            PROSPECTUS CAPTION
                  ----------------                            ------------------
<C>  <S>                                          <C>
10.  Purchases and Contract Value...............  Description of Annuity Contract
     a. Purchases...............................  Description of Annuity Contract--Premiums
     b. Valuation...............................  Description of Annuity Contract--Variable
                                                    Account Value
     c. Daily Calculation.......................  Description of Annuity Contract--Variable
                                                    Account Value
     d. Underwriter.............................  Distribution of Contracts
11.  Redemptions................................  Description of Annuity Contract
     a. --By Owners.............................  Description of Annuity Contract--
                                                    Withdrawals and Surrenders; Payments
     --By Annuitant.............................  Description of Annuity Contract--Proceeds
                                                  on Maturity Date; Payment Options
     b. Texas ORP...............................  N/A
     c. Delay in Payment........................  Description of Annuity Contract--Payments
     d. Lapse...................................  Description of Annuity Contract--Contract
                                                    Termination
     e. Free Look...............................  Description of Annuity Contract--Free-Look
                                                    Period
12.  Taxes......................................  Federal Tax Status
13.  Legal Proceedings..........................  Legal Proceedings
14.  Table of Contents of the Statement of
       Additional Information...................  Statement of Additional Information Table
                                                  of Contents
</TABLE>
 
                                     PART B
 
   
<TABLE>
<CAPTION>
                  ITEM OF FORM N-4                STATEMENT OF ADDITIONAL INFORMATION CAPTION
                  ----------------                -------------------------------------------
<C>  <S>                                          <C>
15.  Cover Page.................................  Cover Page
16.  Table of Contents..........................  Statement of Additional Information Table
                                                  of Contents
17.  General Information and History............  See Prospectus--The Company, Variable
                                                    Account and Funds
18.  Services
     a. Fees and Expenses of Registrant.........  N/A
     b. Management Contract.....................  See Prospectus--Administrative Charges
     c. Custodian...............................  Safekeeping of Account Assets
     d. Independent Public Accountant...........  Experts
     e. Assets of Registration..................  Safekeeping of Account Assets
     f. Affiliated Persons......................  N/A
     g. Principal Underwriter...................  See Prospectus--Distribution of Contracts
19.  Purchase of Securities Being Offered.......  See Prospectus--Distribution of Contracts
20.  Underwriter................................  See Prospectus--Distribution of Contracts
21.  Calculation of Performance Data............  Calculation of Yields and Total Returns
22.  Annuity Payments...........................  See Prospectus--Payment Options
23.  Financial Statements.......................  Financial Statements
</TABLE>
    
<PAGE>   4
 
                                     PART A
 
                  INFORMATION REQUIRED TO BE IN THE PROSPECTUS
<PAGE>   5
 
- --------------------------------------------------------------------------------
 
         INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
                                   ISSUED BY
              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA,
                         A STOCK LIFE INSURANCE COMPANY
                 300 CONTINENTAL DRIVE, NEWARK, DELAWARE 19713
                           TELEPHONE: 1-800-688-5177
 
- --------------------------------------------------------------------------------
 
     This Prospectus describes the individual flexible premium deferred variable
annuity contract (the "Contract") being offered by Providentmutual Life and
Annuity Company of America ("Providentmutual"), a stock life insurance company
domiciled in Delaware which is a wholly-owned subsidiary of Provident Mutual
Life Insurance Company ("PMLIC"). The Contract may be sold to or in connection
with retirement plans which may or may not qualify for special Federal tax
treatment under the Internal Revenue Code.
 
   
     Net Premiums and Contract Values will be allocated, as designated by the
Owner, to one or more of the Subaccounts of the Providentmutual Variable Annuity
Separate Account ("Variable Account"), or the Guaranteed Account (which is part
of Providentmutual's General Account and pays interest at declared rates
guaranteed to equal or exceed 3%), or both. (The Guaranteed Account is not
offered in Oregon.) The assets of each Subaccount will be invested solely in a
corresponding Portfolio of a designated mutual fund ("Funds"). The Funds
available under the Contract are: Market Street Fund, Inc.; Variable Insurance
Products Fund; Variable Insurance Products Fund II; Scudder Variable Life
Investment Fund; OCC Accumulation Trust; Dreyfus Variable Investment Fund; The
Dreyfus Socially Responsible Growth Fund, Inc.; Federated Insurance Series; and
Van Eck Worldwide Insurance Trust. The accompanying Prospectuses for the Funds
describe the Portfolios of such Funds. The Contract Account Value prior to the
Maturity Date, except for amounts in the Guaranteed Account, will vary according
to the investment performance of the Portfolios of the Funds in which the
selected Subaccounts are invested. The Owner bears the entire investment risk of
amounts allocated to the Variable Account.
    
 
   
     This Prospectus sets forth basic information about the Contract and the
Variable Account that a prospective investor ought to know before investing.
Additional information about the Contract and the Variable Account is contained
in the Statement of Additional Information, which has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
dated the same as this Prospectus and is incorporated herein by reference. The
Table of Contents for the Statement of Additional Information is on Page 40 of
this Prospectus. You may obtain a copy of the Statement of Additional
Information free of charge by writing to or calling Providentmutual at the
address or phone number shown above.
    
                                ---------------
 
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUNDS.
                                ---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
  AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
      ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
                        CONTRARY IS A CRIMINAL OFFENSE.
                                ---------------
   
                  THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
    
<PAGE>   6
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                               PAGE
                                                              ------
<S>                                                           <C>
Definitions.................................................     1
Table of Expenses...........................................     2
Summary.....................................................     7
Condensed Financial Information.............................    10
The Company, Variable Account and Funds.....................    11
     Providentmutual Life and Annuity Company of America....    11
     The Providentmutual Variable Annuity Separate
      Account...............................................    11
     The Funds..............................................    12
          Market Street Fund, Inc. .........................    12
          Variable Insurance Products Fund and Variable
            Insurance Products Fund II......................    14
          Scudder Variable Life Investment Fund.............    15
          OCC Accumulation Trust............................    15
          Dreyfus Variable Investment Fund and The Dreyfus
            Socially Responsible Growth Fund, Inc. .........    15
          Federated Insurance Series........................    16
          Van Eck Worldwide Insurance Trust.................    16
Resolving Material Conflicts................................    17
Addition, Deletion or Substitution of Investments...........    18
Description of Annuity Contract.............................    18
     Issuance of a Contract.................................    18
     Premiums...............................................    18
     Free-Look Period.......................................    19
     Allocation of Premiums.................................    19
     Variable Account Value.................................    20
     Transfer Privilege.....................................    21
     Dollar Cost Averaging..................................    22
     Withdrawals and Surrender..............................    22
     Death Benefit Before Maturity Date.....................    24
     Proceeds on Maturity Date..............................    25
     Payments...............................................    25
     Modification...........................................    25
     Reports to Contract Owners.............................    26
     Contract Inquiries.....................................    26
The Guaranteed Account......................................    26
     Minimum Guaranteed and Current Interest Rates..........    26
     Transfers from Guaranteed Account......................    27
     Payment Deferral.......................................    27
Charges and Deductions......................................    27
     Surrender Charge (Contingent Deferred Sales Charge)....    27
     Administrative Charges.................................    28
     Transfer Processing Fee................................    29
     Mortality and Expense Risk Charge......................    29
     Other Charges Including Investment Advisory Fees of the
      Funds.................................................    29
     Premium Taxes..........................................    29
     Other Taxes............................................    30
Payment Options.............................................    30
     Election of Options....................................    30
     Description of Options.................................    30
Yields and Total Returns....................................    31
Federal Tax Status..........................................    32
</TABLE>
    
<PAGE>   7
 
   
<TABLE>
<CAPTION>
                                                               PAGE
                                                              ------
<S>                                                           <C>
     Introduction...........................................    32
     Tax Status of the Contract.............................    33
     Taxation of Annuities..................................    34
     Transfers, Assignments or Exchanges of a Contract......    35
     Withholding............................................    35
     Multiple Contracts.....................................    36
     Taxation of Qualified Plans............................    36
     Restrictions under Qualified Contracts.................    37
     Possible Charge for Providentmutual's Taxes............    38
     Other Tax Consequences.................................    38
Distribution of Contracts...................................    38
Preparing for Year 2000.....................................    38
Legal Proceedings...........................................    39
Voting Rights...............................................    39
Financial Statements........................................    39
Statement of Additional Information Table of Contents.......    40
</TABLE>
    
<PAGE>   8
 
                                  DEFINITIONS
 
ANNUITANT.................. The person whose life determines the annuity
                            benefits payable under the Contract and whose death
                            determines the death benefit.
 
BENEFICIARY................ The person to whom the proceeds payable on the death
                            of the Owner or the Annuitant will be paid.
 
CASH SURRENDER VALUE....... The Contract Account Value less any applicable
                            surrender charge and any applicable Premium Tax
                            Charge.
 
CONTRACT ACCOUNT VALUE..... The sum of the Variable Account Value and the
                            Guaranteed Account Value.
 
CONTRACT YEARS, MONTHS, AND
ANNIVERSARIES..............
                            Are measured from the Contract Date.
 
GUARANTEED ACCOUNT......... This account is part of Providentmutual's General
                            Account and is not part of nor dependent upon the
                            investment performance of the Variable Account.
 
HOME OFFICE................ Providentmutual's office at 300 Continental Drive,
                            Newark, Delaware 19713.
 
MATURITY DATE.............. The date when the Contract Account Value will be
                            applied under a Payment Option, unless the Owner has
                            elected to receive a lump sum payment of the Cash
                            Surrender Value.
 
NET PREMIUM................ The premium paid less any premium tax levied for the
                            year the premium is paid.
 
NON-QUALIFIED CONTRACT..... A Contract that is not a "Qualified Contract."
 
OWNER...................... The person entitled to exercise all rights and
                            privileges provided in the Contract.
 
   
QUALIFIED CONTRACT......... A Contract that is issued in connection with plans
                            that qualify for special Federal income tax
                            treatment under sections 401, 403, or 408A of the
                            Internal Revenue Code of 1986, as amended.
    
 
SUBACCOUNT................. The Variable Account has Subaccounts; the assets of
                            each Subaccount are invested in a corresponding
                            Portfolio of a designated mutual fund.
 
VALUATION DAY.............. Each day on which valuation of the assets of a
                            Subaccount is required by applicable law.
 
VALUATION PERIOD........... The period that starts at the close of business on
                            one Valuation Day and ends at the close of business
                            on the next succeeding Valuation Day.
 
VARIABLE ACCOUNT........... Providentmutual Variable Annuity Separate Account
                            which is not part of Providentmutual's General
                            Account. The Variable Account has Subaccounts each
                            of which is invested in a corresponding Portfolio of
                            a designated mutual fund.
 
WRITTEN NOTICE............. A written request or notice in a form satisfactory
                            to Providentmutual which is signed by the Owner and
                            received at the Home Office.
 
                                        1
<PAGE>   9
 
   
                               TABLE OF EXPENSES
    
 
   
     The following information regarding expenses assumes that the entire
Contract Account Value is in the Variable Account.
    
 
   
<TABLE>
<S>                                            <C>    <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Load Imposed on Premiums...............  none
Maximum Contingent Deferred Sales Charge (as
  a percentage of amount surrendered or
  withdrawn)(1)..............................     6%
Transfer Processing Fee......................     No fee for first twelve transfers in Contract Year;
                                                 $25 fee for each transfer thereafter during Contract
                                                 Year.
ANNUAL ADMINISTRATION FEE....................    $30 per Contract Year
VARIABLE ACCOUNT ANNUAL EXPENSES
  (as a percentage of Variable Account Value)
Mortality and Expense Risk Charges...........  1.25%
Account Fees and Expenses(2).................  0.15%
                                               ----
Total Variable Account
  Annual Expenses............................  1.40%
</TABLE>
    
 
   
<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 percentage 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 percentage 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>
                                                 HIGH       EQUITY-
                                                INCOME      INCOME      GROWTH
                                               PORTFOLIO   PORTFOLIO   PORTFOLIO
                                               ---------   ---------   ---------
<S>                                            <C>         <C>         <C>         <C>         <C>          <C>
VARIABLE INSURANCE PRODUCTS FUND ("VIP FUND")
ANNUAL EXPENSES(4)
(as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................    0.59%       0.49%       0.60%
Other Expenses
  (after reimbursement)(3)...................    0.12%       0.08%       0.07%
                                                 ----        ----        ----
Total Fund Annual Expenses
  (after reimbursement)(3)...................    0.71%       0.57%       0.67%
</TABLE>
    
 
                                        2
<PAGE>   10
 
   
<TABLE>
<CAPTION>
                                                   ASSET           INDEX
                                                  MANAGER           500       CONTRAFUND
                                                 PORTFOLIO       PORTFOLIO     PORTFOLIO
                                              ----------------   ---------   -------------
<S>                                           <C>                <C>         <C>
VARIABLE INSURANCE PRODUCTS FUND II ("VIP II
FUND") ANNUAL EXPENSES(4)
(as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.55%          0.28%         0.59%
Other Expenses
  (after reimbursement)(3)...................       0.09%          0.00%         0.09%
                                                    ----           ----          ----
Total Fund Annual Expenses
  (after reimbursement)(3)...................       0.64%          0.28%         0.68%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                 GROWTH &
                                                    BOND          INCOME     INTERNATIONAL
                                                 PORTFOLIO       PORTFOLIO     PORTFOLIO
                                              ----------------   ---------   -------------
<S>                                           <C>                <C>         <C>
SCUDDER VARIABLE LIFE INVESTMENT FUND
ANNUAL EXPENSES(4)
  (as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.48%         0.47%         0.83%
Other Expenses...............................       0.14%         0.11%         0.17%
                                                    ----           ----          ----
Total Fund Annual Expenses...................       0.62%         0.58%         1.00%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                   SMALL
                                                   EQUITY           CAP         MANAGED
                                                 PORTFOLIO       PORTFOLIO     PORTFOLIO
                                              ----------------   ---------   -------------
<S>                                           <C>                <C>         <C>
OCC ACCUMULATION TRUST
ANNUAL EXPENSES(4)
  (as a % of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.80%          0.80%         0.80%
Other Expenses
  (after reimbursement)(3A)..................       0.19%          0.17%         0.07%
                                                    ----           ----          ----
Total Fund Annual Expenses (after
  reimbursement)(3A).........................       0.99%          0.97%         0.87%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                ZERO COUPON      GROWTH &
                                                    2000          INCOME
                                                 PORTFOLIO       PORTFOLIO
                                              ----------------   ---------
<S>                                           <C>                <C>         <C>
DREYFUS VARIABLE INVESTMENT FUND
ANNUAL EXPENSES(4)
  (as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.45%          0.75%
Other Expenses...............................       0.16%          0.05%
                                                    ----           ----
Total Fund Annual Expenses...................       0.61%          0.80%
</TABLE>
    
 
                                        3
<PAGE>   11
 
   
<TABLE>
<CAPTION>
                                                  SOCIALLY
                                                RESPONSIBLE
                                                 PORTFOLIO
                                              ----------------
<S>                                           <C>                <C>        <C>
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
FUND, INC.(4)
  (as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.75%
Other Expenses...............................       0.07%
                                                    ----
Total Fund Annual Expenses...................       0.82%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                  FUND FOR
                                                U.S. GOVN'T       UTILITY
                                               SECURITIES II      FUND II
                                                 PORTFOLIO       PORTFOLIO
                                              ----------------   ---------
<S>                                           <C>                <C>         <C>
FEDERATED INSURANCE SERIES
ANNUAL EXPENSES(4)
  (as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       0.60%          0.75%
Other Expenses
  (after reimbursement)(3)...................       0.20%          0.10%
                                                    ----           ----
Total Fund Annual Expenses (after
  reimbursement)(3)..........................       0.80%          0.85%
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                 WORLDWIDE     WORLDWIDE     WORLDWIDE
                                                 WORLDWIDE         HARD        EMERGING        REAL
                                                    BOND          ASSETS        MARKETS       ESTATE
                                                 PORTFOLIO       PORTFOLIO     PORTFOLIO     PORTFOLIO
                                              ----------------   ---------   -------------   ---------
<S>                                           <C>                <C>         <C>             <C>
VAN ECK WORLDWIDE INSURANCE TRUST
ANNUAL EXPENSES(4)
  (as a percentage of average net assets)
Management Fees
  (Investment Advisory Fees).................       1.00%          1.00%         1.00%         1.00%
Other Expenses
  (after reimbursement)(3)...................       0.12%          0.17%         0.00%         0.17%
                                                    ----           ----          ----          ----
Total Fund Annual Expenses (after
  reimbursement)(3)..........................       1.12%          1.17%         1.00%         1.17%
</TABLE>
    
 
     Premium taxes may be applicable, depending on various states' laws.
 
   
     The above tables are intended to assist the Owner in understanding the
costs and expenses that will be borne by the Contract Owner, directly or
indirectly. The tables reflect expenses of the Variable Account as well as for
the Funds for the 1997 calendar year. For a more complete description of the
various costs and expenses, see "Charges and Deductions," Page 27.
    
- ---------------
   
 (1) A surrender charge is deducted only if a withdrawal or surrender occurs
     during the first six Contract Years; no surrender charge is deducted for a
     withdrawal or surrender in Contract Years seven and later. For the first
     Contract Year, the maximum charge is 6% of the amount withdrawn or
     surrendered. Thereafter, the surrender charge decreases by 1% each
     subsequent Contract Year until it is zero in Contract Year seven. The
     maximum total surrender charge will not exceed 8 1/2% of the total gross
     premiums paid under the Contract. Subject to certain restrictions, after
     the first Contract Year up to 10% of the Contract Account Value as of the
     beginning of a Contract Year may be surrendered or withdrawn without charge
     in such Contract Year. (See "Surrender Charge," Page 27.)
    
 (2) Asset-based administration charge.
   
 (3) 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
    
 
                                        4
<PAGE>   12
 
   
     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, 0.10%,
     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, 0.66%, 1.25%,
     respectively, for the Federated U.S. Government Securities II Portfolio,
     0.37%, 1.12%, respectively, for the Federated Utility Fund II 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.
    
   
(3A) Effective May 1, 1996, the expenses of the Portfolios of the OCC
     Accumulation Trust are contractually limited by OpCap Advisors so that
     their respective annualized operating expenses of these Portfolios do not
     exceed 1.25% of their respective average daily net assets. Furthermore,
     through April 30, 1997, the annualized operating expenses of the OCC
     Accumulation Trust Equity, Managed, and Small Cap Portfolios have been
     voluntarily limited by OpCap Advisors so that annualized operating expenses
     of these Portfolios do not exceed 1.00% of their respective average daily
     net assets.
    
   
 (4) The fee and expense information regarding the Funds was provided by those
     Funds. The VIP Fund, the VIP II Fund, the Scudder Variable Life Investment
     Fund, the OCC Accumulation Trust, the Dreyfus Variable Investment Fund, The
     Dreyfus Socially Responsible Growth Fund, Inc., the Federated Insurance
     Series and the Van Eck Worldwide Insurance Trust are not affiliated with
     Providentmutual. While Providentmutual has no reason to doubt the accuracy
     of these figures provided by these non-affiliated Funds, Providentmutual
     does not represent that they are true and complete, and disclaims all
     responsibility for these figures.
    
 
   
EXAMPLES
    
 
   
     An Owner would pay the following expenses on a $1,000 investment, assuming
a 5% annual return on assets:
    
 
   
     1. If the Contract is surrendered at the end of the applicable time period:
    
 
   
<TABLE>
<CAPTION>
                  SUBACCOUNT                    1 YEAR   3 YEARS   5 YEARS   10 YEARS
                  ----------                    ------   -------   -------   --------
<S>                                             <C>      <C>       <C>       <C>
MS Growth.....................................  $67.73   $ 95.23   $123.19   $242.72
MS Money Market...............................   67.35     94.06    121.18    238.60
MS Bond.......................................   69.06     99.33    130.20    257.02
MS Managed....................................   69.16     99.63    130.70    258.03
MS Aggressive Growth..........................   69.63    101.09    133.19    263.08
MS International..............................   73.34    112.44    152.44    301.67
MS All Pro Large Cap Growth...................   74.10    114.75    156.36    309.41
MS All Pro Large Cap Value....................   74.10    114.75    156.36    309.41
MS All Pro Small Cap Growth...................   76.00    120.53    166.08    328.49
MS All Pro Small Cap Value....................   76.00    120.53    166.08    328.49
Fidelity High Income..........................   70.39    103.42    137.16    271.12
Fidelity Equity Income........................   69.06     99.33    130.20    257.02
Fidelity Growth...............................   70.01    102.26    135.18    267.11
Fidelity Asset Manager........................   69.73    101.38    133.68    264.09
Fidelity Index 500............................   66.31     90.83    115.64    227.19
Fidelity Contrafund...........................   70.11    102.55    135.67    268.11
Scudder Bond..................................   69.54    100.80    132.69    262.08
Scudder Growth & Income.......................   69.16     99.63    130.70    258.03
Scudder International.........................   73.15    111.86    151.46    299.73
OCC Equity....................................   73.05    111.57    150.97    298.76
OCC Small Cap.................................   72.86    110.99    149.99    296.81
OCC Managed...................................   71.91    108.08    145.07    287.00
</TABLE>
    
 
                                        5
<PAGE>   13
 
   
<TABLE>
<CAPTION>
                  SUBACCOUNT                    1 YEAR   3 YEARS   5 YEARS   10 YEARS
                  ----------                    ------   -------   -------   --------
<S>                                             <C>      <C>       <C>       <C>
Dreyfus Zero Coupon 2000......................   69.44    100.50    132.19    261.07
Dreyfus Growth & Income.......................   71.25    106.05    141.62    280.08
Dreyfus Socially Resp.........................   71.44    106.63    142.61    282.07
Federated U.S. Gov't Securities II............   71.25    106.05    141.62    280.08
Federated Utility Fund II.....................   71.72    107.50    144.09    285.03
Van Eck Worldwide Bond........................   74.29    115.33    157.33    311.34
Van Eck Worldwide Hard Assets.................   74.76    116.78    159.77    316.13
Van Eck Worldwide Emerging Mkts...............   73.15    111.86    151.46    299.73
Van Eck Worldwide Real Estate.................   74.76    116.78    159.77    316.13
</TABLE>
    
 
   
     2. If the Contract is not surrendered or is annuitized at the end of the
applicable time period:
    
 
   
<TABLE>
<CAPTION>
                  SUBACCOUNT                     1 YEAR   3 YEARS   5 YEARS   10 YEARS
                  ----------                     ------   -------   -------   --------
<S>                                              <C>      <C>       <C>       <C>
MS Growth......................................  $21.30   $65.75    $112.79   $242.72
MS Money Market................................   20.90    64.54     110.76    238.60
MS Bond........................................   22.70    69.98     119.87    257.02
MS Managed.....................................   22.80    70.28     120.37    258.03
MS Aggressive Growth...........................   23.30    71.78     122.89    263.08
MS International...............................   27.20    83.47     142.34    301.67
MS All Pro Large Cap Growth....................   28.00    85.86     146.30    309.41
MS All Pro Large Cap Value.....................   28.00    85.86     146.30    309.41
MS All Pro Small Cap Growth....................   30.00    91.81     156.12    328.49
MS All Pro Small Cap Value.....................   30.00    91.81     156.12    328.49
Fidelity High Income...........................   24.10    74.19     126.91    271.12
Fidelity Equity Income.........................   22.70    69.98     119.87    257.02
Fidelity Growth................................   23.70    72.99     124.90    267.11
Fidelity Asset Manager.........................   23.40    72.08     123.39    264.09
Fidelity Index 500.............................   19.80    61.21     105.16    227.19
Fidelity Contrafund............................   23.80    73.29     125.40    268.11
Scudder Bond...................................   23.20    71.48     122.39    262.08
Scudder Growth & Income........................   22.80    70.28     120.37    258.03
Scudder International..........................   27.00    82.88     141.35    299.73
OCC Equity.....................................   26.90    82.58     140.86    298.76
OCC Small Cap..................................   26.70    81.98     139.87    296.81
OCC Managed....................................   25.70    78.99     134.90    287.00
Dreyfus Zero Coupon 2000.......................   23.10    71.18     121.88    261.07
Dreyfus Growth & Income........................   25.00    76.89     131.41    280.08
Dreyfus Socially Resp..........................   25.20    77.49     132.41    282.07
Federated U.S. Gov't Securities II.............   25.00    76.89     131.41    280.08
Federated Utility Fund II......................   25.50    78.39     133.90    285.03
Van Eck Worldwide Bond.........................   28.20    86.46     147.28    311.34
Van Eck Worldwide Hard Assets..................   28.70    87.95     149.74    316.13
Van Eck Worldwide Emerging Mkts................   27.00    82.88     141.35    299.73
Van Eck Worldwide Real Estate..................   28.70    87.95     149.74    316.13
</TABLE>
    
 
     The Examples provided above assume that no transfer charges or premium
taxes have been assessed. The Examples also assume that the Annual
Administration Fee is $30 and that the Contract Account Value per contract is
$10,000, which translates the Administration Fee into an assumed .30% charge for
purposes of the Examples based on a $1,000 investment.
 
     THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED
5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESSER THAN THE
ASSUMED AMOUNT.
 
                                        6
<PAGE>   14
 
                                    SUMMARY
 
THE CONTRACT
 
   
     Issuance of a Contract.  The Contract is an individual flexible premium
deferred variable annuity issued by Providentmutual. Contracts may be sold in
connection with retirement plans which may or may not qualify for special
Federal tax treatment under the Internal Revenue Code. In order to purchase a
Contract, application must be made to Providentmutual through a licensed
Providentmutual representative, who is also a registered representative of 1717
Capital Management Company ("1717") or a broker/dealer having a selling
agreement with 1717 or a broker/dealer having a selling agreement with such
broker/dealer. The minimum initial premium must be paid to Providentmutual.
Annuity payments are deferred unit the Maturity Date. (See "Issuance of a
Contract," Page 18.)
    
 
   
     Free-Look Period.  The Owner has the right to return the Contract within 10
days after such Owner receives the Contract. The returned Contract will be
treated as if it were never issued. Providentmutual will return to the Owner an
amount equal to the greater of the premiums paid or the Contract Account Value
plus charges deducted, except the Mortality and Expense Risk Charge, Asset-Based
Administration Charge and the Funds' advisory fees and operating expenses. For
Contracts sold to residents of certain states (i.e., Arizona, Minnesota and
Pennsylvania), the amount returned to the Owner will be equal to the sum of: (i)
the difference between the premiums paid, including any contract fees and
charges and the amounts, if any, allocated to the Variable Account under the
Contract; and (ii) the Variable Account Value on the date of termination. (See
"Free-Look Period," Page 19.)
    
 
   
     Premiums.  The minimum amount which Providentmutual will normally accept as
an initial premium is $2,000. Subsequent premiums of not less than $100 each for
Non-Qualified Contracts and $50 each for Qualified Contracts may be paid under
the Contract. A Planned Periodic Premium schedule may also be selected. (See
"Premiums," Page 18.)
    
 
   
     Allocation of Net Premiums.  Net Premiums under a Contract will be
allocated, as designated by the Owner, to one or more of the Subaccounts of the
Variable Account or to the Guaranteed Account, or to both. (The Guaranteed
Account is not offered in Oregon.) Except for Contracts sold to residents of
states where the amount returned under the free-look provision reflects
investment performance, the portion of the initial Net Premium which is to be
allocated to the Variable Account will be allocated to the Money Market
Subaccount for a 15-day period. At the end of that period, the amount in the
Money Market Subaccount will be allocated to the chosen Subaccounts. The assets
of each Subaccount will be invested solely in a corresponding Portfolio of a
designated Fund. The Contract Account Value, except for amounts in the
Guaranteed Account, will vary according to the investment performance of the
Portfolios of the Fund in which the chosen Subaccounts are invested. Interest
will be credited to amounts in the Guaranteed Account at a guaranteed minimum
rate of 3% per year, or a higher current interest rate declared by
Providentmutual. (See "Allocation of Premiums," Page 19.)
    
 
     Transfers.  On or before the Maturity Date, the Owner may request a
transfer of all or part of the amount in a Subaccount or the Guaranteed Account
to another Subaccount or the Guaranteed Account subject to certain restrictions.
 
   
     The total amount transferred each time must be at least $500 or the entire
amount in the Subaccount, if less. Only one transfer out of the Guaranteed
Account is allowed each Contract Year and must be made within 30 days of the
Contract Anniversary and is limited in amount. After twelve transfers during a
Contract Year, a Transfer Processing Fee of $25 will be assessed for each
additional transfer during such Contract Year. (See "Transfer Privilege," Page
21.)
    
 
   
     Withdrawals.  At any time before the earlier of the death of the Annuitant
or the Maturity Date, the Owner may withdraw part of the Cash Surrender Value
(Contract Account Value less any applicable Surrender Charge), subject to
certain limitations. (See "Withdrawals," Page 22.)
    
 
     Surrender.  Upon Written Notice received at the Home Office on or before
the earlier of the death of the Annuitant or the Maturity Date, the Owner may
surrender the full Contract value and receive its Cash
                                        7
<PAGE>   15
 
   
Surrender Value (Contract Account Value less any applicable Surrender Charge).
(See "Surrender," Page 23.)
    
 
     Death Benefit.  If the Annuitant dies before the Maturity Date, the
Beneficiary will receive a death benefit. During the first six Contract years,
the death benefit will be equal to the greater of: the premiums paid less any
withdrawn amounts (including applicable surrender charges) or the Contract
Account Value on the date of receipt of due proof of the Annuitant's death.
After the end of the sixth Contract Year, the death benefit will be equal to the
greatest of:
 
        1. the Contract Account Value as of the end of the sixth Contract Year
           less subsequent amounts withdrawn; or
 
        2. the Contract Account Value on the date of receipt due proof of the
           Annuitant's death; or
 
        3. the premiums paid less any withdrawn amounts (including applicable
           Surrender Charges).
 
   
     Step-Up Rider.  Contract Owner may elect the Step-up Rider, which provides
a guaranteed minimum death benefit equal to the Contract Account Value as of the
six year contract anniversary and is reset every six years to the Contract
Account Value on the next six year contract anniversary, if greater. This reset
continues until the six year contract anniversary on or before the annuitant's
85th birthday. Premiums paid between the six year contract anniversaries are
also included in the death benefit proceeds. A reduction in the guaranteed
minimum death benefit for any withdrawal will be based on the proportion of the
withdrawal to the Contract Account Value. At no time will the death benefit
proceeds be less than either the Contract Account Value on the date
Providentmutual receives due proof of the Annuitant's death or the sum of
premiums paid, less any withdrawals, including applicable Surrender Charges.
    
 
   
     Rising Floor Rider.  Contract Owner may elect the Rising Floor Rider, which
provides a guaranteed minimum death benefit equal to the sum of premiums paid
less reductions for withdrawals accumulating at 4 1/2% interest until the
contract anniversary prior to the annuitant's 75th birthday. Thereafter,
premiums are added and reductions for withdrawals are deducted from the
guaranteed death benefit. A reduction in the guaranteed minimum death benefit
for any withdrawal will be based on the proportion of the withdrawal to the
Contract Account Value. At no time will the death benefit proceeds be less than
the Contract Account Value.
    
 
   
If the Owner dies before the Maturity Date, the Contract Account Value (or if
the owner is also the Annuitant, the death benefit) must generally be
distributed to the Beneficiary within five years after the date of the Owner's
death. (See "Death Benefit Before Maturity Date," Page 24.)
    
 
CHARGES AND DEDUCTIONS
 
     The following charges and deductions are made in connection with the
Contract:
 
     Surrender Charge (Contingent Deferred Sales Charge).  No charge for sales
expenses is deducted from premiums at the time premiums are paid. However, if a
Contract has not been in force for six full Contract Years, upon surrender or
for certain withdrawals a surrender charge is deducted from the amount of the
surrender or withdrawal.
 
   
     For the first Contract Year, the charge is 6% of the amount withdrawn or
surrendered. Thereafter, the Surrender Charge decreases by 1% each subsequent
Contract Year. In no event will the total Surrender Charge on any one Contract
exceed 8 1/2% of the total gross premiums paid under the Contract. (See
"Surrender Charge," Page 27.)
    
 
   
     Subject to certain restrictions, after the first Contract Year up to 10% of
the Contract Account Value as of the beginning of a Contract Year may be
surrendered or withdrawn during such Contract Year free of the Surrender Charge.
(See "Amounts Not Subject to Surrender Charge," Page 28.)
    
 
   
     Annual Administration Fee.  On each Contract Anniversary prior to and
including the Maturity Date, and on the Maturity Date if it is not a Contract
Anniversary, Providentmutual deducts an Annual Administration Fee of $30 from
the Contract Account Value. The charge is also deducted upon surrender if the
surrender occurs on other than the Contract Anniversary. (See "Annual
Administration Fee," Page 28.)
    
                                        8
<PAGE>   16
 
   
     Transfer Processing Fee.  The first twelve transfers of amounts in the
Subaccounts and the Guaranteed Account each Contract year are free. A $25
transfer charge will be assessed for each additional transfer during such
Contract Year. (See "Transfer Processing Fee," Page 29.)
    
 
   
     Mortality and Expense Risk Charge.  Providentmutual deducts a daily
mortality and expense risk charge to compensate it for assuming certain
mortality and expense risks. On or prior to the Maturity Date, the charge is
deducted from the assets of the Variable Account at an annual rate of 1.25%
(approximately 0.70% for mortality risk and 0.55% for expense risks). (See
"Mortality and Expense Risk Charge," Page 29.)
    
 
   
     Asset-Based Administration Charge.  Providentmutual deducts a daily
administration charge to compensate it for certain expense it incurs in
administration of the Contract. On or prior to the Maturity Date, the charge is
deducted from the assets of the Variable Account at an annual rate of 0.15%.
(See "Asset-Based Administration Charge," Page 29.)
    
 
   
     Premium Taxes.  If state or other premium taxes are applicable to a
Contract, they will be deducted, depending upon when such taxes are paid to the
taxing authority, either: (i) from premiums as they are received; or (ii) from
the Contract Account Value upon a withdrawal from or surrender of the Contract
or upon application of the Contract Account Value to a Payment Option. (See
"Premium Taxes," Page 29.)
    
 
   
     Investment Advisory Fees and Other Expenses of the Funds.  Because the
Variable Account purchases shares of the Funds, the net assets of each
Subaccount of the Variable Account will reflect the investment advisory fee
incurred by the corresponding Portfolio of the Funds. For each Portfolio, an
investment advisor is paid a daily fee by the Funds for its investment advisory
services. The advisory fees are based on the average daily net assets of the
Portfolio, and, as a result, the amount of the advisory fee will depend upon the
Portfolio and the assets of such Portfolio. Each Portfolio of the Fund in which
the Variable Account invests is also responsible for its own expenses.
Presently, certain fees and expenses of the Funds are waived and reimbursed.
(See "Other Charges Including Investment Advisory Fees of the Funds," Page 29
and the Funds' Prospectuses.)
    
 
ANNUITY PROVISIONS
 
     Maturity Date.  On the Maturity Date, the Contract Account Value (less
applicable Premium Tax) will be applied under a Payment Option, unless the Owner
chooses to receive the Cash Surrender Value in a lump sum.
 
   
     Payment Options.  Payments under these options do not depend upon the
Variable Account's performance. The Payment Options are: Life Annuity; Life
Annuity with 10 Years Guaranteed; and Alternate Income Option. (See "Payment
Options," Page 30.)
    
 
FEDERAL TAX STATUS
 
   
     Generally, a distribution (including a surrender, withdrawal or death
benefit payment) may result in adverse Federal income tax consequences. In
certain circumstances, a penalty tax may apply. For a further discussion of the
Federal income status of Variable Annuity Contracts (see "Federal Tax Status,"
Page 32.)
    
 
                                        9
<PAGE>   17
 
                        CONDENSED FINANCIAL INFORMATION
 
   
     The following condensed financial information is derived from the financial
statements of the Variable Account. The data should be read in conjunction with
the financial statements, related notes and other financial information included
in the Statement of Additional Information. See "Financial Statements," Page 39,
concerning financial statements contained in the Statement of Additional
Information. The All Pro and Van Eck Subaccounts are not included because they
were not available under the contract prior to May 1, 1998.
    
 
   
     The table below sets forth certain information regarding the Subaccounts as
of December 31, 1997.
    
   
<TABLE>
<CAPTION>
                             UNIT VALUE    NUMBER OF UNITS    UNIT VALUE    NUMBER OF UNITS    UNIT VALUE    NUMBER OF UNITS
                               AS OF      OUTSTANDING AS OF     AS OF      OUTSTANDING AS OF     AS OF      OUTSTANDING AS OF
        SUBACCOUNT            12/31/97        12/31/97         12/31/96        12/31/96         12/31/95        12/31/95
        ----------           ----------   -----------------   ----------   -----------------   ----------   -----------------
<S>                          <C>          <C>                 <C>          <C>                 <C>          <C>
MS Growth..................     950.55        32,051.38         775.34         26,301.47         657.63         18,875.42
MS Money Market............     575.95        45,925.41         554.47         45,000.79         534.58         30,689.17
MS Bond....................     597.74        10,217.64         553.59          7,672.67         545.35          4,938.33
MS Managed.................     781.27        16,899.90         653.55         13,564.35         592.07          9,803.13
MS Aggressive Growth.......     833.15        11,389.39         697.07          9,335.43         584.65          6,154.75
MS International...........     704.02        23,495.92         651.04         23,424.42         595.43         17,907.81
Fidelity High Income.......     788.02        21,860.95         679.15         14,990.01         604.03          7,048.75
Fidelity Equity Income.....   1,011.99        73,730.38         801.08         61,560.52         710.92         38,336.60
Fidelity Growth............     905.80        67,965.10         743.89         59,854.74         657.74         34,695.62
Fidelity Asset Man.........     763.46        37,474.25         641.70         32,768.43         567.88         28,966.21
Fidelity Index 500.........   1,088.42        48,054.18         831.78         27,336.06         686.84         10,498.25
Fidelity Contrafund........     879.99        38,683.95         718.85         23,454.47         601.00          7,495.00
OCC Equity.................   1,071.54        19,067.19         858.13         12,563.72         572.66         11,392.30
OCC Small Cap..............     808.05        22,411.36         670.35         16,021.07         724.69         27,336.42
OCC Managed................   1,057.94        54,119.40         877.27         43,626.63         545.82          6,615.25
Scudder Bond...............     594.92        13,308.44         553.18         10,238.78         705.50          7,248.38
Scudder Growth & Inc.......     913.35        17,259.20         709.94          6,349.82         589.44            978.99
Scudder International......     641.18        16,570.16         596.09          9,325.04         526.65          1,170.05
Drey. Zero Coup. 2000......     580.67        10,024.98         550.29          8,998.27         544.02          5,157.10
Dreyfus Growth & Inc.......     884.85        19,203.03         772.15         16,123.15         648.54          3,543.50
Dreyfus Socially Resp......     918.99         5,878.19         725.61          2,403.71         607.04            211.32
Federated Fund for U.S.
 Gov't. Securities II......     582.47         6,129.09         544.01          3,591.63         529.49            888.69
Federated Utility Fund
 II........................     789.26         6,448.18         632.04          4,346.85         574.58          1,076.36
 
<CAPTION>
                             UNIT VALUE    NUMBER OF UNITS    UNIT VALUE    NUMBER OF UNITS
                               AS OF      OUTSTANDING AS OF     AS OF      OUTSTANDING AS OF
        SUBACCOUNT            12/31/94        12/31/94         12/31/93        12/31/93
        ----------           ----------   -----------------   ----------   -----------------
<S>                          <C>          <C>                 <C>          <C>
MS Growth..................    511.45         12,476.41         506.46          3,168.61
MS Money Market............    513.30         16,531.43         501.47          4,652.76
MS Bond....................    459.55          3,487.30         493.74          1,656.64
MS Managed.................    482.84          8,582.76         498.70          2,536.72
MS Aggressive Growth.......    522.44          2,846.86         529.79            452.21
MS International...........    528.22         15,548.80         534.25          2,539.74
Fidelity High Income.......    507.88          4,060.78         523.11            298.26
Fidelity Equity Income.....    533.64         16,111.04         505.43          2,674.86
Fidelity Growth............    492.73         19,272.81         499.75          2,368.98
Fidelity Asset Man.........    492.38         28,637.01         531.69          2,806.80
Fidelity Index 500.........    507.68          3,571.24         509.51            818.51
Fidelity Contrafund........        --                --             --                --
OCC Equity.................    515.26          2,813.10         503.29            313.68
OCC Small Cap..............    503.97          8,553.37         516.26            842.45
OCC Managed................
Scudder Bond...............    468.40          4,419.73         498.86            726.58
Scudder Growth & Inc.......    504.88         15,233.99         498.94          2,723.17
Scudder International......        --                --             --                --
Drey. Zero Coup. 2000......    467.73          3,101.11         493.62            113.90
Dreyfus Growth & Inc.......        --                --             --                --
Dreyfus Socially Resp......        --                --             --                --
Federated Fund for U.S.
 Gov't. Securities II......        --                --             --                --
Federated Utility Fund
 II........................        --                --             --                --
</TABLE>
    
 
                                       10
<PAGE>   18
 
                    THE COMPANY, VARIABLE ACCOUNT AND FUNDS
 
PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
 
   
     The Contracts are issued by Providentmutual Life and Annuity Company of
America ("Providentmutual") which originated as a stock life insurance company
incorporated under the name of Washington Square Life Insurance Company in the
Commonwealth of Pennsylvania in 1958. The name of the Company was changed from
Washington Square to Providentmutual in 1991 and the Company was redomiciled as
a Delaware insurance company in December, 1992. Providentmutual is currently
licensed to transact life insurance business in 48 states and the District of
Columbia. As of December 31, 1997, Providentmutual had total assets of
approximately $1.2 billion.
    
 
   
     Providentmutual is a wholly-owned subsidiary of Provident Mutual Life
Insurance Company ("PMLIC"). PMLIC was chartered by the Commonwealth of
Pennsylvania in 1865 and at the end of 1997 had total assets of approximately
$7.9 billion. On December 31, 1997, Providentmutual and PMLIC entered into a
Support Agreement whereby PMLIC agrees to ensure that Providentmutual's total
adjusted capital will remain at the level of 200% of the company action level
for risk-based capital ("RBC") at the end of each calendar quarter during the
term of the agreement, agreeing to contribute to Providentmutual an amount of
capital sufficient to attain such level of total adjusted capital. RBC
requirements are used to monitor sufficient capitalization of insurance
companies based upon the types and mixtures of risk inherent in such companies'
operations.
    
 
   
     Further, PMLIC agrees to cause Providentmutual to maintain cash or cash
equivalents from time to time as may be necessary during the term of the
agreement in an amount sufficient for the payment of benefits and other
contractual claims pursuant to policies and other contracts issued by
Providentmutual. This agreement will remain in effect provided Providentmutual
is, and remains, a subsidiary of PMLIC. Prior to any material modification or
termination of the agreement, a determination must be made that such
modification or termination will not have an adverse impact on the policyholders
of Providentmutual. Such determination shall be based on the ability of
Providentmutual at the time of such determination to maintain its own financial
stability according to the standards contained in the agreement. Other than this
Support Agreement, PMLIC is under no obligation to invest money in
Providentmutual nor is it in any way a guarantor of Providentmutual's
contractual obligations or obligations under the Contract.
    
 
     Providentmutual is subject to regulation by the Insurance Department of the
State of Delaware as well as by the insurance departments of all other states
and jurisdictions in which it does business. Providentmutual submits annual
statements on its operations and finances to insurance officials in such states
and jurisdictions. The forms for the Contract described in this Prospectus are
filed with and (where required) approved by insurance officials in each state
and jurisdiction in which Contracts are sold.
 
   
     Providentmutual 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 PROVIDENTMUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT
 
     The Providentmutual Variable Annuity Separate Account is a separate
investment account of Providentmutual, established by the Board of Directors of
Providentmutual on May 9, 1991, under Pennsylvania law. Because Providentmutual
later redomesticated as a Delaware Insurance Company, the Variable Account is
now subject to regulation by the Delaware Insurance Department. Providentmutual
has caused the Variable Account to be registered with the Securities and
Exchange Commission (the "SEC") as a unit investment trust under the investment
Company Act of 1940 (the "1940 Act"). Such registration does not involve
supervision by the SEC of the management or investment policies or practices of
the Variable Account.
 
     The assets of the Variable Account are owned by Providentmutual. However,
these assets are held separate from other assets and are not part of
Providentmutual's General Account. The portion of the assets of the Variable
Account equal to the reserves or other contract liabilities of the Variable
Account will not be charged with liabilities that arise from any other business
Providentmutual conducts. Providentmutual may transfer to its General Account
any assets of the Variable Account which exceed the reserves and the Contract
                                       11
<PAGE>   19
 
liabilities of the Variable Account (which will always be at least equal to the
aggregate Contract value allocated to the Variable Account under the Contracts).
 
     The income, gains or losses, whether or not realized, from the assets of
each Subaccount of the Variable Account are credited to or charged against that
Subaccount without regard to any other income, gains or losses. Providentmutual
may accumulate in the Variable Account the charge for expense and expense risks,
mortality gains and losses and investment results applicable to those assets
that are in excess of the net assets supporting the Contracts.
 
   
     The Variable Account currently has thirty-one Subaccounts: Growth; Money
Market; Bond; Managed; Aggressive Growth; International; All Pro Large Cap
Growth; All Pro Large Cap Value; All Pro Small Cap Growth; All Pro Small Cap
Value; Fidelity High Income; Fidelity Equity-Income; Fidelity Growth; Fidelity
Asset Manager; Fidelity Index 500; Fidelity Contrafund; Scudder Bond; Scudder
Growth and Income; Scudder International; OCC Equity; OCC Small Cap; OCC
Managed; Dreyfus Growth and Income; Dreyfus Socially Responsible; Dreyfus Zero
Coupon 2000; Federated Fund for U.S. Government Securities II; Federated Utility
Fund II; Van Eck Worldwide Bond; Van Eck Worldwide Hard Assets; Van Eck
Worldwide Emerging Mkts; and Van Eck Worldwide Real Estate. The assets of each
Subaccount are invested exclusively in shares of a corresponding Portfolio of a
designated Fund.
    
 
THE FUNDS
 
   
     The Variable Account currently invests in portfolios of nine series-type
mutual funds: Market Street Fund, Inc.; Variable Insurance Products Fund;
Variable Insurance Products Fund II; Scudder Variable Life Investment Fund; OCC
Accumulation Trust; Dreyfus Variable Investment Fund; The Dreyfus Socially
Responsible Growth Fund, Inc.; Federated Insurance Series and Van Eck Worldwide
Fund (collectively, the "Funds"). Each of these Funds is registered with the SEC
under the 1940 Act as an open-end diversified investment company. The SEC does
not, however, supervise the management or the investment practices and policies
of the Funds.
    
 
     The assets of each Fund portfolio are separate from other portfolios of
that Fund and each portfolio has separate investment objective and policies. As
a result, each portfolio operates as a separate investment portfolio and the
investment performance of one portfolio has no effect on the investment
performance of any other portfolio. Some of the Funds may, in the future, create
additional portfolios. The investment experience of each of the Subaccounts of
the Variable Account depends on the investment performance of its corresponding
portfolio.
 
     Each of the Funds sells its shares to the Variable Account in accordance
with the terms of a participation agreement between the Fund and
Providentmutual. The termination provisions of those agreements vary. A summary
of these termination provisions may be found in the Statement of Additional
Information. Should an agreement between Providentmutual and a Fund terminate,
the Variable Account will not be able to purchase additional shares of that
Fund. In that event, Owners will no longer be able to allocate Account Values or
premium payments to Subaccounts investing in portfolios of that Fund.
 
     Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to the Variable Account
despite the fact that the participation agreement between the Fund and
Providentmutual has not been terminated. Should a Fund or a portfolio of a Fund
decide not to sell its shares to Providentmutual, Providentmutual will not be
able to honor requests of Owners to allocate their Account Values or premium
payments to Subaccounts investing in shares of that Fund or portfolio.
 
     Certain Subaccounts invest in portfolios that have similar investment
objectives and/or policies; therefore before choosing Subaccounts, carefully
read the individual prospectuses for the Funds along with this prospectus.
 
THE MARKET STREET FUND, INC.
 
   
     The Growth, Money Market, Bond, Managed, Aggressive Growth, International
All Pro Large Cap Growth, All Pro Small Cap Growth, All Pro Large Cap Value and
All Pro Small Cap Value Subaccounts invest in shares of the Market Street Fund,
Inc. The Fund currently issues six "series" or classes of shares, each of which
represents an interest in a separate Portfolio within the Fund: the Growth,
Money Market, Bond, Managed, Aggressive Growth International All Pro Large Cap
Growth, All Pro Small Cap Growth, All
    
                                       12
<PAGE>   20
 
   
Pro Large Cap Value and All Pro Small Cap Value Portfolios. Shares of each
Portfolio currently are purchased and redeemed by the corresponding Subaccount.
    
 
     The investment objectives of the Portfolios are set forth below.
 
     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 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 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 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 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.
    
 
   
     The Growth, Money Market, Bond, Managed, and Aggressive Growth Portfolios
are advised by Sentinel Advisors Company; and the International Portfolio is
advised by Providentmutual Investment Management Company ("PIMC"). PIMC employs
The Boston Company Asset Management, Inc. to provide investment advisory
services in connection with the International Portfolio. PIMC serves as
investment adviser for the All Pro 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. 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 and in part by Husic Capital
Management, pursuant to separate investment sub-advisory agreements. The assets
of the All Pro Large Cap Growth Portfolio are managed in part by Cohen,
Klingenstein & Marks, Inc.; in part by Geewax, Terker & Co.; and in part by Oak
Associates, Ltd.; pursuant to separate investment sub-advisory agreements. The
assets of the All Pro Small Cap Value Portfolio are managed in part by 1838
Investment Advisors and in part by Denver Investment Advisors, pursuant to an
investment sub-advisory agreement. The assets of the All Pro Large Cap Value
Portfolio are managed in part by Equinox Capital Management, Inc.; in part by
Harris Associates, Inc.; and in part by Mellon Equity Associates, pursuant to
separate investment sub-advisory agreements. Each of these advisers is
registered with the SEC as an investment adviser under the Investment Advisers
Act of 1940.
    
                                       13
<PAGE>   21
 
VARIABLE INSURANCE PRODUCTS AND VARIABLE INSURANCE PRODUCTS FUND II
 
   
     The Fidelity High Income Subaccount, the Fidelity Equity-Income Subaccount
and the Fidelity Growth Subaccount invest in shares of their corresponding
portfolios of the Variable Insurance Products Fund ("VIP Fund"); the Fidelity
Asset Manager Subaccount, Fidelity Contrafund Subaccount and the Fidelity Index
500 Subaccount invest in shares of their corresponding portfolios of the
Variable Insurance Products Fund II ("VIP II Fund"). The VIP Fund and the VIP II
Fund each offer insurance companies a selection of investment vehicles for
variable annuity contracts and variable life insurance policies. The VIP Fund
issues a number of "series" or classes of shares, each of which represents an
interest in a separate portfolio within the VIP Fund or a VIP II Fund. Three of
the VIP Fund series are available for investment under the Contracts: VIP High
Income Portfolio; VIP Equity-Income Portfolio; and VIP Growth Portfolio. Three
of the VIP II Fund Series are available for investment under the Contracts: VIP
II Asset Manager Portfolio, VIP II Contrafund Portfolio and VIP II Index 500
Portfolio.
    
 
     The investment objectives of the pertinent Portfolios of the Funds are set
forth below.
 
   
     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 Equity-Income Portfolio.  This Portfolio seeks reasonable income by
investing primarily in income-producing equity securities. In choosing these
securities, the 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 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 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 is not fully recognized 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) of a broad range common stocks publicly traded in the United
States. In seeking this objective, the 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.
    
 
   
     The Portfolios of the VIP Fund and VIP II Fund are managed by Fidelity
Management & Research Company ("FMR"). On behalf of the Asset Manager 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.
    
 
     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.
 
                                       14
<PAGE>   22
 
SCUDDER VARIABLE LIFE INVESTMENT FUND
 
     The Scudder Bond Subaccount, the Scudder Growth and Income Subaccount and
the Scudder International Subaccount invest in shares of their corresponding
portfolios of the Scudder Variable Life Investment Fund ("Scudder Fund"). The
Scudder Fund is designed to provide an investment vehicle for variable annuity
contracts and variable life insurance policies. Therefore, shares of the Scudder
Fund are sold only to insurance company separate accounts including the
Providentmutual Variable Annuity Separate Account.
 
   
     The Scudder Fund currently consists of seven Portfolios. Only the Bond
Portfolio, Growth and Income Portfolio and International Portfolio are available
under the variable annuity Contracts offered by Providentmutual. Their
investment objectives are as follows:
    
 
     Bond Portfolio.  This Portfolio pursues a policy of investing for a high
level of income consistent with a high quality portfolio of securities. It
primarily invests in U.S. Government, corporate, and other notes and bonds.
 
     Growth and Income Portfolio.  This Portfolio seeks long-term growth of
capital, current income and growth of income. It primarily invests in common
stocks, preferred stocks and securities convertible into common stocks.
 
     International Portfolio.  This Portfolio seeks long-term growth of capital
primarily through diversified holdings of marketable foreign equity investments.
The Portfolio invests in companies, wherever organized, which do business
primarily outside the United States.
 
   
     Scudder Kemper Investments, Inc., an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended, manages daily
investments and business affairs of the Scudder Fund, subject to policies
established by the Trustees of the Scudder Fund.
    
 
OCC ACCUMULATION TRUST
 
     The OCC Equity Subaccount, the OCC Small Cap Subaccount and the OCC Managed
Subaccount invest only in shares of their corresponding portfolios of the OCC
Accumulation Trust ("OCC Trust"). Shares of the OCC Trust are sold only to
separate accounts of life insurance companies established to fund variable
annuity contracts.
 
   
     The OCC Trust currently has seven Portfolios, three of which are available
for investment under the Contracts. The investment objectives of the Portfolios
available with the variable annuity Contracts issued by Providentmutual are
described below.
    
 
     Equity Portfolio.  Long term capital appreciation through investment in a
diversified portfolio of primarily equity securities selected on the basis of a
value-oriented approach to investing.
 
     Small Cap Portfolio.  Capital appreciation through investment in a
diversified portfolio of primarily equity securities of companies with market
capitalizations of under $1 billion.
 
     Managed Portfolio.  Growth of capital over time through investment in a
portfolio consisting of common stocks, bonds, and cash equivalents, the
percentages of which will vary over time based on the investment manager's
assessments of relative investment values.
 
   
     The OCC Trust receives investment advice with respect to each of its
Portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital which is a
subsidiary of PIMCO Advisors L.P. and which is registered as an investment
adviser under the Investment Advisers Act of 1940.
    
 
   
DREYFUS VARIABLE INVESTMENT FUND AND DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND,
INC.
    
 
   
     The Dreyfus Growth and Income Subaccount and the Dreyfus Zero Coupon 2000
Subaccount invest in shares of their corresponding portfolios of the Dreyfus
Variable Investment Fund and the Dreyfus Socially Responsible Subaccount invests
in shares of The Dreyfus Socially Responsible Growth Fund, Inc.
    
 
                                       15
<PAGE>   23
 
   
(collectively, the "Dreyfus Funds"). The Dreyfus Funds are intended to be a
funding vehicle for variable annuity contracts and variable life insurance
policies offered by the separate accounts of various life insurance companies.
    
 
   
     The Dreyfus Funds investment objectives are as follows:
    
 
   
     Growth and Income Portfolio.  This Portfolio seeks long-term capital
growth, current income and growth of income, consistent with reasonable
investment risk. The Portfolio invests in equity and debt securities and money
market instruments of domestic and foreign issuers.
    
 
     Zero Coupon 2000 Portfolio.  The Zero Coupon 2000 Portfolio's goal is to
provide as high an investment return as is consistent with the preservation of
capital. This Portfolio invests primarily in debt obligations of the U.S.
Treasury that have been stripped of their unmatured interest coupons, interest
coupons that have been stripped from debt obligations issued by the U.S.
Treasury, receipts and certificates for such stripped debt obligations, and
stripped coupons and zero coupon securities issued by domestic corporations.
This Portfolio will consist primarily of portfolio securities which will mature
on or about December 31, 2000.
 
   
     Socially Responsible Portfolio.  This Portfolio seeks to provide capital
growth primarily through equity investments in companies that, in the opinion of
the Portfolio's management, not only meet traditional investment standards but
which also show evidence that they conduct their business in a manner that
contributes to the quality of life in America, current income is a secondary
goal.
    
 
   
     The Dreyfus Corporation ("Dreyfus") serves as investment adviser to the
Dreyfus Fund. Dreyfus supervises and assists in the overall management of each
Dreyfus Funds' affairs, subject to the overall authority of the Fund Boards. NCM
Capital Management Group, Inc., serves as sub-investment adviser of The Dreyfus
Socially Responsible Growth Fund, Inc. and provides day-to-day management of the
Fund's portfolio.
    
 
FEDERATED INSURANCE SERIES
 
     The Federated Fund for U.S. Government Securities II Subaccount and the
Federated Utility Fund II Subaccount invest in shares of their corresponding
portfolios of the Federated Insurance Series. The Federated Insurance Series is
intended to be a funding vehicle for variable annuity contracts and variable
life insurance policies offered by the separate accounts of various life
insurance companies.
 
     The Federated Insurance Series currently consists of two Portfolios. Only
the Fund for U.S. Government Securities II Portfolio and Utility Fund II
Portfolio are available with the Variable Annuity Contract offered by
Providentmutual. Their investment objectives are as follows:
 
     Fund for U.S. Government Securities II Portfolio.  This Portfolio seeks to
provide current income. It invests primarily in securities which are guaranteed
as to payment of principal and interest by the U.S. Government, its agencies or
instrumentalities.
 
     Utility Fund II Portfolio.  This Portfolio seeks to achieve high current
income and moderate capital appreciation. It invests primarily in equity and
debt securities of utility companies.
 
   
VAN ECK WORLDWIDE INSURANCE TRUST
    
 
   
     The Van Eck Worldwide Bond, the Van Eck Worldwide Hard Assets, the Van Eck
Worldwide Emerging Markets and the Van Eck Worldwide Real Estate Subaccounts of
the Variable Account invest in shares of the Van Eck Worldwide Bond, the Van Eck
Worldwide Hard Assets, the Van Eck Worldwide Emerging Markets, Van Eck Worldwide
Real Estate Portfolio, respectively, of the Van Eck Worldwide Insurance Trust
("Van Eck Trust"). Shares of the Van Eck Worldwide Bond Portfolio, the Worldwide
Hard Assets Portfolio, and the Worldwide Emerging Markets Portfolio, Van Eck
Worldwide Real Estate 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 Van Eck Trust in accordance with a
participation agreement between the Van Eck Trust and Providentmutual. The
termination provisions of this participation agreement are described below.
    
 
                                       16
<PAGE>   24
 
   
     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, 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. Total return is
comprised of current income and capital appreciation. The Portfolio attempts to
achieve its investment objective by taking advantage of investment opportunities
in the United States as well as in other countries throughout the world where
opportunities may be more rewarding and may emphasize either component of total
return.
    
 
   
     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 Bond, the Van Eck
Worldwide Hard Assets and 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.
    
 
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
 
     More detailed information concerning the investment objectives, policies
and restrictions pertaining to the Funds and the expenses, investment advisory
services and charges and the risks attendant to investing in the Portfolios and
other aspects of their operations can be found in the current Prospectus for
each Fund which accompany this prospectus and the current Statement of
Additional Information for each Fund. The Fund prospectuses should be read
carefully before any decision is made concerning the allocation of premium
payments or transfers among the Subaccounts.
 
     You should note that, except for the Portfolios of the Market Street Fund
and the Bond Portfolio of the Scudder Fund, not all of the Portfolios described
in the Prospectuses for the Funds are available with the Contract. Moreover,
Providentmutual cannot guarantee that each Fund will always be available for its
variable annuity contracts, but in the unlikely event that a Fund is not
available, Providentmutual will do everything reasonably practicable to secure
the availability of a comparable fund. Shares of each Portfolio are purchased
and redeemed at net asset value, without a sales charge.
 
RESOLVING MATERIAL CONFLICTS
 
   
     The MS Fund, VIP Fund, VIP II Fund, Scudder Fund, Occ Trust, Dreyfus Funds
and Van Eck Trust are now, or may be in the future, used as investment vehicles
for variable life insurance policies and variable annuity contracts issued by
Providentmutual or PMLIC, as well as registered separate accounts of other
insurance companies offering variable life and annuity contracts. In addition,
certain Funds available with the Contract may sell Shares to retirement plans
qualifying under Section 401 of the Code (including cash or deferred
arrangements under Section 401(k) of the Code) ("Retirement Plans"). As a
result, there is a possibility that a material conflict may arise between the
interests of Owners of Contracts, generally, or certain classes of Owners, and
such Retirement Plans or participants in such Retirement Plans.
    
                                       17
<PAGE>   25
 
   
     Providentmutual currently does not foresee any disadvantages to Owners
resulting from the Funds selling shares to fund products other than
Providentmutual contracts or to Retirement Plans. However, there is a
possibility that a material conflict may arise between Owners whose policy
values are allocated to the Variable Account and the owners of variable life
insurance policies and variable annuity contracts issued by such other companies
whose values are allocated to one or more other separate accounts investing in
any one of the Funds. In the event of a material conflict, Providentmutual will
take any necessary steps, including removing the Variable Account from that
Fund, to resolve the matter. The Board of Directors of each Fund will monitor
events in order to identify any material conflicts that possibly may arise and
determine what action, if any, should be taken in response to those events or
conflicts. See each individual Fund prospectus for more information.
    
 
     A full description of the Portfolios of the Funds, their investment
objectives and policies, their risks, expenses, and all other aspects of their
operation is contained in the accompanying Prospectuses for the Funds, which
should be read carefully together with this Prospectus before investing.
 
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
 
     Providentmutual reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
a Portfolio of the Fund are no longer available for investment or if in
Providentmutual's judgment further investment in any Portfolio should become
inappropriate in view of the purposes of the Variable Account, Providentmutual
may redeem the shares, if any, of that Portfolio and substitute shares of
another registered open-end management company. Providentmutual will not
substitute any shares attributable to a Contract's interest in a Subaccount of
the Variable Account without notice and prior approval of the SEC and state
insurance authorities, to the extent required by the 1940 Act or other
applicable law.
 
     Providentmutual also reserves the right to establish additional Subaccounts
of the Variable Account, each of which would invest in shares corresponding to a
new Portfolio of the Fund or in shares of another investment company having a
specified investment objective. Subject to applicable law and any required SEC
approval, Providentmutual may, in its sole discretion, establish new Subaccounts
or eliminate one or more Subaccounts if marketing needs, tax considerations or
investment conditions warrant. Any new Subaccounts may be made available to
existing Contract Owners on a basis to be determined by Providentmutual.
 
     If any of these substitutions or charges are made, Providentmutual may by
appropriate endorsement change the Contract to reflect the substitution or
change. If Providentmutual deems it to be in the best interest of Contract
Owners and Annuitants, and subject to any approvals that may be required under
applicable law, the Variable Account may be operated as a management company
under the 1940 Act, it may be deregistered under that Act if registration is no
longer required, or it may be combined with other Providentmutual separate
accounts.
 
                        DESCRIPTION OF ANNUITY CONTRACT
 
ISSUANCE OF A CONTRACT
 
     In order to purchase a Contract, application must be made to
Providentmutual through a licensed representative of Providentmutual, who is
also a registered representative of 1717 Capital Management Company ("1717") or
a broker-dealer having a selling agreement with 1717 or a broker/dealer having a
selling agreement with such broker/dealer. Contracts may be sold to or in
connection with retirement plans which to not qualify for special tax treatment
(Non-Qualified Plans) as well as retirement plans that qualify for special tax
treatment under the Internal Revenue Code (Qualified Plans).
 
PREMIUMS
 
     The minimum initial premium which Providentmutual will normally accept is
$2,000. Subsequent premium payments may be paid under the Contract at any time
during the Annuitant's lifetime and before the
 
                                       18
<PAGE>   26
 
Maturity Date and must be for at least $100 each for Non-Qualified Contracts and
$50 each for Qualified Contracts.
 
     At the time of application, a Planned Periodic Premium schedule may be
selected based on a periodic billing mode of annual, semi-annual, or quarterly
payment. The Owner will receive a premium reminder notice at the specified
interval. The Owner may change the Planned Periodic Premium frequency and
amount. Also, under the Automatic Payment Plan, the Owner can select a monthly
payment schedule pursuant to which premium payments will be automatically
deducted from a bank account or other source rather than being "billed."
 
FREE-LOOK PERIOD
 
     The Contract provides for an initial "free-look" period. The Owner has the
right to return the Contract within 10 days after such Owner receives the
Contract. When Providentmutual receives the returned Contract at its Home
Office, it will be canceled and Providentmutual will refund to the Owner an
amount equal to the greater of: (a) the premiums paid under the Contract; and
(b) the sum of (i) the Contract Account Value as of the earlier of the date the
returned Contract is received by Providentmutual at its Home Office or by the
Providentmutual representative through whom the Contract was purchased; plus
(ii) the amount of any charges deducted from the Variable Account except the
Mortality and Expense Risk Charge, Asset-Based Administration Charge and the
Funds' advisory fees and operating expenses. For contracts sold to residents of
certain states (i.e., Arizona, Minnesota and Pennsylvania), the amount returned
to the Owner will be equal to the sum of: (i) the difference between the
premiums paid, including any contract fees and charges, and the amounts, if any,
allocated to the Variable Account under the Contract; and (ii) the Variable
Account Value (or, in Pennsylvania, if there is no Variable Account Value, the
reserve for the Contract on the date the Contract is cancelled attributable to
the amounts allocated to the Variable Account.)
 
ALLOCATION OF PREMIUMS
 
     If the application for a Contract is properly completed and is accompanied
by all the information necessary to process it, including payment of the initial
premium, the initial Net Premium (premium less deduction of any required premium
tax) will be allocated between the Money Market Subaccount and the Guaranteed
Account within two business days of receipt of such premium by Providentmutual
at its Home Office. If the application is not properly completed,
Providentmutual will retain the premium for up to five business days while it
attempts to complete the application. If the application is not complete at the
end of the 5-day period, Providentmutual will inform the applicant of the reason
for the delay and the initial premium will be returned immediately, unless the
applicant specifically consents to Providentmutual retaining the premium until
the application is complete. Once the application is complete, the initial Net
Premium will be allocated within two business days.
 
     At the time of application, the Owner selects how the initial Net Premium
is to be allocated among the Subaccounts and the Guaranteed Account. When, as
described above, Net Premium is allocated, the portion of the initial Net
Premium which is to be allocated to the Subaccounts of the Variable Account will
be allocated to the Money Market Subaccount for a 15-day period. After the
expiration of such 15-day period, the amount in the Money Market Subaccount will
be allocated to the chosen Subaccounts based on the proportion that the
allocation percentage for such Subaccount bears to the sum of the Subaccount
allocation percentages. Any subsequent Net Premiums will be allocated at the end
of the Valuation Period in which the subsequent premium is received by
Providentmutual in the same manner, unless the allocation percentages are
changed. Premiums will be allocated in accordance with the allocation schedule
in effect at the time the premium payment is received.
 
     For contracts sold to residents of states where the amount of the premium
returned during the "Free-Look Period" as described above reflects the
investment performance of the Variable Account, (i.e., Arizona, Minnesota and
Pennsylvania) the portion of the initial Net Premium for such Contract which is
to be allocated to the Variable Account will not automatically be allocated to
the Money Market Subaccount for
 
                                       19
<PAGE>   27
 
the 15-day period but instead will be credited to the chosen Subaccounts of the
Variable Account within 2 or 5 business days of receipt of such premium.
 
     The values of the Subaccounts of the Variable Account will vary with the
investment experience of the Subaccounts, and the Owner bears the entire
investment risk. Owners should periodically review their allocation schedule for
premiums in light of market conditions and the Owner's overall financial
objectives.
 
VARIABLE ACCOUNT VALUE
 
     The Variable Account Value will reflect the investment experience of the
chosen Subaccounts of the Variable Account, any premiums paid, any withdrawals,
any surrenders, any transfers, and any charges assessed in connection with the
Contract. There is no guaranteed minimum Variable Account Value, and, because a
Contract's Variable Account Value on any future date depends upon a number of
variables, it cannot be predetermined.
 
     Calculation of Variable Account Value.  The Variable Account Value is
determined on each Valuation Date. The value will be the aggregate of the values
attributable to the Contract in each of the Subaccounts, determined for each
Subaccount by multiplying the Subaccount's Unit Value on the relevant Valuation
Date by the number of Subaccount units allocated to the Contract.
 
     Determination of Number of Units.  Any amounts allocated to the Subaccounts
will be converted into units of the Subaccount. The number of units to be
credited to the Contract is determined by dividing the dollar amount being
allocated to the Subaccount by the Unit Value for that Subaccount at the end of
the Valuation Period during which the amount was allocated. The number of units
in any Subaccount will be increased at the end of the Valuation Period by any
premiums allocated to the Subaccount during the current Valuation Period and by
any transfers to the Subaccount from another Subaccount or from the Guaranteed
Account during the current Valuation Period. The number of units in any
Subaccount will be decreased at the end of the Valuation Period by any amounts
transferred from the Subaccount to another Subaccount or the Guaranteed Account
during the current Valuation Period and any surrender charge upon a withdrawal
or surrender and the Annual Administration Fee assessed in connection with the
Contract during the current Valuation Period.
 
   
     Determination of Unit Value.  The Unit Value for each Subaccount's first
Valuation Period is set at $500. The Unit Value for a Subaccount is calculated
for each subsequent Valuation Period by multiplying the Unit Value at the end of
the immediately preceding Valuation Period by the Net Investment Factor for the
Valuation Period for which the value is being determined.
    
 
     Net Investment Factor.  The Net Investment Factor is an index that measures
the investment performance of a Subaccount from one Valuation Period to the
next. Each Subaccount has its own Net Investment Factor, which may be greater or
less than one. The Net Investment Factor for each Subaccount for a Valuation
Period equals 1 plus the fraction obtained by dividing (a) by (b) where:
 
          (a) is the net result of:
 
             1. the investment income, dividends, and capital gains, realized or
                unrealized, credited during the current Valuation Period; plus
 
             2. any amount credited or released from reserves for taxes
                attributable to the operation of the Subaccount; minus
 
             3. the capital losses, realized or unrealized, charged during the
                current Valuation Period; minus
 
             4. any amount charged for taxes or any amount set aside during the
                Valuation Period as a reserve for taxes attributable to the
                operation or maintenance of the Subaccount; minus
 
             5. the amount charged for mortality and expense risk for that
                Valuation Period; minus
 
             6. the amount charged for administration for that Valuation Period;
                and
 
                                       20
<PAGE>   28
 
          (b) is the value of the assets in the Subaccount at the end of the
     preceding Valuation Period, adjusted for allocations and transfers to and
     withdrawals and transfers from the Subaccount occurring during that
     preceding Valuation Period.
 
TRANSFER PRIVILEGE
 
     Before the Maturity Date, an Owner may transfer all or a part of an amount
in the Subaccount(s) to another Subaccount(s) or to the Guaranteed Account, or
transfer a part of an amount in the Guaranteed Account to the Subaccount(s),
subject to these general restrictions and the additional restrictions below. The
minimum transfer amount must be the lesser of $500 or the entire amount in that
Subaccount or the Guaranteed Account. A transfer request that would reduce the
amount in a Subaccount or the Guaranteed Account below $500 will be treated as a
transfer request for the entire amount in that Subaccount or the Guaranteed
Account.
 
     The transfer will be made on the day Written Notice requesting such
transfer is received by Providentmutual. There is no limit on the number of
transfers which can be made between Subaccounts or to the Guaranteed Account.
However, only one transfer may be made from the Guaranteed Account each Contract
Year (See "Transfers from Guaranteed Account," Page 25). The first twelve
transfers during each Contract Year are free. Any unused free transfers do not
carry over to the next Contract Year. A $25 Transfer Processing Fee will be
assessed for the thirteenth and subsequent transfers during a Contract Year. For
the purpose of assessing the fee, each written request is considered to be one
transfer, regardless of the number of Subaccounts or the Guaranteed Account
affected by the transfer. The processing fee will be deducted from the amount
being transferred.
 
     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 Providentmutual.
Providentmutual reserves the right to suspend telephone transfer privileges at
any time, for any class of Contracts, for any reason.
 
     Providentmutual 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. Providentmutual, however, may be liable for such losses
if it does not follow those reasonable procedures. The procedures
Providentmutual 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 Variable Account Values
among the Subaccounts in order to achieve a particular percentage allocation of
Variable Account Values among such Subaccounts. Such percentage allocations must
be in whole numbers and must allocate amounts only among the Subaccounts. No
amounts will be transferred to the Guaranteed Account as a part of Automatic
Asset Rebalancing. The percentage allocation of your Contract Account Value for
rebalancing will be based on your premium allocation instructions in effect at
the time of rebalancing. Any allocation instructions that you give us that
differ from your then current allocation instructions will be treated as a
request to change such allocation instructions.
 
   
     Once elected Automatic Asset Rebalancing begins on the first quarterly or
annual anniversary following election. You may change or terminate Automatic
Asset Rebalancing by written instruction to Providentmutual, or by telephone if
you have previously authorized us to take telephone instructions.
Providentmutual reserves the right to suspend Automatic Asset Rebalancing at any
time for any class of contracts for any reason upon written notice to you.
    
 
   
DOLLAR COST AVERAGING
    
 
     Dollar Cost Averaging is a program which, if elected, enables the Owner of
a Contract to systematically and automatically transfer, on a monthly basis,
specified dollar amounts from the Designated Subaccount to the Contract's other
Subaccounts. By allocating on a regularly scheduled basis as opposed to
allocating the
 
                                       21
<PAGE>   29
 
total amount at one particular time, an Owner may be less susceptible to the
impact of market fluctuations. Providentmutual, however, makes no guarantee that
Dollar Cost Averaging will result in a profit or protect against loss.
 
   
     Dollar Cost Averaging may be elected for a period from 6 to 36 months. To
qualify for Dollar Cost Averaging, the following minimum amount must be
allocated to the Designated Subaccount: 6 months -- $3,000; 12 months -- $6,000;
24 months -- $12,000; 36 months -- $18,000. At least $500 must be transferred
from the Designated Subaccount each month. The amount required to be allocated
to the Designated Subaccount can be made an initial or subsequent investment or
by transferring amounts into the Designated Subaccount from the other
Subaccounts or from the Guaranteed Account (which may be subject to certain
restrictions). (See "Transfers from Guaranteed Account," Page 27.)
    
 
     Election into this program may occur at the time of application by
completing the authorization on the application or at any time after the
Contract is issued by properly completing the election form and returning it to
the Company by the beginning of the month and ensuring that the required minimum
amount is in the Money Market Subaccount, Dollar Cost Averaging transfers may
not commence until the later of (a) 30 days after the Contract Date and (b) five
days after the end of the free look period.
 
     Once elected, transfers from the Money Market Subaccount will be processed
monthly until the number of designated transfers have been completed, or the
value of the Money Market Subaccount is completely depleted, or the Owner
instructs Providentmutual in writing to cancel the monthly transfers.
 
     Transfers made under the Dollar Cost Averaging program will not count
toward the twelve transfers permitted each Contract Year without imposing the
Transfer Charge. Providentmutual reserves the right to discontinue offering
automatic transfers upon 30 days' written notice to the Owner.
 
WITHDRAWALS AND SURRENDER
 
   
     Withdrawals.  At any time before the earlier of the death of the Annuitant
or the Maturity Date, an Owner may withdraw part of the Cash Surrender Value.
The minimum amount which may be withdrawn is $500; the maximum amount is that
which would leave a cash surrender value of not less than $2,000. A withdrawal
request which would reduce the amount in a Subaccount or in the Guaranteed
Account below $500 will be treated as a request for full withdrawal of the
amount in that Subaccount or the Guaranteed Account. Providentmutual will
withdraw the amount requested from the Contract Account Value on the day Written
Notice for the withdrawal is received at its Home Office. Any applicable
Surrender Charge will be deducted from the remaining Contract Account Value.
(See "Surrender Charge," Page 27.)
    
 
     The Owner may specify the amount to be withdrawn from certain Subaccounts
or the Guaranteed Account for the withdrawal. If the Owner does not so specify
or the amount in the designated Subaccounts or Guaranteed Account is inadequate
to comply with the request, the withdrawal will be made from each Subaccount and
the Guaranteed Account based on the proportion that the value is such account
bears to the Contract Account Value immediately prior to the withdrawal.
 
   
     A withdrawal may have adverse Federal income tax consequences. (See
"Taxation of Annuities," Page 34.)
    
 
     Systematic Withdrawals.  The Systematic Withdrawal Plan enables the Owner
of a Contract to pre-authorize a periodic exercise of the withdrawal right
described in the Contract. The Owner may elect the plan at the time of
application by completing the authorization on the application form and making a
minimum initial premium payment of $15,000 or by properly completing the
election form after a Contract is issued if it has a Contract Account Value of
$15,000. Certain Federal income tax consequences may apply to systematic
withdrawals from the Contract and the Owner should, therefore, consult with his
or her tax advisor before requesting any Systematic Withdrawal Plan.
 
     Contract Owners entering into the plan instruct Providentmutual to withdraw
a level dollar amount from the Contract on a monthly or quarterly basis.
Distributions will begin on the monthly or quarterly anniversary following the
receipt of the request. The minimum, distribution requested must be for at least
$100 monthly or at least $300 quarterly. The maximum amount which can be
withdrawn under the plan each year is 10% of the
 
                                       22
<PAGE>   30
 
   
Contract Account Value as of the beginning of the Contract Year in which the
plan is elected or 10% of the initial premium paid if elected at the time of
application. Providentmutual will notify the Owner of the total amount to be
withdrawn in a subsequent Contract Year will exceed 10% of the Contract Account
Value as of the beginning of such Contract Year. Unless the Owner instructs
Providentmutual to reduce the withdrawal amount for that year so that it does
not exceed the 10% limit, Providentmutual will continue to process withdrawals
for the designated amount. Once the amount of the withdrawals exceeds the 10%
limit, Providentmutual will deduct the applicable Surrender Charge from the
remaining payments made during that Contract Year. (See "Surrender Charge," Page
27.)
    
 
     Providentmutual will pay the Owner the amount requested each month or
quarter and cancel units equal to the amount withdrawn from the Subaccounts and
the Guaranteed Account based on the proportion that the value in such Subaccount
or Guaranteed Account bears to the Contract Account Value immediately prior to
the withdrawal. In the event that the amount to be withdrawn exceeds the
Subaccount's Value, Providentmutual will process the withdrawal for the amount
available and will contact the Owner for further instructions.
 
   
     Each payment under the Systematic Withdrawal Plan of less than 10% of the
Contract Account Value as of the beginning of such Contact Year is not subject
to a Surrender Charge. However, notwithstanding the rules ordinarily governing
the imposition of a Surrender Charge (See "Surrender Charge," Page 27), any
other withdrawal in a year when the Systematic Withdrawal Plan has been utilized
will be subject to the Surrender Charge. If an additional withdrawal is made
from a Contract participating in the plan, systematic withdrawals will
automatically terminate and may only be reinstated on or after the beginning of
the next Contract Year pursuant to a new request.
    
 
     Systematic withdrawals may be discontinued by the Owner at any time upon
written request to Providentmutual. Providentmutual reserves the right to
discontinue offering systematic withdrawals upon 30 days' written notice to
Owners.
 
   
     Charitable Remainder Trust Rider.  Contract Owner may elect a Charitable
Remainder Trust Rider, which combines an extended Maturity Date to the contract
anniversary nearest the Annuitant's age 100, unless a lump sum payment of Cash
Surrender Value is elected, with a replacement of the surrender
charge/withdrawal provision for contracts issued in a Charitable Remainder
Trust. A Charitable Remainder Trust allows for income to be distributed and for
the payment of trustee fees and charges. The rider would only apply the
appropriate surrender charge to withdrawals or surrenders during a contract year
that exceed the greater of: (1) 10% of the Contract Account Value as of the
beginning of the contract year; or (2) any amounts in excess of the total
premiums paid. There will be no limit on the number of withdrawals occurring in
any contract year.
    
 
   
     Surrender.  At any time before the earlier of the death of the Annuitant or
the Maturity Date, the Owner may request a surrender of the Contract for its
Cash Surrender Value (Contract Account Value less any applicable Surrender
Charge). The proceeds paid to the Contract Owner will equal the amount of the
surrender less the Surrender Charge and any withholding or premium taxes. (See
"Surrender Charge," Page 27.) The Cash Surrender Value will be determined on the
date Written Notice of Surrender and the Contract are received at
Providentmutual's Home Office. The Cash Surrender Value will be paid in a lump
sum unless the Owner requests payment under a Payment Option. A surrender may
have adverse Federal income tax consequences. (See "Taxation of Annuities." Page
34.)
    
 
     Restrictions on Distributions from Certain Contracts.  There are certain
restrictions on surrenders of and withdrawals from Contracts used as funding
vehicles for Internal Revenue Code 403(b) retirement plans. Section 403(b)(11)
of the Internal Revenue Code of 1986, as amended, restricts the distribution
under Section 403(b) annuity contracts of: (i) elective contributions made in
years beginning after December 31, 1988; (ii) earnings on those contributions;
and (iii) earnings in such years on amounts held as of the last year beginning
before January 1, 1989. Distributions of those amounts may only occur upon the
death of the employee, attainment of age 59 1/2, separation from service,
disability, or financial hardship. In addition, income attributable to elective
contributions may not be distributed in the case of hardship.
 
                                       23
<PAGE>   31
 
     Contract Termination.  Providentmutual may end this Contract and pay the
Cash Surrender Value to the Owner if, before the Maturity Date, all of these
events simultaneously exist;
 
     1. no premiums have been paid for at least two years;
 
     2. the Contract Account Value is less than $2,000; and
 
     3. the total premiums paid, less any partial withdrawals, is less than
$2,000.
 
     Providentmutual will mail the Owner a notice of its intention to end the
Contract at least six months in advance. The Contract will automatically
terminate on the date specified in the notice, unless Providentmutual receives
an additional premium payment before the termination date specified in the
notice. This additional premium payment must be for at least the required
minimum amount. (Termination of the Contract under this provision is not
permitted in New Jersey.)
 
DEATH BENEFIT BEFORE MATURITY DATE
 
   
     Step Up Rider.  Contract Owner may elect the Step-up Rider, which provides
a guaranteed minimum death benefit equal to the Contract Account Value as of the
six year contract anniversary and is reset every six years to the Contract
Account Value on the next six year contract anniversary, if greater. This reset
continues until the six year contract anniversary on or before the annuitant's
85th birthday. Premiums paid between the six year contract anniversaries are
also included in the death benefit proceeds. A reduction in the guaranteed
minimum death benefit for any withdrawal will be based on the proportion of the
withdrawal to the Contract Account Value. At no time will the death benefit
proceeds be less than either the Contract Account Value on the date
Providentmutual receives due proof of the Annuitant's death or the sum of
premiums paid, less any withdrawals, including applicable Surrender Charges.
    
 
   
     Rising Floor Rider.  Contract Owner may elect the Rising Floor Rider, which
provides a guaranteed minimum death benefit equal to the sum of premiums paid
less reductions for withdrawals accumulating at 4 1/2% interest until the
contract anniversary prior to the annuitant's 75th birthday. Thereafter,
premiums are added and reductions for withdrawals are deducted for the
guaranteed death benefit. A reduction in the guaranteed minimum death benefit
for any withdrawal will be based on the proportion of the withdrawal to the
Contract Account Value. At no time will the death benefit proceeds be less than
the Contract Account Value.
    
 
     Death of Annuitant.  If the Annuitant dies before the Maturity Date,
Providentmutual will pay the death benefit under the Contract to the
Beneficiary. During the first six Contract Years, the death benefit is equal to
the greater of: the premiums paid, less any withdrawals (including applicable
surrender charges); or the Contract Account Value on the date Providentmutual
receives due proof of Annuitant's death. After the end of the sixth Contract
Year, the death benefit is equal to the greatest of:
 
          1. the Contract Account Value as of the end of the sixth Contract Year
             less subsequent amounts withdrawn; or
 
          2. the Contract Account Value on the date Providentmutual receives due
             proof of the Annuitant's death; or
 
          3. the premiums paid, less any withdrawals (including applicable
             Surrender Charges).
 
There is no death benefit payable if the Annuitant dies after the Maturity Date.
The proceeds will be paid to the Beneficiary in a lump sum unless the Owner or
Beneficiary elects a Payment Option. If the Annuitant is the Owner, the proceeds
must be distributed in accordance with the rules set forth below in "Death of
Owner" for the death of an Owner before the Maturity Date.
 
     Death of Owner.  If an Owner dies before the Maturity Date, Federal tax law
requires (for a Non-Qualified Contract) that the Contract Account Value (or if
the Owner is the Annuitant, the proceeds payable upon the Annuitant's death) be
distributed to the Beneficiary within five years after the date of the Owner's
death. If an Owner dies on or after the Maturity Date, any remaining payments
must be distributed at least as rapidly as under the Payment Option in effect on
the date of such Owner's death.
 
                                       24
<PAGE>   32
 
     These distribution requirements will be considered satisfied as to any
portion of the proceeds payable to or for the benefit of a designated
Beneficiary, and which is distributed over the life (or a period not exceeding
the life expectancy) of that Beneficiary, provided that such distributions begin
within one year of the Owner's death. However, if the Owner's spouse is the
designated Beneficiary, the Contract may be continued with such surviving spouse
as the new Owner. If the Contract has joint owners, the surviving joint owner
will be the designated Beneficiary. Joint owners must be husband and wife as of
the Contract Date.
 
     If the Owner is not an individual, the Annuitant, as determined in
accordance with Section 72(s) of the Internal Revenue Code, will be treated as
Owner for purposes of these distribution requirements, and any changes in the
Annuitant will be treated as the death of the Owner.
 
     Other rules may apply to a Qualified Contract.
 
PROCEEDS ON MATURITY DATE
 
     The maturity Date is selected by the Owner, subject to Providentmutual's
approval and state law.
 
     On the Maturity Date, the proceeds will be applied under the Life Annuity
with Ten Year Certain Payment Option, unless the Owner chooses to have the
proceeds paid under another Payment Option or in a lump sum. If a Payment Option
is elected, the amount which will be applied is the Contract Account Value; if a
lump sum payment is chosen, the amount paid will be the Cash Surrender Value on
the Maturity Date.
 
     The Maturity Date may be changed subject to these limitations: the Owner's
Written Notice must be received at the Home Office at least 30 days before the
current Maturity Date; the requested Maturity Date must be a date that is at
least 30 days after receipt of the Written Notice; and the requested Maturity
Date must be not later than the first day of the month after the Annuitant's
90th birthday, or any earlier date required by law.
 
PAYMENTS
 
     Any withdrawal, Cash Surrender Value, or death benefit will usually be paid
within seven days of receipt of written request or receipt and filing of due
proof of death. However, payments may be postponed if:
 
     1. the New York Stock Exchange is closed, other than customary weekend and
        holiday closings, or trading on the exchange is restricted as determined
        by the SEC; or
 
     2. the SEC permits by an order the postponement for the protection of
        policyowners; or
 
     3. the SEC determines that an emergency exists that would make the disposal
        of securities held in the Variable Account or the determination of the
        value of the Variable Account's net assets not reasonably practicable.
 
     If a recent check or draft has been submitted, Providentmutual has the
right to defer payment until such check or draft has been honored.
 
     Providentmutual has the right to defer payment of any withdrawal, cash
surrender, or transfer from the Guaranteed Account for up to six months from the
date of receipt of Written Notice for a withdrawal, surrender, or transfer. If
payment is not made within 30 days after receipt of documentation necessary to
complete the transaction, or such shorter period required by a particular
jurisdiction, interest will be added to the amount paid from the date of receipt
of documentation at 3% or such higher rate required for a particular state.
 
MODIFICATION
 
     Upon notice to the Owner, Providentmutual may modify the Contract, but only
if such modification:
 
     1. is necessary to make the Contract or the Variable Account comply with
        any law or regulation issued by a governmental agency to which
        Providentmutual is subject; or
 
                                       25
<PAGE>   33
 
     2. is necessary to assure continued qualification of the Contract under the
        Internal Revenue Code or other Federal or state laws relating to
        retirement annuities or variable annuity contracts; or
 
     3. is necessary to reflect a change in the operation of the Variable
        Account; or
 
     4. provides additional Variable Account and/or fixed accumulation options.
 
     In the event of any such modifications, Providentmutual will make
appropriate endorsement to the Contract.
 
REPORTS TO CONTRACT OWNERS
 
     At least quarterly, Providentmutual will mail to each Contract Owner, at
such Owner's last known address of record, a report containing the Contract
Account Value and Cash Surrender Value of the Contract and any further
information required by and applicable law or regulation. The information will
be as of a date not more than two months prior to the date of mailing.
 
CONTRACT INQUIRIES
 
     Inquiries regarding a Contract may be made by writing to Providentmutual at
its Home Office, 300 Continental Drive, Newark, Delaware 19713.
 
                             THE GUARANTEED ACCOUNT
 
     An Owner may allocate some or all of the Net Premiums and transfer some or
all of the Contract Account Value to the Guaranteed Account, which is part of
Providentmutual's General Account and pays interest at declared rates guaranteed
for each calendar year (subject to a minimum guaranteed interest rate of 3%).
The principal, after deductions, is also guaranteed. Providentmutual's General
Account supports its insurance and annuity obligations. The Guaranteed Account
has not, and is not required to be, registered with the SEC under the Securities
Act of 1933, and neither the Guaranteed Account nor Providentmutual's General
Account has been registered as an investment company under the Investment
Company Act of 1940. Therefore, neither Providentmutual's General Account, the
Guaranteed Account, nor any interests therein are generally subject to
regulation under the 1933 Act or the 1940 Act. The disclosures relating to these
accounts which are included in this Prospectus are for your information and have
not been reviewed by the SEC. However, such disclosures may be subject to
certain generally applicable provisions of Federal securities laws relating to
the accuracy and completeness of statements made in prospectuses.
 
     The portion of the Contract Account Value allocated to the Guaranteed
Account will be credited with rates of interest, as described below. Since the
Guaranteed Account is part of Providentmutual's General Account, Providentmutual
assumes the risk of investment gain or loss on this amount. All assets in the
General Account are subject to Providentmutual's general liabilities from
business operations.
 
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
 
     The Guaranteed Account Value is guaranteed to accumulate at a minimum
effective annual interest rate of 3%. Providentmutual intends to credit the
Guaranteed Account Value with current rates in excess of the minimum guarantee
but is not obligated to do so. These current interest rates are influenced by,
but do not necessarily correspond to, prevailing general market interest rates.
Since Providentmutual, in its sole discretion, anticipates changing the current
interest rate from time to time, different allocations to and from the
Guaranteed Account Value will be credited with different current interest rates.
The interest rate to be credited to each amount allocated or transferred to the
Guaranteed Account will apply to the end of the calendar year in which such
amount is received or transferred. At the end of the calendar year,
Providentmutual will determine a new current interest rate on such amount and
accrued interest thereon (which may be a different current interest rate from
the current interest rate on new allocations to the Guaranteed Account on that
date). The rate declared on such amount and accrued interest thereon at the end
of each calendar year will be guaranteed for the following calendar year. Any
interest credited on the amounts
 
                                       26
<PAGE>   34
 
in the Guaranteed Account in excess of the minimum guaranteed rate of 3% per
year will be determined in the sole discretion of Providentmutual. The Owner
assumes the risk that interest credited may not exceed the guaranteed minimum
rate.
 
     Amounts deducted from the Guaranteed Account for the administration fee,
withdrawals, transfers to the Subaccounts, or other charges are currently, for
the purpose of crediting interest, accounted for on a last in, first out
("LIFO") method.
 
     Providentmutual reserves the right to change the method of crediting
interest from time to time, provided that such changes do not have the effect of
reducing the guaranteed rate of interest below 3% per annum or shorten the
period for which the interest rate applies to less than a calendar year (except
for the year in which such amount is received or transferred).
 
     Calculation of Guaranteed Account Value.  The Guaranteed Account Value at
any time is equal to amounts allocated and transferred to it plus interest
credited to it, minus amounts deducted, transferred, or withdrawn from it.
 
TRANSFERS FROM GUARANTEED ACCOUNT
 
     Within 30 days prior to or following any contract Anniversary, one transfer
is allowed from the Guaranteed Account to any or all of the Subaccounts. The
amount transferred from the Guaranteed Account may not exceed 25% of the
guaranteed Account Value on the date of transfer, unless the balance after the
transfer is less than $500 in which case the entire amount will be transferred.
If the written request for such transfer is received prior to the Contract
Anniversary, the transfer will be made as of the Contract Anniversary; if the
written request is received after the Contract Anniversary, the transfer will be
made as of the date Providentmutual receives the written request at its Home
Office.
 
PAYMENT DEFERRAL
 
     Providentmutual has the right to defer payment of any withdrawal, cash
surrender, or transfer from the Guaranteed Account for up to six months from the
date of receipt of the Written Notice for withdrawal, surrender, or transfer.
 
                             CHARGES AND DEDUCTIONS
 
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
 
     General.  No charge for sales expense is deducted from premiums at the time
premiums are paid. However, within certain time limits described below, a
Surrender Charge (contingent deferred sales charge) is deducted from the
Contract Account Value if a withdrawal is made or a Contract is surrendered
before annuity payments begin. In the event surrender charges are not sufficient
to cover sales expenses, the loss will be borne by Providentmutual; conversely,
if the amount of such charges proves more than enough, the excess will be
retained by Providentmutual. Providentmutual does not currently believe that the
surrender charges imposed will cover the expected costs of distributing the
Contracts. Any shortfall will be made up from Providentmutual's general assets.
 
                                       27
<PAGE>   35
 
     Charges for Withdrawals or Surrender.  If a withdrawal is made or a
Contract is surrendered, the applicable Surrender Charge will be as follows:
 
<TABLE>
<CAPTION>
CONTRACT YEAR IN WHICH  CHARGES AS PERCENTAGE OF
    WITHDRAWAL OR                AMOUNT
   SURRENDER OCCURS     WITHDRAWN OR SURRENDERED
- ----------------------  ------------------------
<S>                     <C>
          1                        6%
          2                        5
          3                        4
          4                        3
          5                        2
          6                        1
     7 and after                   0
</TABLE>
 
     No Surrender Charge is deducted if the withdrawal or surrender occurs after
six full Contract Years. In addition, no Surrender Charge is deducted on the
Maturity Date if the Contract proceeds are applied under a Payment Option.
 
     In no event will the total Surrender Charges assessed under a Contract
exceed 8 1/2% of the total gross premiums paid under that contract.
 
     If the Contract is being surrendered, the Surrender Charge is deducted from
the Contract Account Value in determining the Cash Surrender Value. For a
withdrawal, the Surrender Charge is deducted from the Contract Account Value
remaining after the amount requested is withdrawn.
 
     Amounts Not Subject to Surrender Charge.  Subject to certain restrictions,
up to 10% of the Contract Account Value as of the beginning of a Contract Year
may be withdrawn or surrendered in that Contract Year without a Surrender
Charge. Specifically, after the first Contract Year, the otherwise applicable
Surrender Charge will not be applied to the first and second withdrawals during
a Contract Year to the extent that the amount withdrawn is not in excess of 10%
of the Contract Account Value as of the beginning of such Contract Year. During
the first Contract Year, the full amount of all withdrawals (and any surrender)
will be subject to the Surrender Charge.
 
     After the first Contract Year, any amounts withdrawn in excess of 10% or
subsequent to the second withdrawal in a Contract Year will be assessed a
Surrender Charge. This right is not cumulative from Contract Year to Contract
Year. If the Contract is surrendered and there have been no prior withdrawals
during such Contract Year, no Surrender Charge will apply to the amount of the
surrender up to 10% of the Contract Account Value as of the beginning of that
Contract Year. If a surrender is made during a Contract Year in which one or
more withdrawals have been made, the Contract Owner may surrender free of charge
an amount equal to 10% of the Contract Account Value as of the beginning of the
Contract Year less the total amount previously withdrawn during such Contract
Year without imposition of the Surrender Charge. In the event that a surrender
is made in excess of the amount which may be surrendered free of charge, only
the excess amount will be subject to the Surrender Charge.
 
ADMINISTRATIVE CHARGES
 
     Annual Administration Fee.  On each Contract Anniversary prior to and
including the Maturity Date, and upon surrender of the Contract or on the
Maturity Date (other than on a Contract Anniversary), Providentmutual deducts
from the Contract Account Value an Annual Administration Fee of $30 to reimburse
it for administrative expenses relating to the Contract. The charge will be
deducted from each Subaccount and the Guaranteed Account based on the proportion
that the value in each such account bears to the total Contract Account Value.
(In some states such as Washington and South Carolina, the charge can only be
deducted from the Guaranteed Account to the extent of premiums allocated to such
account during the Contract Year plus the amount of interest in excess of the
guaranteed minimum which is credited to the account for the Contract Year. The
portion of the charge which is allocable to the Guaranteed Account but
 
                                       28
<PAGE>   36
 
cannot be deducted from such account due to this limitation will be deducted
proportionally from the Subaccounts.). No Annual Administration Fee is payable
during the annuity period.
 
     Asset-Based Administration Charge.  To compensate Providentmutual for costs
associated with administration of the Contracts, prior to the Maturity Date
Providentmutual deducts a daily asset-based administration charge from the
assets of the Variable Account equal to an annual rate of .15%.
 
     The Contracts are administered by PMLIC pursuant to a Service Agreement
between Providentmutual and PMLIC. Under the agreement, PMLIC also maintains
records of transactions relating to the Contracts and provides other services.
 
TRANSFER PROCESSING FEE
 
     The first twelve transfers during each Contract Year are free. A $25
Transfer Processing Fee will be assessed for each additional transfer during
such Contract Year. For the purpose of assessing the fee, each Written Notice of
transfer is considered to be one transfer, regardless of the number of
Subaccounts or accounts affected by the transfer. The processing fee will be
deducted from the amount being transferred. Providentmutual does not expect a
profit from this fee.
 
MORTALITY AND EXPENSE RISK CHARGE
 
     To compensate Providentmutual for assuming mortality and expense risks,
prior to the Maturity Date Providentmutual deducts a daily Mortality and Expense
Risk Charge from the assets of the Variable Account. Providentmutual will impose
a charge in an amount that is equal to an annual rate of 1.25% (daily rate of
 .00342466%) (approximately 0.70% for mortality risk and 0.55% for expense risk).
 
   
     The mortality risk Providentmutual assumes is that Annuitants may live for
a longer period of time than estimated when the guarantees in the contract were
established. Because of these guarantees, each Payee is assured that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk Providentmutual assumes also includes a guarantee to pay a death benefit if
the Annuitant dies before the Maturity Date. The expense risk Providentmutual
assumes is the risk that the surrender charges, administration fees, and
transfer fees may be insufficient to cover actual future expenses. In the event
that there are any profits from fees and charges deducted under the Contract,
including but not limited to mortality and expense risk charges, such profits
could be used to finance the distribution of the Contracts.
    
 
OTHER CHARGES INCLUDING INVESTMENT ADVISORY FEES OF THE FUNDS
 
     Because the Variable Account purchases shares of the Funds, the net assets
of each Subaccount of the Variable Account will reflect the investment advisory
fees and operating expense incurred by the Funds. For each Portfolio, an
investment advisor is paid a daily fee by the Funds for its investment advisory
services. Each advisory fee is a percentage of a Portfolio's average daily net
assets, and thus the actual fee paid depends on the Portfolio and the assets of
such Portfolio. Each Portfolio of the Funds is also responsible for its
operating expenses. See the accompanying current Prospectuses for the Funds for
further details.
 
PREMIUM TAXES
 
     Various states and other governmental entities levy a premium tax on
annuity contracts issued by insurance companies. Premium tax rates are subject
to change from time to time by legislative and other governmental action. In
addition, other governmental units within a state may levy such taxes.
 
     The timing of tax levies varies from one taxing authority to another. If
premium taxes are applicable to a Contract, they will be deducted, depending on
when such taxes are paid to the taxing authority, either (a) from premiums as
they are received, or (b) from the Contract proceeds upon (i) a withdrawal from
or surrender of the Contract or (ii) application of the proceeds to a Payment
Option.
 
                                       29
<PAGE>   37
 
OTHER TAXES
 
     Currently, no charge will be made against the Variable Account for Federal
income taxes. Providentmutual may, however, make such a charge in the future if
income or gains within the Variable Account will result in any Federal income
tax liability to Providentmutual. Charges for other taxes attributable to the
Variable Account, if any, may also be made.
 
                                PAYMENT OPTIONS
 
     The Contract ends on the Maturity Date, at which time the Contract Account
Value will be applied under a Payment Option, unless the Owner elects to receive
the Cash Surrender Value in a single sum. If an election of a Payment Option has
not been filed at Providentmutual's Home Office on the Maturity Date, the
proceeds will be paid as a life annuity with payments for ten years guaranteed.
Prior to the Maturity Date, the Owner can have the Cash Surrender Value applied
under a Payment Option, or a Beneficiary can have the death benefit applied
under a Payment Option. Any premium tax applicable will be deducted from the
Cash Surrender Value or the Contract Account Value at the time payments
commence. The Contract must be surrendered so that the applicable amount can be
paid in a lump sum or a supplemental contract for the applicable Payment Option
can be issued.
 
     The Payment Options available are described below. The term "Payee" means a
person who is entitled to receive payment under that option. The Payment Options
are fixed, which means that each option has a fixed and guaranteed amount to be
paid during the annuity period that is not in any way dependent upon the
investment experience of the Variable Account.
 
ELECTION OF OPTIONS
 
     An option may be elected, revoked, or changed at any time before the
Maturity Date while the Annuitant is living. If the Payee is other than the
Owner, the election of a Payment Option requires the consent of Providentmutual.
If an election is not in effect at the Annuitant's death or if payment is to be
made in one sum under an existing election, the Beneficiary may elect one of the
options after the death of the Annuitant.
 
     An election of option and any revocation or change must be made by Written
Notice. It must be filed with the Home Office.
 
     An option may not be elected if any periodic payment under the election
would be less than $50. Subject to this condition, payments may be made
annually, semi-annually, quarterly, or monthly and are made at the beginning of
such period.
 
DESCRIPTION OF OPTIONS
 
     Option A -- Life Annuity Option.  To have the proceeds paid in equal
amounts each month during the Payee's lifetime with payments ceasing with the
last payment prior to the death of the Payee. No amounts are payable after the
Payee dies. Therefore, if the Payee dies immediately following the date of the
first payment, the Payee will receive one monthly payment only.
 
     Option B -- Life Annuity Option with 10 Years Guaranteed.  To have the
proceeds paid in equal amounts each month during the Payee's lifetime with the
guarantee that payments will be made for a period of not less than ten years.
Under this option, if any Beneficiary dies while receiving payment, the present
value of the current dollar amount on the date of death of any remaining
guaranteed payments will be paid in one sum to the executors or administrators
of the Beneficiary unless otherwise provided in writing. Calculation of such
present value shall be at 3% which is the rate of interest assumed in computing
the amount of annuity payments.
 
     The amount of each payment will be determined from the Tables in the
Contract which apply to the particular option using the Payee's age and sex. If
the Contract is sold in a group or employer-sponsored arrangement, the amount of
the payments will be based on the Payee's age, only. Age will be determined from
the nearest birthday at the due date of the first payment.
                                       30
<PAGE>   38
 
     Alternate Income Option.  In lieu of one of the above options, the Contract
Account Value, Cash Surrender Value or death benefit, as applicable, may be
settled under an Alternate Income Option based on Providentmutual's single
premium immediate annuity rates in effect at the time of settlement. Such rates
will be adjusted to a due basis. The first payment will be made immediately (at
the beginning of the first month, rather than at the end of the month) which
will result in receiving one additional payment. The income will be increased by
4%. In no case will the income be less than that which would be payable if the
amount were used to purchase a single premium immediate annuity adjusted to a
due basis.
 
                            YIELDS AND TOTAL RETURNS
 
   
     From time to time, Providentmutual may advertise or include in sales
literature historic performance data for the Variable Accounts, including
yields, effective yields, standard annual total returns and nonstandard measures
of performance for the Subaccounts. These figures are based on historical
earnings and do not indicate or project future performance. Each Subaccount may,
from time to time, advertise or include in sales literature performance relative
to certain performance rankings and indices compiled by independent
organizations. More detailed information as to the calculation of performance
information, as well as comparisons with unmanaged market indices, appears in
the Statement of Additional Information.
    
 
     Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Portfolio of the Funds. The Funds'
performance in part reflects the Funds' expenses. See the Prospectuses for the
Funds.
 
   
     The yield of the Money Market Subaccount refers to the annualized
investment income generated by an investment in the Subaccount over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
the Subaccount is assumed to be reinvested. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment.
    
 
     The yield of a Subaccount (except the Money Market Subaccount) refers to
the annualized income generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is calculated by assuming that
the income generated by the investment during that 30-day or one-month period is
generated each period over a 12-month period and is shown as a percentage of the
investment.
 
     The total return of a Subaccount refers to return quotations assuming an
investment under a Contract has been held in the Subaccount for various periods
of time including, but not limited to, a period measured from the date the
Subaccount commenced operations. When a Subaccount has been in operation for
one, five, and ten years, respectively, the total return for these periods will
be provided. For periods prior to the date the Variable Account commenced
operations, performance information for Contracts funded by the Subaccounts will
be calculated based on the performance of the Funds' Portfolios and the
assumption that the Subaccounts were in existence for the same periods as those
indicated for the Funds' Portfolios, with the level of Contract charges that
were in effect at the inception of the Subaccounts for the Contracts.
 
     The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Subaccount from the beginning date of the measuring
period to the end of that period. This standardized version of average annual
total return reflects all historical investment results, less all charges and
deductions applied against the Subaccount (including any surrender charge that
would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
 
     In addition to the standard version described above, total return
performance information computed on two different non-standard bases may be used
in advertisements. Average total return information may be presented, computed
on the same basis as described above, except deductions will not include the
Surrender
 
                                       31
<PAGE>   39
 
Charge. In addition, Providentmutual may from time to time disclose average
annual total return in non-standard formats and cumulative total return for
Contracts funded by the Subaccounts.
 
     Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
 
     In advertising and sales literature, the performance of each Subaccount may
be compared to the performance of other variable annuity issuers in general or
to the performance of particular types of variable annuities investing in mutual
funds, or investment series of mutual funds with investment objectives similar
to each of the Subaccounts. Lipper Analytical Services, Inc. ("Lipper") and the
Variable Annuity Research Data Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity issuers in each of the
major categories of investment objectives on an industry-wide basis.
 
     Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree of
risk inherent in their investment objectives.
 
     Advertising and sales literature may also compare the performance of each
Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index assumes the reinvestment of
dividends but does not reflect any "deduction" for the expense of operating or
managing an investment portfolio. Other independent ranking services and indices
may also be used as a source of performance comparison.
 
     Providentmutual may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the underlying
Portfolio's investment experience is positive.
 
                               FEDERAL TAX STATUS
 
     THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
 
INTRODUCTION
 
     This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by Providentmutual. Any person
concerned about these tax implications should consult a competent tax advisor
before initiating any transaction. This discussion is based upon
Providentmutual'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 the continuation of the present Federal income tax
laws or of the current interpretation by the Internal Revenue Service, Moreover,
no attempt has been made to consider any applicable state or other tax laws.
 
   
     The Contract may be purchased on a non-qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). The Qualified Contract is
designed for use by individuals whose premium payments are comprised solely of
proceeds from and/or contributions under retirement plans which are intended to
qualify as plans entitled to special income tax treatment under Sections 401(a),
403(b), or 408A of the Internal Revenue Code of 1986, as amended (the "Code").
The ultimate effect of Federal income taxes on the amounts held under a
Contract, or annuity payments, and on the economic benefit to the Owner, the
Annuitant, or the Beneficiary depends on the type of retirement plan, on the tax
and employment status of the individual concerned, and on Providentmutual's tax
    
                                       32
<PAGE>   40
 
status. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax-qualified plan and receiving
distributions from a Qualified Contract in order to continue receiving favorable
tax treatment. Therefore, purchasers of Qualified Contracts should seek
competent legal and tax advice regarding the suitability of a Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a Contract. The following discussion assumes that Qualified
Contracts are purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special Federal income tax treatment.
 
TAX STATUS OF THE CONTRACT
 
     Diversification Requirements.  Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Variable
Account, through each Portfolio of the Funds, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Subaccounts may be
invested. Although Providentmutual does not have control over the Funds in which
the Variable Account invests, we believe that each Portfolio in which the
Variable Account owns shares will meet the diversification requirements and that
therefore the Contract will be treated as an annuity contact under the Code.
 
   
     Owner Control.  In certain circumstances, owners of variable annuity
contracts may be considered the owners, for Federal income tax purposes, of the
assets of the separate account used to support their contracts. In those
circumstances, income and gains from the separate account assets would be
includable in the variable annuity contract owner's gross income. Several years
ago, the IRS stated in published rulings that a variable contract owner will be
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. More recently, the Treasury Department
announced, in connection with the issuance of regulations concerning investment
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, rather that 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 contract are similar to, but different in
certain resects from, those described by the Service in rulings in which it was
determined that contractowners were not owners of separate account assets. For
example, the Owner of the Contract has the choice of one or more Subaccounts in
which to allocate premiums and Contract values, and may be able to transfer
among Subaccounts more frequently than in such rulings. These differences could
result in the Owner's being treated as the owner of the assets of the Variable
Account. In addition, Providentmutual 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. Providentmutual therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Owner from being
considered the owner of the assets of the Variable Account.
 
     Required Distributions.  In addition to the requirements of Section 817(h)
of the Code, in order to be treated as an annuity contract for Federal income
tax purposes, Section 72(s) of the Code requires any Non-Qualified Contract to
provide that; (a) if any Owner dies on or after the Maturity Date but prior to
the time the entire interest in the Contract has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death; and (b)
if any Owner dies prior to the annuity commencement date, the entire interest in
the Contract will be distributed within five years after the date of the Owner's
death. These requirements will be considered satisfied as to any portion of the
Owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such Beneficiary or over
a period not extending beyond the life expectancy of that Beneficiary, provided
that such distributions begin within one year of that Owner's death. The Owner's
"designated beneficiary" is the person designated by such owner as a Beneficiary
and to whom ownership of the Policy passes by reason of death and must be a
natural person. However, if the owner's
 
                                       33
<PAGE>   41
 
"designated beneficiary" is the surviving spouse of the Owner, the contract may
be continued with the surviving spouse as the new Owner.
 
     The Non-Qualified Contract contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Providentmutual intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise.
 
     Other rules may apply to Qualified Contracts.
 
     The following discussion assumes that the Contracts will qualify as annuity
contracts for Federal income tax purposes.
 
TAXATION OF ANNUITIES
 
     In General.  Section 72 of the Code governs taxation of annuities in
general. Providentmutual believes that an Owner who is a natural person
generally is not taxed on increases in the value of a Contract until
distribution occurs by withdrawing all or part of the Contract Account Value
(e.g., partial withdrawals and complete surrenders) or as annuity payments under
the Payment Option elected. For this purpose, the assignment, pledge, or
agreement to assign or pledge any portion of the Contract Account Value (and in
the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or an annuity) is taxable as
ordinary income.
 
     The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Contract Account Value
over the "investment in the contract" during the taxable year. There are some
exceptions to this rule, and a prospective Owner that is not a natural person
may wish to discuss these with a competent tax advisor.
 
     The following discussion generally applies to Contracts owned by natural
persons.
 
     Withdrawals.  In the case of a withdrawal (including Systematic
Withdrawals) from a Qualified Contract, under Section 72(e) of the Code a
ratable portion of the amount received is taxable, generally based on the ratio
of the "investment in the contract" to the participant's total accrued benefit
or balance under the retirement plan. The "investment in the contract" generally
equals the portion, if any, of any premium payments paid by or on behalf of any
individual under a Contract which was not excluded from the individual's gross
income. For Contracts issued in connection with qualified plans, the "investment
in the contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.
 
     In the case of a withdrawal from a Non-Qualified Contract before the
Maturity Date, under Code Section 72(e) amounts received are generally first
treated as taxable income to the extent that the accumulation value immediately
before the withdrawal exceeds the "investment in the contract" at that time. Any
additional amount withdrawn is not taxable.
 
     In the case of a full surrender under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
 
   
     Annuity Payments.  Although tax consequences may vary depending on the
Payment Option elected under an annuity contract, under Code Section 72(b),
generally (prior to recovery of the investment in the contract) gross income
does not include that part of the amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. Stated
differently, prior to recovery of the investment in the contract, in general,
there is no tax on the amount of each payment which represents the same ratio
that the "investment in the contract" bears to the total expected value of the
annuity payments for the term of payments; however, the remainder of each income
payment is taxable. After the "investment in the contact" is recovered, the full
amount of any additional annuity payments is taxable. If Annuity payments cease
as a result of an Annuitant's death before full recovery of the "investment in
the contract," consult a competent tax adviser regarding deductibility of the
unrecovered amount.
    
                                       34
<PAGE>   42
 
     Taxation of Death Benefit Proceeds.  Amounts may be distributed from a
Contract because of the death of the Owner or an Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a full surrender
of the contract; or (ii) if distributed under a Payment Option, they are taxed
in the same way as annuity payments. For these purposes, the investment in the
contract is not affected by the owner's or annuitant's death. That is, the
investment in the contract remains the amount of any purchase payments paid
which were not excluded from gross income.
 
     Penalty Tax on Certain Withdrawals.  In the case of a distribution pursuant
to a Non-Qualified Contract, there may be imposed a Federal penalty tax equal to
10% of the amount treated as taxable income. In general, however, there is no
penalty on distributions:
 
     1. made on or after the taxpayer reaches age 59 1/2.
 
     2. made on or after the death of the holder (or if the holder is not an
        individual, the death of the primary annuitant);
 
     3. attributable to the taxpayer's becoming disabled;
 
     4. a part of a series of substantially equal periodic payments (not less
        frequently than annually) for the life (or life expectancy) of the
        taxpayer or the joint lives (or joint life expectancies) of the taxpayer
        and his or her designated beneficiary;
 
     5. made under an annuity contract that is purchased with a single premium
        when the annuity starting date is no later than a year from purchase of
        the annuity and substantially equal periodic payments are made, not less
        frequently than annually, during the annuity period; and
 
     6. made under certain annuities issued in connection with structured
        settlement agreements.
 
     Other tax penalties may apply to certain distributions under a Qualified
Contract, as well as to certain contributions, loans, and other circumstances.
 
   
     Although the likelihood of legislative change is uncertain, there is always
the possibility that the tax treatment of the Contracts could change by
legislation or other means. For instance, the President's 1999 Budget Proposal
recommended legislation that, if enacted, would adversely modify the federal
taxation of the Contracts. It is also possible that any 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 Contract.
    
 
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
 
     A transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, the selection of certain
Maturity Dates or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein. An Owner contemplating
any such transfer, assignment, or exchange of a Contract should contact a
competent tax advisor with respect to the potential effects of such a
transaction.
 
WITHHOLDING
 
   
     Distributions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distribution and the Owner's tax status. The Owner will be provided
the opportunity to elect not to have tax withheld from distributions.
    
 
   
     "Eligible rollover distributions" from section 401(a) plans and section
403(b) tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
    
 
                                       35
<PAGE>   43
 
MULTIPLE CONTRACTS
 
     All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by Providentmutual (or its affiliates) to the same Owner
during any calendar year are treated as one annuity Contract for purposes of
determining the amount includible in gross income under Code Section 72(e). This
rule could affect the time when income is taxable and the amount that might be
subject to the 10% penalty tax described above. In addition, the Treasury
Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity contracts or
otherwise. There may also be other situations in which the Treasury may conclude
that it would be appropriate to aggregate two or more annuity contracts
purchased by the same Owner. Accordingly, a Contract Owner should consult a
competent tax advisor before purchasing more than one annuity contract.
 
TAXATION OF QUALIFIED PLANS
 
     The Contracts are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but Providentmutual shall not be bound by the terms and conditions
of such plans to the extent such terms contradict the Contract, unless
Providentmutual consents. Some retirement plans are subject to distribution and
other requirements that are not incorporated into our Contract administration
procedures. Owners, participants and beneficiaries are responsible for
determining that contributions, distributions and other transactions with
respect to the Contracts comply with applicable law. Brief descriptions follow
of the various types of qualified retirement plans in connection with a
Contract. Providentmutual will amend the Contract as necessary to confirm it to
the requirements of the Code.
 
   
     Corporate Pension and Profit Sharing Plans.  Section 401(a) of the Code
permits corporate employers to establish various types of retirement plans for
employees. These retirement plans may permit the purchase of the Contracts to
accumulate retirement savings under the plans. Adverse tax or other legal
consequences to the plan, to the participant or to both may result if this
Contract is assigned or transferred to any individual as a means to provide
benefit payments, unless the plan complies with all legal requirements
applicable to such benefits prior to transfer of the Contract. Corporate
employers intending to use the Contract with such plans should seek competent
advice. The Contract includes a Death Benefit that in some cases may exceed the
greater of the Purchase Payments or the Contract Value. The Death Benefit could
be characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax adviser.
    
 
   
     Individual Retirement Annuities.  Sections 408 and 408A of the Code permit
eligible individuals to contribute to an individual retirement program known as
an "Individual Retirement Annuity" or "IRA". All IRAs are subject to limits on
the amount that may be contributed, the persons who are eligible, and on the
time when distributions may commence. Section 408 governs "ordinary" IRAs.
Subject to certain income limits, contributions to an ordinary IRA may be tax
deductible. Distributions from an ordinary IRA, if attributable to deductible
contributions, are generally subject to income tax. Distributions from certain
other types of qualified retirement plans may be "rolled over" on a tax-deferred
basis into an ordinary IRA. Distributions from an ordinary IRA prior to age
59 1/2 (unless certain exceptions apply) are subject to a 10% penalty tax.
    
 
                                       36
<PAGE>   44
 
   
     Section 408A of the Code permits individuals to contribute to a special
type of IRA called a Roth IRA. The IRA must be designated as a "Roth IRA" at the
time it is established, in accordance with IRS rules. Contributions to a Roth
IRA are not deductible. If certain conditions are met, qualified distributions
from a Roth IRA are tax free. Subject to special limitations, a distribution
from an ordinary IRA or another Roth IRA may be rolled over to a Roth IRA and an
ordinary IRA may be converted to a Roth IRA. You should consult a tax adviser
before combining any converted amounts with any other Roth IRA contributions,
including any other conversion amounts from other tax years. Distributions from
a Roth IRA generally are not taxed, except that, once aggregate distributions
exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply
to distributions made (1) before age 59 1/2 (subject to certain exceptions) or
(2) during the five taxable years starting with the year in which the first
contribution is made to the Roth IRA.
    
 
   
     Sales of a Contract for use with an ordinary or Roth IRA may be subject to
special requirements of the IRS. The IRS has not reviewed the contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision, such as the provision in the
Contract, comports with IRS qualification requirements.
    
 
   
     SIMPLE Retirement Accounts.  Beginning January 1, 1997, certain small
employers may establish Simple Retirement Accounts as provided by Section 408(p)
of the Code, under which employees may elect to defer up to $6,000 (as increased
for cost of living adjustments) as a percentage of compensation. The sponsoring
employer is required to make a matching contribution on behalf of contributing
employees. Distributions from a Simple Retirement Account are subject to the
same restrictions that apply to IRA distributions and are taxed as ordinary
income. Subject to certain exceptions, premature distributions prior to age
59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the
distribution occurs within the first two years after the commencement of the
employee's participation in the plan.
    
 
     Tax Sheltered Annuities.  Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the premiums paid, within certain limits, on a Contract that will
provide an annuity for the employee's retirement. These payments may be subject
to FICA (social security) tax. Code section 403(b)(11) restricts the
distributions under Code section 403(b) annuity contracts of: (1) elective
contributions made in years beginning after December 31, 1988; (2) earnings on
those contributions; and (3) earnings in such years on amounts held as of the
last year beginning before January 1, 1989. Distribution of those amounts may
only occur upon death of the employee, attainment of age 59 1/2, separation from
service, disability, or financial hardship. In addition, income attributable to
elective contributions may not be distributed in the case of hardship.
 
   
     The Contract includes a Death Benefit that in some cases may exceed the
greater of the Purchase Payments or the Contract Value. The Death Benefit could
be characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the Death Benefit may exceed
this limitation, employers using the Contract in connection with such plans
should consult their tax adviser.
    
 
   
     Required Distributions.  For qualified plans under Section 401(a) and
403(b), the Code requires that distributions generally must commence no later
than the later of April 1 of the calendar year following the calendar year in
which the Owner (or plan participant) (i) reaches age 70 1/2 or (ii) retires,
and must be made in a specified form or manner. If the plan participant is a "5
percent owner" (as defined in the Code), distributions generally must begin no
later than April 1 of the calendar year following the calendar year in which the
Owner (or plan participant) reaches age 70 1/2. For ordinary IRAs, distributions
generally must commence no later than April 1 of the calendar year following the
calendar year in which the Owner (or plan participant) reaches age 70 1/2. Roth
IRAs do not require distributions at any time prior to the Owner's death.
    
 
RESTRICTIONS UNDER QUALIFIED CONTRACTS
 
     Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
 
                                       37
<PAGE>   45
 
POSSIBLE CHARGE FOR PROVIDENTMUTUAL'S TAXES
 
     At the present time, the Company makes no charge to the Subaccounts for any
Federal, state, or local taxes that the Company incurs which may be attributable
to such Subaccounts or to the Contracts. The Company, however, reserves the
right in the future to make a charge for any such tax or other economic burden
resulting from the application of the tax laws that it determines to be properly
attributable to the Subaccounts or to the Contracts.
 
     If any tax charges are made in the future, they will be accumulated daily
and transferred from the applicable Subaccount to Providentmutual's General
Account. Any investment earnings on tax charges accumulated in a Subaccount will
be retained by Providentmutual.
 
OTHER TAX CONSEQUENCES
 
     As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
Federal income tax consequences discussed herein reflect Providentmutual's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual circumstances
of each Owner or recipient of the distribution. A competent tax advisor should
be consulted for further information.
 
                           DISTRIBUTION OF CONTRACTS
 
   
     The Contracts will be offered to the public on a continuous basis, and
Providentmutual does not anticipate discontinuing the offering of the Contracts.
However, Providentmutual reserves the right to discontinue the offering.
Applications for Contracts are solicited by agents who are licensed by
applicable state insurance authorities to sell Providentmutual's variable
annuity contracts and who are also registered representatives of 1717 Capital
Management Company ("1717") or broker/dealers. 1717 is a wholly owned indirect
subsidiary of Provident Mutual Life Insurance Company and is registered with the
SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member
of the National Association of Securities Dealers, Inc.
    
 
     1717 acts as the Principal Underwriter, as defined in the Investment
Company Act of 1940, of the Contracts for the Variable Account pursuant to an
Underwriting Agreement between Providentmutual and 1717. 1717 is not obligated
to sell any specific number of Contracts. 1717's principal business address is
Christiana Executive Campus, P.O. Box 15626, Wilmington, Delaware 19850. The
Contracts may also be sold through other broker-dealers registered under the
Securities Exchange Act of 1934 whose representatives are authorized by
applicable law to sell variable annuity contracts. 1717 has entered into a
Selling Agreement with Sentinel Financial Services Company (SFSC), a registered
broker-dealer affiliated with 1717. Under the terms of the Selling Agreement,
SFSC will be national distributor of the Contracts. Registered Representatives
of SFSC will solicit applications and SFSC will also enter into selling
agreements with other broker-dealers with respect to distribution of the
Contracts. 1717 and SFSC receive the full commissions on Contracts sold by their
registered representatives. Nonaffiliated broker-dealers receive full
commissions on Contracts sold by their registered representatives, less a
nominal charge by 1717 or SFSC for expenses incurred. The commissions paid are
no greater than 6% of premiums.
 
   
                            PREPARING FOR YEAR 2000
    
 
   
     Like all financial services providers, Providentmutual and its affiliates
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. Providentmutual and its
affiliates 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 Providentmutual and its affiliates. However, as of the date of this
prospectus, it is not
    
                                       38
<PAGE>   46
 
   
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. Providentmutual and its affiliates currently
anticipate that their systems will be Year 2000 compliant on or about January 1,
1999 but there can be no assurance that Providentmutual and its affiliates will
be successful, or that interaction with other service providers will not impair
Providentmutual or its affiliates' services at that time.
    
 
                               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 reasonable
likely to have a material adverse impact on the Separate Account or PMLIC.
    
 
                                 VOTING RIGHTS
 
     In accordance with its view of present applicable law, Providentmutual will
vote the Portfolio shares held in the Variable Account at special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts. If, however, the
Investment Company Act of 1940 or any regulation thereunder should be amended,
or if the present interpretation thereof should change, or Providentmutual
determines that it is allowed to vote the Portfolio shares in its own right, it
may elect to do so.
 
     The number of votes which are available to an Owner will be calculated
separately for each Subaccount of the Variable Account, and may include
fractional votes. The number of votes attributable to a Subaccount will be
determined by applying an Owner's percentage interest, if any, in a particular
Subaccount to the total number of votes attributable to that Subaccount. An
Owner holds a voting interest in each Subaccount to which the Variable Account
Value is allocated. The Owner only has voting interest prior to the Maturity
Date.
 
     The number of votes of a Portfolio which are available to the Contract
Owner will be determined as of the date coincident with the date established by
that Portfolio for determining shareholders eligible to vote at the relevant
meeting of each Fund. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established by
the Funds.
 
     Fund shares as to which no timely instructions are received and shares held
by Providentmutual in a Subaccount as to which an Owner has no beneficial
interest will be voted in proportion to the voting instructions which are
received with respect to all Contracts participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon will be applied on a pro
rata basis to reduce the votes eligible to be cast.
 
                              FINANCIAL STATEMENTS
 
   
     The audited statements of financial condition for Providentmutual as of
December 31, 1997 and 1996 and the related statements of operations, changes in
capital and surplus and cash flows for each of the three years in the period
ended December 31, 1997 as well as the Report of Independent Accountants are
contained in the Statement of Additional Information. The audited statements of
assets and liabilities for the Variable Account as of December 31, 1997 and the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the two years in the period then ended are
included in the Statement of Additional Information for the Variable Account.
    
 
                                       39
<PAGE>   47
 
             STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                             <C>
Additional Contract Provisions..............................     S-2
     The Contract...........................................     S-2
     Incontestability.......................................     S-2
     Misstatement of Age or Sex.............................     S-2
     Non-Participation......................................     S-2
Calculation of Yields and Total Returns.....................     S-2
     Money Market Subaccount Yields.........................     S-2
     Other Subaccount Yields................................     S-3
     Average Annual Total Returns...........................     S-4
     Other Total Returns....................................     S-7
     Effect of the Administration Fee on Performance Data...     S-8
Termination of Participation Agreements.....................     S-8
Safekeeping of Account Assets...............................    S-10
State Regulation............................................    S-10
Records and Reports.........................................    S-10
Legal Matters...............................................    S-10
Experts.....................................................    S-10
Other Information...........................................    S-11
Financial Statements........................................    S-11
</TABLE>
    
 
                                       40
<PAGE>   48
 
              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA,
                         A STOCK LIFE INSURANCE COMPANY
                             300 CONTINENTAL DRIVE
                             NEWARK, DELAWARE 19713
                                 1-800-688-5177
 
                      STATEMENT OF ADDITIONAL INFORMATION
                       VARIABLE ANNUITY SEPARATE ACCOUNT
         INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
 
     This Statement of Additional Information contains information in addition
to the information described in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered by Providentmutual Life and
Annuity Company of America. This Statement of Additional Information is not a
Prospectus, and it should be read only in conjunction with the Prospectuses for
the Contract and The Market Street Fund, Inc., the Variable Insurance Products
Fund, the Variable Insurance Products Fund II, the Scudder Variable Life
Investment Fund, the OCC Accumulation Trust, the Dreyfus Variable Investment
Fund and the Federated Insurance Series. The Prospectus is dated the same as
this Statement of Additional Information. You may obtain a copy of the
Prospectus by writing or calling us at our address or phone number shown above.
 
   
      THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS MAY 1, 1998
    
 
                      STATEMENT OF ADDITIONAL INFORMATION
 
                               TABLE OF CONTENTS*
 
   
<TABLE>
  <S>                                                           <C>
  ADDITIONAL CONTRACT PROVISIONS (12-20)......................   S-2
       The Contract...........................................   S-2
       Incontestability.......................................   S-2
       Misstatement of Age or Sex.............................   S-2
       Non-Participation......................................   S-2
  CALCULATION OF YIELDS AND TOTAL RETURNS (24-26).............   S-2
       Money Market Subaccount Yields.........................   S-2
       Other Subaccount Yields................................   S-3
       Average Annual Total Returns...........................   S-4
       Other Total Returns....................................   S-7
       Effect of the Administration Fee on Performance Data...   S-8
  TERMINATION OF PARTICIPATION AGREEMENTS.....................   S-8
  SAFEKEEPING OF ACCOUNT ASSETS...............................  S-10
  STATE REGULATION (7)........................................  S-10
  RECORDS AND REPORTS.........................................  S-10
  LEGAL MATTERS (30)..........................................  S-10
  EXPERTS.....................................................  S-10
  OTHER INFORMATION...........................................  S-11
  FINANCIAL STATEMENTS (31)...................................  S-11
</TABLE>
    
 
- ---------------
 
* Numbers in parentheses refer to corresponding pages of the Prospectus.
<PAGE>   49
 
                         ADDITIONAL CONTRACT PROVISIONS
 
THE CONTRACT
 
     The entire contract is made up of the policy and the application. The
statements made in the application are deemed representations and not
warranties. Providentmutual cannot use any statement in defense of a claim or to
void the Contract unless it is contained in the application and a copy of the
application is attached to the Contract at issue.
 
INCONTESTABILITY
 
     Providentmutual will not contest the Contract after it has been in force
during the Annuitant's lifetime for two years from the Issue Date of the
Contract.
 
MISSTATEMENT OF AGE OR SEX
 
     If the age or sex of the annuitant has been misstated, the amount which
will be paid is that which the proceeds would have purchased at the correct age
and sex.
 
     If an overpayment is made because of an error in age or sex, the
overpayment plus interest at 3% compounded annually will be a debt against the
Contract. If the debt is not repaid, future payments will be reduced
accordingly.
 
     If an underpayment is made because of an error in age or sex, any annuity
payments will be recalculated at the correct age and sex and future payments
will be adjusted. The underpayment with interest at 3% compounded annually will
be paid in a single sum.
 
NON-PARTICIPATION
 
     The Contract is not eligible for dividends and will not participate in
Providentmutual's divisible surplus.
 
                    CALCULATION OF YIELDS AND TOTAL RETURNS
 
   
     From time to time, Providentmutual may disclose historic performance data
for the subaccounts including yields, standard annual total returns, and other
nonstandard measures of performance. Such performance data will be computed, or
accompanied by performance data computed, in accordance with the standards
defined by the Securities and Exchange Commission.
    
 
     Because of the charges and deductions imposed under a Contract, the yield
for the Subaccounts will be lower than the yield for their respective
Portfolios. The calculations of yields, total returns, and other performance
data do not reflect the effect of any premium tax that may be applicable to a
particular Contract. Premium taxes currently range from 0% to 3.5% of premium
based on the state in which the Contract is sold.
 
MONEY MARKET SUBACCOUNT YIELDS
 
   
     From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses or income other than investment income on shares of the Money
Market Portfolio or on its portfolio securities.
    
 
   
     This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation and exclusive of income other than investment
income) at the end of the seven-day period in the value of a hypothetical
account under a Contract having a balance of 1 unit of the Money Market
Subaccount at the beginning of the period, dividing such net change in account
value by the value of the hypothetical account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects: 1) net income from the
Portfolio attributable to the hypothetical account; and 2) charges and
    
 
                                       S-2
<PAGE>   50
 
deductions imposed under the Contract which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: 1) the Annual Administration Fee; 2) Asset-Based
Administration Charge; and 3) the Mortality and Expense Risk Charge. For
purposes of calculating current yields for a Contract, an average per unit
administration fee is used based on the $30 administration fee deducted at the
end of each Contract Year. Current Yield will be calculated according to the
following formula:
 
     Current Yield = ((NCS - ES)/UV) X (365/7)
 
     Where:
 
   
     NCS = the net change in the value of the Portfolio (exclusive of realized
           gains or losses on the sale of securities and unrealized appreciation
           and depreciation and exclusive of income other than investment
           income) for the seven-day period attributable to a hypothetical
           account having a balance of 1 Subaccount unit.
    
 
     ES   = per unit expenses attributable to the hypothetical account for the
            seven-day period.
 
     UV  = The unit value on the first day of the seven-day period.
 
     The effective yield of the Money Market Subaccount determined on a
compounded basis for the same seven-day period may also be quoted.
 
     The effective yield is calculated by compounding the unannualized base
period return according to the following formula:
 
     Effective Yield = (1 + ((NCS - ES)/UV))365/7 - 1
 
     Where:
 
   
     NCS = the net change in the value of the Portfolio (exclusive of realized
           gains or losses on the sale of securities and unrealized appreciation
           and depreciation and exclusive of income other than investment
           income) for the seven-day period attributable to a hypothetical
           account having a balance of 1 Subaccount unit.
    
 
     ES   = per unit expenses attributable to the hypothetical account for the
            seven-day period.
 
     UV  = The unit value on the first day of the seven-day period.
 
     Because of the charges and deductions imposed under the contract, the yield
for the Money Market Subaccount will be lower than the yield for the Money
Market Portfolio.
 
     The current and effective yields on amounts held in the Money Market
Subaccount normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Portfolio, the types of quality of
portfolio securities held by the Money Market Portfolio and the Money Market
Portfolio's operating expenses. Yields on amounts held in the Money Market
Subaccount may also be presented for periods other than a seven-day period.
 
OTHER SUBACCOUNT YIELDS
 
     From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the Subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one-month periods. The annualized yield
of a Subaccount refers to income generated by the Subaccount over a specific
30-day or one-month period. Because the yield is annualized, the yield generated
by a Subaccount during a 30-day or one-month period is assumed to be generated
each period over a 12-month period.
 
     The yield is computed by: 1) dividing the net investment income of the
Portfolio attributable to the Subaccount units less Subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding
                                       S-3
<PAGE>   51
 
that yield for a six-month period; and by 4) multiplying that result by 2.
Expenses attributable to the Subaccount include the Annual Administration Fee,
the Asset-Based Administration Charge and the Mortality and Expense Risk charge.
The yield calculation assumes an administration fee of $30 per year per Contract
deducted at the end of each Contract Year. For purposes of calculating the
30-day or one-month yield, an average administration fee per dollar of Contract
value in the Variable Account is used to determine the amount of the charge
attributable to the Subaccount for the 30-day or one-month period. The 30-day or
one-month yield is calculated according to the following formula:
 
     Yield = 2 (((NI - ES)/(U X UV)) + 1)(6-1)
 
     Where:
 
     NI   = net income of the Portfolio for the 30-day or one-month period
            attributable to the Subaccount's units.
 
     ES   = expenses of the Subaccount for the 30-day or one-month period.
 
     U    = the average number of units outstanding.
 
     UV  = the unit value at the close (highest) of the last day in the 30-day
           or one-month period.
 
     Because of the charges and deductions imposed under the Contracts, the
yield for the Subaccount will be lower than the yield for the corresponding Fund
Portfolio.
 
     The yield on the amounts held in the Subaccounts normally will fluctuate
over time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The
Subaccount's actual yield is affected by the types and quality of portfolio
securities held by the Portfolio and its operating expenses.
 
     Yield calculations do not take into account the Surrender Charge under the
Contract equal to 1% to 6% of premiums paid during the six years prior to the
surrender or withdrawal (including the year in which the surrender is made) on
amounts surrendered or withdrawn under the contract. A Surrender Charge will not
be imposed on the first or second withdrawal in any Contract Year on an amount
up to 10% of the Contract Account Value as of the beginning of such year.
 
AVERAGE ANNUAL TOTAL RETURNS
 
     From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Subaccounts for various
periods of time.
 
     Until a Subaccount has been in operation for 10 years, Providentmutual will
always include quotes of average annual total return for the period measured
from the date the Contracts were first offered for sale. When a Subaccount has
been in operation for 1, 5, and 10 years, respectively, the average annual total
return for these periods will be provided. Average annual total returns for
other periods of time may, from time to time, also be disclosed.
 
     Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month-end practicable, considering the type
and media of the communication and will be stated in the communication.
 
     Average annual total returns will be calculated using Subaccount unit
values which Providentmutual calculates on each Valuation Day based on the
performance of the Subaccount's underlying Portfolio, the deductions for the
Mortality and Expense Risk Charge, the Asset-Based Administration Charge, and
the Annual Administration Fee. The calculation assumes that the administration
fee is $30 per year per contract deducted at the end of each Contract Year. For
purposes of calculating average annual total return, an average per dollar
administration fee attributable to the hypothetical account for the period is
used. The calculation also assumes surrender of the Contract at the end of the
period for the return quotation. Total returns will
 
                                       S-4
<PAGE>   52
 
therefore reflect a deduction of the Surrender Charge for any period less than
seven years. The total return will then be calculated according to the following
formula:
 
     TR  = ((ERV/P)1/N) - 1
 
     Where:
 
     TR  = the average annual total return net of Subaccount recurring charges.
 
     ERV = the ending redeemable value (net of any applicable surrender charge)
           of the hypothetical account at the end of the period.
 
     P    = a hypothetical initial payment of $1,000.
 
     N    = the number of years in the period.
 
     From time to time, sales literature or advertisements may also quote
average annual total returns for periods prior to the date the Variable Account
commenced operations. Such performance information for the Subaccounts will be
calculated based on the performance of the Portfolios and the assumption that
the Subaccounts were in existence for the same periods as those indicated for
the Portfolios, with the level of Contract charges currently in effect. In
addition, sales literature or advertisements may quote average annual total
return for the Growth, Money Market, Bond, Managed, Aggressive Growth, and
International Subaccounts for the period before the Contracts were registered
under the 1933 Act (from the inception of these Subaccounts (April 14, 1992) to
December 31, 1992), with the level of Contract charges currently in effect.
 
     The Funds have provided the total return information for the Portfolios,
including the Portfolio total return information used to calculate the total
returns of the Subaccounts for periods prior to the Subaccounts' inception of
the Subaccounts. The Variable Insurance Products Fund, the Variable Insurance
Products Fund II, the Scudder Variable Life Investment Fund, the OCC
Accumulation Trust, the Dreyfus Variable Investment Fund and The Federated
Insurance Series are not affiliated with Providentmutual. While Providentmutual
has no reason to doubt the accuracy of these figures provided by these
non-affiliated Funds, Providentmutual does not represent that they are true and
complete, and disclaims all responsibility for these figures.
 
                                       S-5
<PAGE>   53
 
     Such average annual total return information for the Subaccounts is as
follows:
 
   
<TABLE>
<CAPTION>
                                                                                       FOR THE 10-YEAR PERIOD
                                                                                           ENDED 12/31/97
                                                     FOR THE 1-YEAR   FOR THE 5-YEAR        (OR DATE OF
                                                      PERIOD ENDED     PERIOD ENDED      INCEPTION IF LESS
   SUBACCOUNT (DATE OF FUND PORTFOLIO INCEPTION)        12/31/97         12/31/97          THAN 10 YEARS)
   ---------------------------------------------     --------------   --------------   ----------------------
<S>                                                  <C>              <C>              <C>
MARKET STREET FUND
  Growth (December 12, 1985).......................       16.79%          14.95%               14.00%
  Money Market (December 12, 1985).................       (1.09)%          2.59%                3.87%
  Bond (December 12, 1985).........................        2.83%           5.23%                6.35%
  Managed (December 12, 1985)......................       13.88%          11.12%                9.46%
  Aggressive Growth (May 1, 1989)..................       13.86%           9.88%               12.73%
  International (November 1, 1991).................        2.98%          11.69%                7.51%
 
VARIABLE INSURANCE PRODUCTS FUND AND
  VARIABLE INSURANCE PRODUCTS FUND II
  High Income (September 19, 1985).................       10.52%          11.94%               11.13%
  Equity Income (October 9, 1986)..................       20.36%          18.13%               15.02%
  Growth (October 9, 1986).........................       16.00%          15.99%               15.48%
  Asset Manager (September 6, 1989)................       13.33%          11.02%               11.05%
  Index 500 (August 27, 1992)......................       24.68%          17.88%               17.88%
  Contrafund (July 3, 1995)........................       16.62%                               24.70%
 
OCC ACCUMULATION TRUST
  Equity (August 1, 1988)..........................       18.96%                               19.27%
  Small Cap (August 1, 1988).......................       14.83%                               11.23%
  Managed (August 1, 1988).........................       14.88%                               19.11%
 
SCUDDER VARIABLE LIFE INVESTMENT FUND
  Bond (July 16, 1985).............................        2.42%           5.31%                6.87%
  Growth & Income (May 2, 1994)....................       22.58%                               21.26%
  International (May 1, 1987)......................        2.44%          11.75%               10.13%
 
DREYFUS VARIABLE INVESTMENT FUND
  Zero Coupon 2000 (August 31, 1990)...............        0.49%           5.45%                8.15%
  Growth & Income (May 2, 1994)....................        9.15%                               21.89%
  Socially Responsible (October 7, 1993)...........       20.67%                               19.18%
 
FEDERATED INSURANCE SERIES
  Fund for US Gov't Securities II (March 29,
     1994).........................................        1.96%                                3.88%
  Utility Fund II (April 14, 1994).................       18.97%                               11.95%
 
VAN ECK WORLDWIDE INSURANCE TRUST
  Worldwide Bond (September 1, 1989)...............       (3.87)%          3.64%                4.48%
  Worldwide Hard Assets (September 1, 1989)........       (7.70)%         13.15%                5.31%
  Worldwide Emerging Markets (December 27, 1995)...      (17.04)%                               1.70%
  Worldwide Real Estate (June 23, 1997)............                                            24.53%
</TABLE>
    
 
                                       S-6
<PAGE>   54
 
OTHER TOTAL RETURNS
 
     From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect the Surrender Charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn. Such information
is as follows:
 
   
<TABLE>
<CAPTION>
                                                                                       FOR THE 10-YEAR PERIOD
                                                                                           ENDED 12/31/97
                                                     FOR THE 1-YEAR   FOR THE 5-YEAR        (OR DATE OF
                                                      PERIOD ENDED     PERIOD ENDED      INCEPTION IF LESS
   SUBACCOUNT (DATE OF FUND PORTFOLIO INCEPTION)        12/31/97         12/31/97          THAN 10 YEARS
   ---------------------------------------------     --------------   --------------   ----------------------
<S>                                                  <C>              <C>              <C>
MARKET STREET FUND
  Growth (December 12, 1985).......................       22.30%          15.15%               14.00%
  Money Market (December 12, 1985).................        3.58%           2.78%                3.87%
  Bond (December 12, 1985).........................        7.68%           5.42%                6.35%
  Managed (December 12, 1985)......................       19.24%          11.32%                9.46%
  Aggressive Growth (May 1, 1989)..................       19.22%          10.08%               12.73%
  International (November 1, 1991).................        7.84%          11.89%                7.51%
 
VARIABLE INSURANCE PRODUCTS FUND AND
  VARIABLE INSURANCE PRODUCTS FUND II
  High Income (September 19, 1985).................       15.73%          12.14%               11.13%
  Equity Income (October 9, 1986)..................       26.03%          18.34%               15.02%
  Growth (October 9, 1986).........................       21.47%          16.20%               15.48%
  Asset Manager (September 6, 1989)................       18.67%          11.22%               11.05%
  Index 500 (August 27, 1992)......................       30.55%          18.09%               18.08%
  Contrafund (July 3, 1995)........................       22.12%                               26.23%
 
OCC ACCUMULATION TRUST
  Equity (August 1, 1988)..........................       24.57%                               19.79%
  Small Cap (August 1, 1988).......................       20.24%                               11.72%
  Managed (August 1, 1988).........................       20.30%                               19.63%
 
SCUDDER VARIABLE LIFE INVESTMENT FUND
  Bond (July 16, 1985).............................        7.25%           5.50%                6.87%
  Growth & Income (May 2, 1994)....................       28.35%                               22.17%
  International (May 1, 1987)......................        7.27%          11.95%               10.13%
 
DREYFUS VARIABLE INVESTMENT FUND
  Zero Coupon 2000 (August 31, 1990)...............        5.22%           5.64%                8.15%
  Growth & Income (May 2, 1994)....................       14.30%                               22.80%
  Socially Responsible (October 7, 1993)...........       26.35%                               19.69%
 
FEDERATED INSURANCE SERIES
  Fund for US Gov't Securities II (March 29,
     1994).........................................        6.77%                                4.64%
  Utility Fund II (April 14, 1994).................       24.58%                               12.74%
 
VAN ECK WORLDWIDE INSURANCE TRUST
  Worldwide Bond (September 1, 1989)...............        0.66%           3.82%                4.48%
  Worldwide Hard Assets (September 1, 1989)........       (3.35)%         13.35%                5.31%
  Worldwide Emerging Markets (December 27, 1995)...      (13.13)%                               3.57%
  Worldwide Real Estate (June 23, 1997)............                                            38.46%
</TABLE>
    
 
                                       S-7
<PAGE>   55
 
     Providentmutual may disclose Cumulative Total Returns in conjunction with
the standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
 
     CTR = (ERV/P) - 1
 
     Where:
 
     CTR = The Cumulative Total Return net of Subaccount recurring charges for
           the period.
 
     ERV = The ending redeemable value of the hypothetical investment at the end
           of the period.
 
     P    = A hypothetical single payment of $1,000.
 
EFFECT OF THE ADMINISTRATION FEE ON PERFORMANCE DATA
 
     The Contract provides for a $30 Annual Administration Fee to be deducted
annually at the end of each Contract Year, from the Subaccounts and the
Guaranteed Account based on the proportion that the value of each such account
bears to the total Contract Account Value. For purposes of reflecting the
administration fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average contract value
in the Variable Account of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.
 
                    TERMINATION OF PARTICIPATION AGREEMENTS
 
     The participation agreements pursuant to which the Funds sell their shares
to the Variable Account contain varying provisions regarding termination. The
following summarizes those provisions:
 
     Market Street Fund, Inc.  This agreement provides for termination: (1) on
one year's advance notice by any party; (2) at Providentmutual's option if
shares of the Fund are not reasonably available to meet the requirements of the
Contracts; (3) at the option of the Fund or Providentmutual if certain
enforcement proceedings are instituted against the other; (4) upon vote of the
Owners of Contracts to substitute shares of another mutual fund; (5) at
Providentmutual's option if the Fund ceases to qualify as a regulated investment
company under the Code or fails to meet the diversification requirements
thereunder; (6) at the option of Providentmutual or the Fund upon a
determination that an irreconcilable material conflict exists between Owners of
variable insurance products of all the separate accounts or the interests of
participating insurance companies investing in the Fund; (7) at the option of
Providentmutual if it has withdrawn the Variable Account's investment in the
Fund; or (8) at the option of any party upon another party's material breach of
any provision of the agreement.
 
     Variable Insurance Products Fund and Variable Insurance Products Fund
II.  These agreements provide for termination: (1) on six months' advance notice
by any party; (2) at Providentmutual's option if shares of the Fund are not
reasonably available to meet the requirements of the Contracts; (3) at
Providentmutual'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 fails to meet the diversification
requirements thereunder; (4) at the option of the Fund or its principal
underwriter if it determines that Providentmutual has suffered material adverse
changes in its business or financial conditions or is the subject to material
adverse publicity; (5) at the option of Providentmutual if the Fund has suffered
material adverse changes in its business or financial condition or is the
subject of material adverse publicity; or (6) at the option of the Fund or its
principal underwriter if Providentmutual decides to make another mutual fund
available as a funding vehicle for its Contracts.
 
     Scudder Variable Life Investment Fund.  This agreement provides for
termination: (1) one hundred twenty days after the renegotiation date if the
Fund and Providentmutual fail within sixty days after such renegotiation date to
agree to continue or amend the agreement; (2) at the option of Providentmutual
or the Fund if no shares of the Fund are owned by Providentmutual, the Variable
Account, an affiliated insurance company or a separate account of such
affiliated insurance company; (3) upon determination that an irreconcilable
conflict exists between the interests of owners of the Contracts and variable
insurance products of all separate accounts or the interests of participating
insurance companies investing in the Fund.
 
                                       S-8
<PAGE>   56
 
   
     OCC Accumulation Trust.  This agreement provides for termination: (1) on
one year's advance notice by any party; (2) at Providentmutual's option if
shares of the Fund are not reasonably available to meet the requirements of the
Contracts; (3) at the option of the Fund or Providentmutual if certain
enforcement proceedings are instituted against the other; (4) upon vote of the
Owners of Contracts to substitute shares of another mutual fund; (5) at
Providentmutual's option if the Fund ceases to qualify as a regulated investment
company under the Code or fails to meet the diversification requirements
thereunder; (6) at the option of Providentmutual or the Fund upon a
determination that an irreconcilable material conflict exists between Owners of
variable insurance products of all the separate accounts or the interests of
participating insurance companies investing in the Fund; (7) at the option of
Providentmutual if it has withdrawn the Variable Account's investment in the
Fund; (8) at the option of any party upon another party's material breach of any
provision of the agreement; or (9) at Providentmutual's option or the Fund's if
it determines that the other party has suffered a material adverse change in its
business, operations or financial condition or is the subject of material
adverse publicity.
    
 
     Dreyfus Variable Investment Fund.  This agreement provides for termination:
(a) on 180 days' notice by Providentmutual or the Fund; (b) at Providentmutual's
option if shares of the Fund are not reasonably available to meet the
requirements of the Contracts; (c) at the option of Providentmutual or the Fund
if certain enforcement proceedings are instituted against the other; (d) at the
option of the Fund if it determines that Providentmutual has suffered a material
adverse change in its business or financial condition or is the subject of
material adverse publicity; (e) upon termination of the Investment Advisory
Agreement between the Fund and Dreyfus; (f) in the event the Fund's shares are
not registered, issued or sold in accordance with applicable laws; (g) at the
option of the Fund upon a determination that it is no longer advisable and in
the interests of shareholders to continue the agreement; (h) at the option of
the Fund if the Contracts cease to qualify as annuity contracts under the Code;
(i) at the option of either party upon another's breach of any material
provision of the agreement; (j) at the option of the Fund, if the Contracts are
not registered, issued or sold in accordance with applicable law; (k) upon
assignment of the agreement.
 
     Federated Insurance Series.  This agreement provides for termination: (a)
on 180 days' notice by Providentmutual or the Fund; (b) at Providentmutual's
option if shares of the Portfolios are not reasonably available to meet the
requirements of the Contracts; (c) at the option of Providentmutual or the Fund
if certain enforcement proceedings are instituted against the other; (d) upon
the vote of Owners having an interest in a subaccount investing in a Fund
Portfolio to substitute shares of another investment company for corresponding
shares of the Portfolio of the Fund; (e) in the event the Fund's shares are not
registered, issued or sold in accordance with applicable law; (f) at the option
of Providentmutual or the Fund upon a determination that an irreconcilable
conflict exists between Owners of variable insurance products of all separate
accounts and the interests of participating insurance companies investing in the
Fund; and (g) at the option of Providentmutual if the Fund or a Portfolio ceases
to qualify as a regulated investment company under the Code or fails to meet the
diversification requirements thereunder.
 
   
     Van Eck Worldwide Insurance Trust.  The agreement with Van Eck Worldwide
Insurance Trust ("Van Eck Trust") provides for termination 1) by
Providentmutual, 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 Providentmutual
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 Providentmutual 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 Providentmutual
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 Providentmutual and a Fund terminate, the
Subaccounts which 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.
    
 
                                       S-9
<PAGE>   57
 
   
     Additionally, in certain circumstances, it is possible that a Fund or a
portion of a Fund may refuse to sell its shares to a Subaccount despite the fact
that the participation agreement between the Fund and Providentmutual has not
been terminated. Should a Fund or portfolio of such Fund decide not to sell its
shares to Providentmutual, Providentmutual will 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.
    
 
                         SAFEKEEPING OF ACCOUNT ASSETS
 
     Providentmutual holds the title to the assets of the Variable Account. The
assets are kept physically segregated and held separate and apart from the
Company's General Account assets and from the assets in any other separate
account.
 
     Records are maintained of all purchases and redemptions of Portfolio shares
held by each of the Subaccounts.
 
     The officers and employees of Providentmutual are covered by an insurance
company blanket bond issued by Aetna Casualty and Surety Company to Provident
Mutual Life Insurance Company of Philadelphia in the amount of ten million
dollars. The bond insurers against dishonest and fraudulent acts of officers and
employees.
 
                                STATE REGULATION
 
     Providentmutual is subject to regulation and supervision by the Insurance
Department of the State of Delaware 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 Contract form has been filed
with, and where required approved by, insurance officials in each jurisdiction
where the Contracts are sold. Providentmutual 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.
 
                              RECORDS AND REPORTS
 
     Providentmutual will maintain all records and accounts relating to the
Variable Account. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, reports containing such information as
may be required under the Act or by any other applicable law or regulation will
be sent to Contract Owners semi-annually at the last address known to the
Company.
 
                                 LEGAL MATTERS
 
   
     Adam Scaramella, Esquire, Counsel of Provident Mutual Life Insurance
Company, has provided advice on certain matters relating to the laws of Delaware
regarding the Contacts and Providentmutual's issuance of the Contracts.
Sutherland, Asbill & Brennan, L.L.P., of Washington, D.C. has provided advice on
certain matters relating to the Federal securities laws.
    
 
                                    EXPERTS
 
   
     The statements of financial condition for Providentmutual as of December
31, 1997 and 1996 and the related statements of operations, capital and surplus
and cash flows for each of the three years in the period ended December 31, 1997
and the audited statements of assets and liabilities of the Providentmutual
Variable Annuity Separate Account as of December 31, 1997 and the related
statements of operations for the year then ended and the statements of changes
in net assets for each of the two years in the period then ended, which are
included in this Statement of Additional Information and in the registration
statement have been audited by Coopers & Lybrand L.L.P. as set forth in their
report included herein, and are included herein in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.
    
                                      S-10
<PAGE>   58
 
                               OTHER INFORMATION
 
     A registration statement has been filed with the SEC under the Securities
Act of 1933 as amended, with respect to the Contracts discussed in this
Statement of Additional Information. Not all the information set forth in the
registration statement, amendments and exhibits thereto has been included in
this Statement of Additional Information. Statements contained in this Statement
of Additional Information concerning the content of the Contracts and other
legal instruments are intended to be summaries. For a complete statement of the
terms of these documents, reference should be made to the instruments filed with
the SEC at 450 Fifth Street, N.W., Washington, DC 20549.
 
                              FINANCIAL STATEMENTS
 
   
     This Statement of Additional Information contains the audited statements of
assets and liabilities of the Providentmutual Variable Annuity Separate Account
as of December 31, 1997 and the related statements of operations for the year
then ended and the statements of changes in net assets for each of the two years
in the period then ended. Coopers & Lybrand L.L.P. serves as independent
accountants for the Providentmutual Variable Annuity Separate Account.
    
 
   
     Providentmutual's statements of financial condition as of December 31, 1997
and 1996 and the related statements of operations, capital and surplus, and cash
flows for each of the three years in the period ended December 31, 1997, which
are included in this Statement of Additional Information, should be considered
only as bearing Providentmutual's ability to meet its obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Providentmutual Variable Annuity Separate
Account.
    
 
                                      S-11
<PAGE>   59
 
                              FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Providentmutual Variable Annuity Separate Account
     Report of Independent Accountants......................  F-2
     Statements of Assets and Liabilities, December 31,
      1997..................................................  F-3
     Statements of Operations for the Year Ended December
      31, 1997..............................................  F-9
     Statements of Changes in Net Assets for the Year Ended
      December 31, 1997.....................................  F-15
     Statements of Changes in Net Assets for the Year Ended
      December 31, 1996.....................................  F-21
     Notes to Financial Statements..........................  F-27
Providentmutual Life and Annuity Company of America
     Report of Independent Accountants......................  F-43
     Statements of Financial Condition as of December 31,
      1997 and 1996.........................................  F-44
     Statements of Operations for the Years Ended December
      31, 1997, 1996, and 1995..............................  F-45
     Statements of Capital and Surplus for the Years Ended
      December 31, 1997, 1996, and 1995.....................  F-46
     Statements of Cash Flows for the Years Ended December
      31, 1997, 1996, and 1995..............................  F-47
     Notes to Financial Statements..........................  F-48
</TABLE>
 
                                       F-1
<PAGE>   60
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Report of Independent Accountants
 
- --------------------------------------------------------------------------------
 
To the Contractholders and
  Board of Directors of
Providentmutual Life and Annuity
  Company of America
 
We have audited the accompanying statements of assets and liabilities of the
Providentmutual Variable Annuity Separate Account (comprising thirty-three
subaccounts) as of December 31, 1997, and the related statements of operations
for the year then ended and the statements of changes in net assets for each of
the two years in the period then ended. These financial statements are the
responsibility of the management of the Providentmutual Variable Annuity
Separate Account. 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 Providentmutual Variable
Annuity Separate Account as of December 31, 1997, and the results of its
operations for the year then ended and the changes in its net assets for each of
the two 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>   61
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                     MONEY                              AGGRESSIVE
                                       GROWTH       MARKET        BOND       MANAGED      GROWTH     INTERNATIONAL
                                     SUBACCOUNT   SUBACCOUNT   SUBACCOUNT  SUBACCOUNT   SUBACCOUNT    SUBACCOUNT
- ------------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>         <C>          <C>          <C>
ASSETS
Investment in the Market Street
  Fund, Inc., at market value:
  Growth Portfolio.................  $40,187,145
  Money Market Portfolio...........               $29,558,266
  Bond Portfolio...................                            $8,035,105
  Managed Portfolio................                                        $16,388,015
  Aggressive Growth Portfolio......                                                     $10,901,871
  International Portfolio..........                                                                    $18,609,318
Dividends receivable...............                   139,080
Receivable from Providentmutual
  Life and Annuity Company of
  America..........................                   175,788
                                     -----------  -----------  ----------  -----------  -----------  -------------
NET ASSETS.........................  $40,187,145  $29,873,134  $8,035,105  $16,388,015  $10,901,871    $18,609,318
                                     ===========  ===========  ==========  ===========  ===========  =============
Held for the benefit of
  contractholders..................  $40,111,649  $29,828,503  $7,996,097  $16,355,197  $10,836,973    $18,564,060
Attributable to Providentmutual
  Life and Annuity Company of
  America..........................       75,496       44,631      39,008       32,818       64,898         45,258
                                     -----------  -----------  ----------  -----------  -----------  -------------
                                     $40,187,145  $29,873,134  $8,035,105  $16,388,015  $10,901,871    $18,609,318
                                     ===========  ===========  ==========  ===========  ===========  =============
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-3
<PAGE>   62
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                      FIDELITY      FIDELITY                                 FIDELITY
                                        HIGH         EQUITY-      FIDELITY      FIDELITY       ASSET       FIDELITY
                                       INCOME        INCOME        GROWTH       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:
  High Income Portfolio............  $18,444,392
  Equity-Income Portfolio..........                $78,900,963
  Growth Portfolio.................                              $64,877,265
  Overseas Portfolio...............                                            $1,931,345
Investment in the Variable
  Insurance Products Fund II, at
  market value:
  Asset Manager Portfolio..........                                                         $30,153,803
  Index 500 Portfolio..............                                                                       $58,389,961
                                     -----------   -----------   -----------   ----------   -----------   -----------
NET ASSETS.........................  $18,444,392   $78,900,963   $64,877,265   $1,931,345   $30,153,803   $58,389,961
                                     ===========   ===========   ===========   ==========   ===========   ===========
Held for the benefit of
  contractholders..................  $18,411,224   $78,834,350   $64,802,399   $1,902,644   $30,095,805   $58,325,728
Attributable to Providentmutual
  Life and Annuity Company of
  America..........................      33,168        66,613        74,866       28,701        57,998         64,233
                                     -----------   -----------   -----------   ----------   -----------   -----------
                                     $18,444,392   $78,900,963   $64,877,265   $1,931,345   $30,153,803   $58,389,961
                                     ===========   ===========   ===========   ==========   ===========   ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-4
<PAGE>   63
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                FIDELITY
                                                               INVESTMENT
                                                   FIDELITY      GRADE         OCC          OCC          OCC
                                                  CONTRAFUND      BOND       EQUITY      SMALL CAP     MANAGED
                                                  SUBACCOUNT   SUBACCOUNT  SUBACCOUNT   SUBACCOUNT   SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>         <C>          <C>          <C>
ASSETS
Investment in the Variable Insurance Products
  Fund II, at market value:
  Contrafund Portfolio..........................  $37,275,257
  Investment Grade Bond Portfolio...............               $1,051,370
Investment in the OCC Accumulation Trust, at
  market value:
  Equity Portfolio..............................                           $20,484,486
  Small Cap Portfolio...........................                                        $18,158,198
  Managed Portfolio.............................                                                     $57,318,003
                                                  -----------  ----------  -----------  -----------  -----------
NET ASSETS......................................  $37,275,257  $1,051,370  $20,484,486  $18,158,198  $57,318,003
                                                  ===========  ==========  ===========  ===========  ===========
Held for the benefit of contractholders.........  $37,227,370  $1,024,243  $20,431,344  $18,108,399  $57,255,282
Attributable to Providentmutual Life and Annuity
  Company of America............................       47,887      27,127       53,142       49,799       62,721
                                                  -----------  ----------  -----------  -----------  -----------
                                                  $37,275,257  $1,051,370  $20,484,486  $18,158,198  $57,318,003
                                                  ===========  ==========  ===========  ===========  ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-5
<PAGE>   64
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                  SCUDDER                                      DREYFUS       DREYFUS
                                    SCUDDER       GROWTH         SCUDDER      DREYFUS ZERO   GROWTH AND     SOCIALLY
                                      BOND      AND INCOME    INTERNATIONAL   COUPON 2000      INCOME      RESPONSIBLE
                                   SUBACCOUNT   SUBACCOUNT     SUBACCOUNT      SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>           <C>             <C>            <C>           <C>
ASSETS
Investment in the Scudder
  Variable Life Investment Fund,
  at market value:
  Bond Portfolio.................  $7,946,949
  Growth and Income Portfolio....               $15,812,300
  International Portfolio........                              $10,657,678
Investment in the Dreyfus
  Variable Investment Fund, at
  market value:
  Zero Coupon 2000 Portfolio.....                                              $5,849,377
  Growth and Income Portfolio....                                                            $17,037,442
  Socially Responsible
    Portfolio....................                                                                          $5,448,634
                                   ----------   -----------    -----------     ----------    -----------   ----------
NET ASSETS.......................  $7,946,949   $15,812,300    $10,657,678     $5,849,377    $17,037,442   $5,448,634
                                   ==========   ===========    ===========     ==========    ===========   ==========
Held for the benefit of
  contractholders................  $7,917,505   $15,763,702    $10,623,552     $5,821,032    $16,991,629   $5,402,009
Attributable to Providentmutual
  Life and Annuity Company
  of America.....................     29,444        48,598          34,126         28,345        45,813        46,625
                                   ----------   -----------    -----------     ----------    -----------   ----------
                                   $7,946,949   $15,812,300    $10,657,678     $5,849,377    $17,037,442   $5,448,634
                                   ==========   ===========    ===========     ==========    ===========   ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-6
<PAGE>   65
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                           FEDERATED
                                           FUND FOR                         NEUBERGER    NEUBERGER     NEUBERGER &
                                        U.S. GOVERNMENT      FEDERATED       & BERMAN     & BERMAN    BERMAN LIMITED
                                         SECURITIES II    UTILITY FUND II    BALANCED      GROWTH     MATURITY BOND
                                          SUBACCOUNT        SUBACCOUNT      SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>               <C>          <C>          <C>
ASSETS
Investment in the Federated Insurance
  Series, at market value:
  Fund for U.S. Government Securities
    II Portfolio......................    $3,601,347
  Utility Fund II Portfolio...........                      $5,130,507
Investment in the Neuberger & Berman
  Advisers Management Trust,   at
  market value:
  Balanced Portfolio..................                                       $721,721
  Growth Portfolio....................                                                    $935,110
  Limited Maturity Bond Portfolio.....                                                                   $981,512
                                          ----------        ----------       --------     --------       --------
NET ASSETS............................    $3,601,347        $5,130,507       $721,721     $935,110       $981,512
                                          ==========        ==========       ========     ========       ========
Held for the benefit of
  contractholders.....................    $3,570,011        $5,089,318       $690,349     $901,290       $953,645
Attributable to Providentmutual Life
  and Annuity Company of America......        31,336            41,189         31,372       33,820         27,867
                                          ----------        ----------       --------     --------       --------
                                          $3,601,347        $5,130,507       $721,721     $935,110       $981,512
                                          ==========        ==========       ========     ========       ========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-7
<PAGE>   66
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Assets and Liabilities, December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                 AMERICAN                    VAN ECK      VAN ECK         ALGER
                                                CENTURY VP      VAN ECK     WORLDWIDE    WORLDWIDE       AMERICAN
                                                  CAPITAL      WORLDWIDE       HARD       EMERGING        SMALL
                                               APPRECIATION       BOND        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................................    $161,139
Investment in Van Eck Worldwide Insurance
  Trust, at market value:
  Van Eck Worldwide Bond Portfolio...........                   $923,361
  Van Eck Worldwide Hard Assets Portfolio....                                $156,819
  Van Eck Worldwide Emerging Markets
    Portfolio................................                                             $931,951
Investment in the Alger American Fund, at
  market value:
  Alger American Small Capitalization
    Portfolio................................                                                           $2,239,590
                                                 --------       --------     --------     --------      ----------
NET ASSETS...................................    $161,139       $923,361     $156,819     $931,951      $2,239,590
                                                 ========       ========     ========     ========      ==========
Held for the benefit of contractholders......    $137,716       $896,285     $130,912     $908,450      $2,212,017
Attributable to Providentmutual Life and
  Annuity Company of America.................      23,423         27,076       25,907       23,501          27,573
                                                 --------       --------     --------     --------      ----------
                                                 $161,139       $923,361     $156,819     $931,951      $2,239,590
                                                 ========       ========     ========     ========      ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-8
<PAGE>   67
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                      MONEY                                AGGRESSIVE
                                         GROWTH       MARKET        BOND       MANAGED       GROWTH     INTERNATIONAL
                                       SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT    SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>          <C>          <C>          <C>          <C>          <C>
INVESTMENT INCOME
Dividends............................  $ 683,987    $1,479,330    $361,124    $ 452,363    $  69,133     $  137,769
EXPENSES
Mortality and expense risks..........    452,371      409,048       84,658      186,866      128,899        254,141
                                       ----------   ----------    --------    ----------   ----------    ----------
Net investment income (loss).........    231,616    1,070,282      276,466      265,497      (59,766)      (116,372)
                                       ----------   ----------    --------    ----------   ----------    ----------
NET REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS
Realized gain distributions
  reinvested.........................  3,151,879                                 91,718       13,711      1,078,588
Net realized gain (loss) from
  redemption of investment shares....    278,162                   (15,685)     247,551      455,523        309,239
                                       ----------   ----------    --------    ----------   ----------    ----------
Net realized gain (loss) on
  investments........................  3,430,041                   (15,685)     339,269      469,234      1,387,827
                                       ----------   ----------    --------    ----------   ----------    ----------
Net unrealized appreciation of
  investments:
  Beginning of year..................  4,997,236                    86,993    1,316,337      945,250      1,575,419
  End of year........................  8,125,549                   341,931    3,141,355    2,237,231      1,663,549
                                       ----------   ----------    --------    ----------   ----------    ----------
Net unrealized appreciation during
  the year...........................  3,128,313                   254,938    1,825,018    1,291,981         88,130
                                       ----------   ----------    --------    ----------   ----------    ----------
Net realized and unrealized gain on
  investments........................  6,558,354                   239,253    2,164,287    1,761,215      1,475,957
                                       ----------   ----------    --------    ----------   ----------    ----------
Net increase in net assets resulting
  from operations....................  $6,789,970   $1,070,282    $515,719    $2,429,784   $1,701,449    $1,359,585
                                       ==========   ==========    ========    ==========   ==========    ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                       F-9
<PAGE>   68
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                      FIDELITY     FIDELITY                                 FIDELITY
                                        HIGH        EQUITY-      FIDELITY      FIDELITY      ASSET       FIDELITY
                                       INCOME       INCOME        GROWTH       OVERSEAS     MANAGER      INDEX 500
                                     SUBACCOUNT   SUBACCOUNT    SUBACCOUNT    SUBACCOUNT   SUBACCOUNT   SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>           <C>           <C>          <C>          <C>
INVESTMENT INCOME
Dividends..........................  $ 773,832    $  862,294    $  310,714     $  3,965    $ 748,757    $   291,382
EXPENSES
Mortality and expense risks........    194,498       885,637       770,166       14,204      355,204        565,085
                                     ----------   -----------   -----------    --------    ----------   -----------
Net investment income (loss).......    579,334       (23,343)     (459,452)     (10,239)     393,553       (273,703)
                                     ----------   -----------   -----------    --------    ----------   -----------
NET REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS
Realized gain distributions
  reinvested.......................     95,642     4,335,423     1,390,815       15,739    1,878,238        591,252
Net realized gain from redemption
  of investment shares.............    194,367       792,883     1,249,941       10,908      340,012        316,572
                                     ----------   -----------   -----------    --------    ----------   -----------
Net realized gain on investments...    290,009     5,128,306     2,640,756       26,647    2,218,250        907,824
                                     ----------   -----------   -----------    --------    ----------   -----------
Net unrealized appreciation
  (depreciation) of investments:
  Beginning of year................    788,054     7,714,797     6,606,438        6,677    2,991,814      3,722,079
  End of year......................  1,994,767    17,071,432    14,960,831        3,948    4,749,426     13,147,837
                                     ----------   -----------   -----------    --------    ----------   -----------
Net unrealized appreciation
  (depreciation) during the year...  1,206,713     9,356,635     8,354,393       (2,729)   1,757,612      9,425,758
                                     ----------   -----------   -----------    --------    ----------   -----------
Net realized and unrealized gain on
  investments......................  1,496,722    14,484,941    10,995,149       23,918    3,975,862     10,333,582
                                     ----------   -----------   -----------    --------    ----------   -----------
Net increase in net assets
  resulting from operations........  $2,076,056   $14,461,598   $10,535,697    $ 13,679    $4,369,415   $10,059,879
                                     ==========   ===========   ===========    ========    ==========   ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-10
<PAGE>   69
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                FIDELITY
                                                               INVESTMENT
                                                   FIDELITY      GRADE         OCC          OCC           OCC
                                                  CONTRAFUND      BOND        EQUITY     SMALL CAP      MANAGED
                                                  SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT   SUBACCOUNT
- -----------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>          <C>          <C>
INVESTMENT INCOME
Dividends.......................................  $ 153,755     $14,240     $ 103,937    $  66,503    $   440,814
EXPENSES
Mortality and expense risks.....................    380,649       6,700       210,252      199,279        684,780
                                                  ----------    -------     ----------   ----------   -----------
Net investment gain (loss)......................   (226,894)      7,540      (106,315)    (132,776)      (243,966)
                                                  ----------    -------     ----------   ----------   -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain distributions reinvested..........    406,354                   370,000      468,993      1,353,882
Net realized gain from redemption of investment
  shares........................................    249,218       1,806       426,084      214,594      1,680,914
                                                  ----------    -------     ----------   ----------   -----------
Net realized gain on investments................    655,572       1,806       796,084      683,587      3,034,796
                                                  ----------    -------     ----------   ----------   -----------
Net unrealized appreciation of investments:
  Beginning of year.............................  2,216,487       4,399     2,228,445    1,970,184      9,403,779
  End of year...................................  7,221,948      41,164     4,899,452    4,006,030     15,384,550
                                                  ----------    -------     ----------   ----------   -----------
Net unrealized appreciation during the year.....  5,005,461      36,765     2,671,007    2,035,846      5,980,771
                                                  ----------    -------     ----------   ----------   -----------
Net realized and unrealized gain on
  investments...................................  5,661,033      38,571     3,467,091    2,719,433      9,015,567
                                                  ----------    -------     ----------   ----------   -----------
Net increase in net assets resulting from
  operations....................................  $5,434,139    $46,111     $3,360,776   $2,586,657   $ 8,771,601
                                                  ==========    =======     ==========   ==========   ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-11
<PAGE>   70
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                               DREYFUS
                                                  SCUDDER                        ZERO       DREYFUS       DREYFUS
                                     SCUDDER     GROWTH AND      SCUDDER        COUPON     GROWTH AND    SOCIALLY
                                       BOND        INCOME     INTERNATIONAL      2000        INCOME     RESPONSIBLE
                                    SUBACCOUNT   SUBACCOUNT    SUBACCOUNT     SUBACCOUNT   SUBACCOUNT   SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S>                                 <C>          <C>          <C>             <C>          <C>          <C>
INVESTMENT INCOME
Dividends.........................   $387,826    $ 211,659      $100,838       $282,144    $ 213,322     $ 19,638
EXPENSES
Mortality and expense risks.......     89,466      133,020       118,456         69,398      215,717       49,568
                                     --------    ----------     --------       --------    ----------    --------
Net investment income (loss)......    298,360       78,639       (17,618)       212,746       (2,395)     (29,930)
                                     --------    ----------     --------       --------    ----------    --------
NET REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS
Realized gain distributions
  reinvested......................     17,188      213,481        52,820         50,736    1,188,467      153,000
Net realized gain from redemption
  of investment shares............     14,064      151,816        92,814         23,258      328,089       74,055
                                     --------    ----------     --------       --------    ----------    --------
Net realized gain on
  investments.....................     31,252      365,297       145,634         73,994    1,516,556      227,055
                                     --------    ----------     --------       --------    ----------    --------
Net unrealized appreciation
  (depreciation) of investments:
  Beginning of year...............     31,472      449,079       382,202         11,496     (407,725)      65,790
  End of year.....................    182,019    2,145,837       695,843         (4,370)     135,652      633,396
                                     --------    ----------     --------       --------    ----------    --------
Net unrealized appreciation
  (depreciation) during the
  year............................    150,547    1,696,758       313,641        (15,866)     543,377      567,606
                                     --------    ----------     --------       --------    ----------    --------
Net realized and unrealized gain
  on investments..................    181,799    2,062,055       459,275         58,128    2,059,933      794,661
                                     --------    ----------     --------       --------    ----------    --------
Net increase in net assets
  resulting from operations.......   $480,159    $2,140,694     $441,657       $270,874    $2,057,538    $764,731
                                     ========    ==========     ========       ========    ==========    ========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-12
<PAGE>   71
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                           FEDERATED
                                           FUND FOR                         NEUBERGER    NEUBERGER     NEUBERGER &
                                        U.S. GOVERNMENT      FEDERATED       & BERMAN     & BERMAN    BERMAN LIMITED
                                         SECURITIES II    UTILITY FUND II    BALANCED      GROWTH     MATURITY BOND
                                          SUBACCOUNT        SUBACCOUNT      SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>               <C>          <C>          <C>
INVESTMENT INCOME
Dividends.............................     $ 87,041          $ 76,808        $ 1,790                     $15,192
EXPENSES
Mortality and expense risks...........       35,242            49,660          4,146      $  7,191         7,485
                                           --------          --------        -------      --------       -------
Net investment income (loss)..........       51,799            27,148         (2,356)       (7,191)        7,707
                                           --------          --------        -------      --------       -------
NET REALIZED AND UNREALIZED GAIN
  (LOSS) ON INVESTMENTS
Realized gain distributions
  reinvested..........................                         65,766          4,594        22,230
Net realized gain (loss) from
  redemption of investment shares.....       (1,435)           42,795          3,024        12,512           520
                                           --------          --------        -------      --------       -------
Net realized gain (loss) on
  investments.........................       (1,435)          108,561          7,618        34,742           520
                                           --------          --------        -------      --------       -------
Net unrealized appreciation of
  investments:
  Beginning of year...................        6,635           190,839          1,338         7,212           463
  End of year.........................      139,066           942,031         36,672        83,141        21,796
                                           --------          --------        -------      --------       -------
Net unrealized appreciation during the
  year................................      132,431           751,192         35,334        75,929        21,333
                                           --------          --------        -------      --------       -------
Net realized and unrealized gain
  on investments......................      130,996           859,753         42,952       110,671        21,853
                                           --------          --------        -------      --------       -------
Net increase in net assets
  resulting from operations...........     $182,795          $886,901        $40,596      $103,480       $29,560
                                           ========          ========        =======      ========       =======
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-13
<PAGE>   72
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Operations for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                  AMERICAN                   VAN ECK      VAN ECK         ALGER
                                                 CENTURY VP     VAN ECK     WORLDWIDE    WORLDWIDE       AMERICAN
                                                  CAPITAL      WORLDWIDE       HARD       EMERGING        SMALL
                                                APPRECIATION      BOND        ASSETS      MARKETS     CAPITALIZATION
                                                 SUBACCOUNT    SUBACCOUNT   SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>          <C>          <C>          <C>
INVESTMENT INCOME
Dividends.....................................                  $ 4,941      $ 1,157     $     511
EXPENSES
Mortality and expense risks...................    $ 1,534         7,065          957         7,400       $ 18,151
                                                  -------       -------      -------     ---------       --------
Net investment gain (loss)....................     (1,534)       (2,124)         200        (6,889)       (18,151)
                                                  -------       -------      -------     ---------       --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
  INVESTMENTS
Realized gain distributions reinvested........      2,357                        853                       42,209
Net realized gain (loss) from redemption of
  investment shares...........................     (2,828)          150         (191)       11,001          3,889
                                                  -------       -------      -------     ---------       --------
Net realized gain (loss) on investments.......       (471)          150          662        11,001         46,098
                                                  -------       -------      -------     ---------       --------
Net unrealized appreciation (depreciation) of
  investments:
  Beginning of year...........................     (1,957)        1,185        1,566         3,026          5,653
  End of year.................................     (6,096)       25,331       (8,342)     (247,842)       126,890
                                                  -------       -------      -------     ---------       --------
Net unrealized appreciation (depreciation)
  during the year.............................     (4,139)       24,146       (9,908)     (250,868)       121,237
                                                  -------       -------      -------     ---------       --------
Net realized and unrealized gain (loss) on
  investments.................................     (4,610)       24,296       (9,246)     (239,867)       167,335
                                                  -------       -------      -------     ---------       --------
Net increase (decrease) in net assets
  resulting from operations...................    $(6,144)      $22,172      $(9,046)    $(246,756)      $149,184
                                                  =======       =======      =======     =========       ========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-14
<PAGE>   73
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                    MONEY                                  AGGRESSIVE
                                    GROWTH         MARKET          BOND        MANAGED       GROWTH      INTERNATIONAL
                                  SUBACCOUNT     SUBACCOUNT     SUBACCOUNT   SUBACCOUNT    SUBACCOUNT     SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>             <C>          <C>           <C>           <C>
FROM OPERATIONS
Net investment income (loss)....  $  231,616    $   1,070,282   $ 276,466    $  265,497    $  (59,766)    $  (116,372)
Net realized gain (loss) on
  investments...................   3,430,041                      (15,685)      339,269       469,234       1,387,827
Net unrealized appreciation of
  investments during the year...   3,128,313                      254,938     1,825,018     1,291,981          88,130
                                  -----------   -------------   ----------   -----------   -----------    -----------
Net increase in net assets from
  operations....................   6,789,970        1,070,282     515,719     2,429,784     1,701,449       1,359,585
                                  -----------   -------------   ----------   -----------   -----------    -----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums...   2,088,885      130,399,881     551,478     1,148,358       850,433       1,255,853
Administrative charges..........     (17,605)          (7,663)     (3,214)       (7,746)       (6,581)        (11,877)
Surrenders and forfeitures......  (1,365,373)      (3,060,448)   (279,782)     (621,704)     (484,756)     (1,100,295)
Transfers between investment
  portfolios....................   5,570,307     (124,703,022)  2,062,898     1,923,797     1,707,222         787,778
Net withdrawals due to policy
  loans.........................      (5,569)          (2,194)       (406)         (963)       (5,084)         (2,337)
Withdrawals due to death
  benefits......................     (60,690)         (66,875)    (40,881)      (41,895)      (78,959)        (99,780)
                                  -----------   -------------   ----------   -----------   -----------    -----------
Net increase in net assets
  derived from contract
  transactions..................   6,209,955        2,559,679   2,290,093     2,399,847     1,982,275         829,342
                                  -----------   -------------   ----------   -----------   -----------    -----------
Total increase in net assets....  12,999,925        3,629,961   2,805,812     4,829,631     3,683,724       2,188,927
NET ASSETS
  Beginning of year.............  27,187,220       26,243,173   5,229,293    11,558,384     7,218,147      16,420,391
                                  -----------   -------------   ----------   -----------   -----------    -----------
  End of year...................  $40,187,145   $  29,873,134   $8,035,105   $16,388,015   $10,901,871    $18,609,318
                                  ===========   =============   ==========   ===========   ===========    ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-15
<PAGE>   74
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                     FIDELITY      FIDELITY                                   FIDELITY
                                       HIGH         EQUITY-       FIDELITY      FIDELITY       ASSET        FIDELITY
                                      INCOME        INCOME         GROWTH       OVERSEAS      MANAGER       INDEX 500
                                    SUBACCOUNT    SUBACCOUNT     SUBACCOUNT    SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>            <C>          <C>            <C>
FROM OPERATIONS
Net investment income (loss)......  $  579,334    $  (23,343)   $  (459,452)   $ (10,239)   $   393,553    $  (273,703)
Net realized gain on
  investments.....................     290,009     5,128,306      2,640,756       26,647      2,218,250        907,824
Net unrealized appreciation
  (depreciation) of investments
  during the year.................   1,206,713     9,356,635      8,354,393       (2,729)     1,757,612      9,425,758
                                    -----------   -----------   -----------    ----------   -----------    -----------
Net increase in net assets from
  operations......................   2,076,056    14,461,598     10,535,697       13,679      4,369,415     10,059,879
                                    -----------   -----------   -----------    ----------   -----------    -----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums.....   1,280,526     4,268,560      4,338,146      158,943      1,519,377      5,358,511
Administrative charges............      (7,533)      (35,464)       (39,051)        (395)       (13,984)       (20,920)
Surrenders and forfeitures........    (747,010)   (2,452,358)    (1,961,173)     (10,628)    (1,204,262)    (1,030,109)
Transfers between investment
  portfolios......................   5,414,722    13,589,788      7,419,053    1,610,770      4,483,284     20,918,768
Net repayments (withdrawals) due
  to policy loans.................     (33,050)      (33,934)       (14,356)                        975        (20,224)
Withdrawals due to death
  benefits........................     (17,041)     (632,965)      (421,777)        (113)      (123,325)      (147,455)
                                    -----------   -----------   -----------    ----------   -----------    -----------
Net increase in net assets derived
  from contract transactions......   5,890,614    14,703,627      9,320,842    1,758,577      4,662,065     25,058,571
                                    -----------   -----------   -----------    ----------   -----------    -----------
Total increase in net assets......   7,966,670    29,165,225     19,856,539    1,772,256      9,031,480     35,118,450
NET ASSETS
  Beginning of year...............  10,477,722    49,735,738     45,020,726      159,089     21,122,323     23,271,511
                                    -----------   -----------   -----------    ----------   -----------    -----------
  End of year.....................  $18,444,392   $78,900,963   $64,877,265    $1,931,345   $30,153,803    $58,389,961
                                    ===========   ===========   ===========    ==========   ===========    ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-16
<PAGE>   75
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                 FIDELITY
                                                                INVESTMENT
                                                   FIDELITY       GRADE          OCC           OCC           OCC
                                                  CONTRAFUND       BOND        EQUITY       SMALL CAP      MANAGED
                                                  SUBACCOUNT    SUBACCOUNT   SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>           <C>           <C>
FROM OPERATIONS
Net investment income (loss)....................  $ (226,894)   $   7,540    $ (106,315)   $ (132,776)   $  (243,966)
Net realized gain on investments................     655,572        1,806       796,084       683,587      3,034,796
Net unrealized appreciation of investments
  during the year...............................   5,005,461       36,765     2,671,007     2,035,846      5,980,771
                                                  -----------   ----------   -----------   -----------   -----------
Net increase in net assets from operations......   5,434,139       46,111     3,360,776     2,586,657      8,771,601
                                                  -----------   ----------   -----------   -----------   -----------
FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS
Contractholders' net premiums...................   2,843,886       54,796     1,602,917     1,130,432      3,738,480
Administrative charges..........................     (16,030)        (195)       (8,166)       (9,057)       (26,367)
Surrenders and forfeitures......................  (1,027,236)      (3,478)     (774,950)     (504,489)    (1,990,422)
Transfers between investment portfolios.........  12,918,442      783,432     5,613,117     4,233,814      8,848,392
Net withdrawals due to policy loans.............     (13,879)                      (688)      (11,287)       (31,626)
Withdrawals due to death benefits...............                               (130,515)      (46,072)      (313,679)
                                                  -----------   ----------   -----------   -----------   -----------
Net increase in net assets derived from contract
  transactions..................................  14,705,183      834,555     6,301,715     4,793,341     10,224,778
                                                  -----------   ----------   -----------   -----------   -----------
Total increase in net assets....................  20,139,322      880,666     9,662,491     7,379,998     18,996,379
NET ASSETS
  Beginning of year.............................  17,135,935      170,704    10,821,995    10,778,200     38,321,624
                                                  -----------   ----------   -----------   -----------   -----------
  End of year...................................  $37,275,257   $1,051,370   $20,484,486   $18,158,198   $57,318,003
                                                  ===========   ==========   ===========   ===========   ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-17
<PAGE>   76
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                SCUDDER                                      DREYFUS       DREYFUS
                                  SCUDDER       GROWTH         SCUDDER      DREYFUS ZERO     GROWTH       SOCIALLY
                                    BOND      AND INCOME    INTERNATIONAL   COUPON 2000    AND INCOME    RESPONSIBLE
                                 SUBACCOUNT   SUBACCOUNT     SUBACCOUNT      SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>           <C>             <C>            <C>           <C>
FROM OPERATIONS
Net investment income (loss)...  $ 298,360    $   78,639     $   (17,618)    $  212,746    $   (2,395)   $  (29,930)
Net realized gain on
  investments..................     31,252       365,297         145,634         73,994     1,516,556       227,055
Net unrealized appreciation
  (depreciation) of investments
  during the year..............    150,547     1,696,758         313,641        (15,866)      543,377       567,606
                                 ----------   -----------    -----------     ----------    -----------   ----------
Net increase in net assets from
  operations...................    480,159     2,140,694         441,657        270,874     2,057,538       764,731
                                 ----------   -----------    -----------     ----------    -----------   ----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net
  premiums.....................    291,718     1,186,505       1,046,437        509,829     1,412,748       505,234
Administrative charges.........     (3,726)       (4,669)         (4,407)        (2,535)      (11,090)       (2,482)
Surrenders and forfeitures.....   (191,865)     (301,213)       (175,614)      (703,664)     (574,271)     (134,940)
Transfers between investment
  portfolios...................  1,707,689     8,319,936       3,778,824        805,262     1,705,003     2,541,677
Net withdrawals due to policy
  loans........................     (4,218)       (8,156)         (7,520)        (2,358)      (14,113)       (4,931)
Withdrawals due to death
  benefits.....................    (22,128)      (65,835)        (10,135)        (5,854)      (76,105)       (1,793)
                                 ----------   -----------    -----------     ----------    -----------   ----------
Net increase in net assets
  derived from contract
  transactions.................  1,777,470     9,126,568       4,627,585        600,680     2,442,172     2,902,765
                                 ----------   -----------    -----------     ----------    -----------   ----------
Total increase in net assets...  2,257,629    11,267,262       5,069,242        871,554     4,499,710     3,667,496
NET ASSETS
  Beginning of year............  5,689,320     4,545,038       5,588,436      4,977,823    12,537,732     1,781,138
                                 ----------   -----------    -----------     ----------    -----------   ----------
  End of year..................  $7,946,949   $15,812,300    $10,657,678     $5,849,377    $17,037,442   $5,448,634
                                 ==========   ===========    ===========     ==========    ===========   ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-18
<PAGE>   77
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                           FEDERATED
                                           FUND FOR                         NEUBERGER    NEUBERGER     NEUBERGER &
                                        U.S. GOVERNMENT      FEDERATED       & BERMAN     & BERMAN    BERMAN LIMITED
                                         SECURITIES II    UTILITY FUND II    BALANCED      GROWTH     MATURITY BOND
                                          SUBACCOUNT        SUBACCOUNT      SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>               <C>          <C>          <C>
FROM OPERATIONS
Net investment income (loss)........      $   51,799        $   27,148       $ (2,356)    $ (7,191)      $  7,707
Net realized gain (loss) on
  investments.......................          (1,435)          108,561          7,618       34,742            520
Net unrealized appreciation of
  investments during the year.......         132,431           751,192         35,334       75,929         21,333
                                          ----------        ----------       --------     --------       --------
Net increase in net assets from
  operations........................         182,795           886,901         40,596      103,480         29,560
                                          ----------        ----------       --------     --------       --------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums.......         208,631           521,063         22,838       80,259         68,951
Administrative charges..............          (1,031)           (1,719)           (65)        (252)           (98)
Surrenders and forfeitures..........         (62,558)          (89,033)       (10,471)      (1,022)        (1,686)
Transfers between investment
  portfolios........................       1,295,645         1,039,150        600,636      619,422        783,333
Net withdrawals due to policy
  loans.............................                              (324)
Withdrawals due to death benefits...          (4,837)           (5,282)
                                          ----------        ----------       --------     --------       --------
Net increase in net assets derived
  from contract transactions........       1,435,850         1,463,855        612,938      698,407        850,500
                                          ----------        ----------       --------     --------       --------
Total increase in net assets........       1,618,645         2,350,756        653,534      801,887        880,060
NET ASSETS
  Beginning of year.................       1,982,702         2,779,751         68,187      133,223        101,452
                                          ----------        ----------       --------     --------       --------
  End of year.......................      $3,601,347        $5,130,507       $721,721     $935,110       $981,512
                                          ==========        ==========       ========     ========       ========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-19
<PAGE>   78
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1997
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                  AMERICAN                   VAN ECK      VAN ECK         ALGER
                                                 CENTURY VP     VAN ECK     WORLDWIDE    WORLDWIDE       AMERICAN
                                                  CAPITAL      WORLDWIDE       HARD       EMERGING        SMALL
                                                APPRECIATION      BOND        ASSETS      MARKETS     CAPITALIZATION
                                                 SUBACCOUNT    SUBACCOUNT   SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>          <C>          <C>          <C>
FROM OPERATIONS
Net investment gain (loss)....................    $ (1,534)     $ (2,124)    $    200    $  (6,889)     $  (18,151)
Net realized gain (loss) on investments.......        (471)          150          662       11,001          46,098
Net unrealized appreciation (depreciation) of
  investments during the year.................      (4,139)       24,146       (9,908)    (250,868)        121,237
                                                  --------      --------     --------    ----------     ----------
Net increase (decrease) in net assets from
  operations..................................      (6,144)       22,172       (9,046)    (246,756)        149,184
                                                  --------      --------     --------    ----------     ----------
FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS
Contractholders' net premiums.................      17,286        80,140        7,900      143,354         180,116
Administrative charges........................         (92)          (96)         (42)        (148)           (595)
Surrenders and forfeitures....................        (345)       (3,711)                   (4,908)         (5,167)
Transfers between investment portfolios.......      67,816       707,353      115,282      943,837       1,434,196
                                                  --------      --------     --------    ----------     ----------
Net increase in net assets derived from
  contract transactions.......................      84,665       783,686      123,140    1,082,135       1,608,550
                                                  --------      --------     --------    ----------     ----------
Total increase in net assets..................      78,521       805,858      114,094      835,379       1,757,734
NET ASSETS
  Beginning of year...........................      82,618       117,503       42,725       96,572         481,856
                                                  --------      --------     --------    ----------     ----------
  End of year.................................    $161,139      $923,361     $156,819    $ 931,951      $2,239,590
                                                  ========      ========     ========    ==========     ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-20
<PAGE>   79
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                    MONEY                                  AGGRESSIVE
                                    GROWTH         MARKET          BOND        MANAGED       GROWTH     INTERNATIONAL
                                  SUBACCOUNT     SUBACCOUNT     SUBACCOUNT   SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S>                               <C>           <C>             <C>          <C>           <C>          <C>
FROM OPERATIONS
Net investment income (loss)....  $  316,085    $     784,204   $ 184,491    $  217,888    $ (33,086)    $   (55,547)
Net realized gain (loss) on
  investments...................   1,067,017                      (25,492)      421,760      495,730         648,114
Net unrealized appreciation
  (depreciation) of investments
  during the year...............   2,484,529                      (64,812)      390,458      540,916         694,991
                                  -----------   -------------   ----------   -----------   ----------    -----------
Net increase in net assets from
  operations....................   3,867,631          784,204      94,187     1,030,106    1,003,560       1,287,558
                                  -----------   -------------   ----------   -----------   ----------    -----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums...   1,644,231      121,758,353     304,881       978,648      588,324       1,004,617
Administrative charges..........     (13,376)          (5,026)     (2,343)       (6,006)      (4,280)         (9,958)
Surrenders and forfeitures......    (795,658)      (1,435,990)   (182,432)     (719,819)    (273,147)       (652,687)
Transfers between investment
  portfolios....................   4,176,554     (111,307,382)  1,372,798     1,582,506    1,796,643       3,132,226
Net repayments (withdrawals) due
  to policy loans...............      (7,338)         (34,207)        100                       (552)         (1,372)
Withdrawals due to death
  benefits......................     (11,907)         (58,579)    (10,224)       (3,236)     (17,636)        (29,540)
                                  -----------   -------------   ----------   -----------   ----------    -----------
Net increase in net assets
  derived from contract
  transactions..................   4,992,506        8,917,169   1,482,780     1,832,093    2,089,352       3,443,286
                                  -----------   -------------   ----------   -----------   ----------    -----------
Capital Contribution from
  Providentmutual Life and
  Annuity Company of America....      10,000
                                  -----------   -------------   ----------   -----------   ----------    -----------
Total increase in net assets....   8,870,137        9,701,373   1,576,967     2,862,199    3,092,912       4,730,844
NET ASSETS
  Beginning of year.............  18,317,083       16,541,800   3,652,326     8,696,185    4,125,235      11,689,547
                                  -----------   -------------   ----------   -----------   ----------    -----------
  End of year...................  $27,187,220   $  26,243,173   $5,229,293   $11,558,384   $7,218,147    $16,420,391
                                  ===========   =============   ==========   ===========   ==========    ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-21
<PAGE>   80
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                     FIDELITY      FIDELITY                                   FIDELITY
                                       HIGH         EQUITY-       FIDELITY      FIDELITY       ASSET        FIDELITY
                                      INCOME        INCOME         GROWTH       OVERSEAS      MANAGER       INDEX 500
                                    SUBACCOUNT    SUBACCOUNT     SUBACCOUNT    SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>           <C>            <C>          <C>            <C>
FROM OPERATIONS
Net investment income (loss)......  $  254,927    $ (505,931)   $  (429,419)    $   (311)   $   364,988    $  (109,536)
Net realized gain (loss) on
  investments.....................     132,327     1,618,452      1,925,234         (160)       663,926        389,122
Net unrealized appreciation of
  investments during the year.....     440,156     3,721,134      2,649,303        6,677      1,281,085      2,715,967
                                    -----------   -----------   -----------     --------    -----------    -----------
Net increase in net assets from
  operations......................     827,410     4,833,655      4,145,118        6,206      2,309,999      2,995,553
                                    -----------   -----------   -----------     --------    -----------    -----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums.....   1,340,627     4,044,472      3,701,064       23,248      1,313,614      2,421,951
Administrative charges............      (4,355)      (21,830)       (22,665)                    (11,966)        (7,281)
Surrenders and forfeitures........    (288,950)   (1,390,637)    (1,509,084)         (15)      (828,163)      (354,068)
Transfers between investment
  portfolios......................   4,325,677    15,191,804     15,851,318      104,650      1,876,550     10,995,467
Net repayments (withdrawals) due
  to policy loans.................          85        (3,854)        (5,133)                     (8,826)          (282)
Withdrawals due to death
  benefits........................      (9,539)     (208,952)                                                  (26,054)
                                    -----------   -----------   -----------     --------    -----------    -----------
Net increase in net assets derived
  from contract transactions......   5,363,545    17,611,003     18,015,500      127,883      2,341,209     13,029,733
                                    -----------   -----------   -----------     --------    -----------    -----------
Capital Contribution from
  Providentmutual Life and Annuity
  Company of America..............                                                25,000
                                    -----------   -----------   -----------     --------    -----------    -----------
Total increase in net assets......   6,190,955    22,444,658     22,160,618      159,089      4,651,208     16,025,286
NET ASSETS
  Beginning of year...............   4,286,767    27,291,080     22,860,108           --     16,471,115      7,246,225
                                    -----------   -----------   -----------     --------    -----------    -----------
  End of year.....................  $10,477,722   $49,735,738   $45,020,726     $159,089    $21,122,323    $23,271,511
                                    ===========   ===========   ===========     ========    ===========    ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-22
<PAGE>   81
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                 FIDELITY
                                                                INVESTMENT                   QUEST FOR     QUEST FOR
                                                   FIDELITY       GRADE       QUEST FOR        VALUE         VALUE
                                                  CONTRAFUND       BOND      VALUE EQUITY    SMALL CAP      MANAGED
                                                  SUBACCOUNT    SUBACCOUNT    SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>          <C>            <C>           <C>
FROM OPERATIONS
Net investment income (loss)....................  $ (144,281)    $   (408)   $   (54,942)   $  (31,575)   $  (100,692)
Net realized gain on investments................     113,953          457        247,237       314,931        497,811
Net unrealized appreciation of investments
  during the year...............................   2,097,336        4,399      1,334,288     1,105,412      5,133,690
                                                  -----------    --------    -----------    -----------   -----------
Net increase in net assets from operations......   2,067,008        4,448      1,526,583     1,388,768      5,530,809
                                                  -----------    --------    -----------    -----------   -----------
FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS
Contractholders' net premiums...................   1,525,821       34,827      1,229,182       811,707      2,943,888
Administrative charges..........................      (5,051)                     (4,681)       (6,037)       (15,390)
Surrenders and forfeitures......................    (228,810)         (25)      (421,232)     (485,083)    (1,143,195)
Transfers between investment portfolios.........   9,242,839      106,454      3,356,209     2,518,729     11,176,788
Net withdrawals due to policy loans.............        (288)                                   (2,593)          (773)
Withdrawals due to death benefits...............                                  (9,938)       (3,231)       (16,253)
                                                  -----------    --------    -----------    -----------   -----------
Net increase in net assets derived from contract
  transactions..................................  10,534,511      141,256      4,149,540     2,833,492     12,945,065
                                                  -----------    --------    -----------    -----------   -----------
Capital Contribution from Providentmutual Life
  and Annuity Company of America................                   25,000
                                                  -----------    --------    -----------    -----------   -----------
Total increase in net assets....................  12,601,519      170,704      5,676,123     4,222,260     18,475,874
NET ASSETS
  Beginning of year.............................   4,534,416           --      5,145,872     6,555,940     19,845,750
                                                  -----------    --------    -----------    -----------   -----------
  End of year...................................  $17,135,935    $170,704    $10,821,995    $10,778,200   $38,321,624
                                                  ===========    ========    ===========    ===========   ===========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-23
<PAGE>   82
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                SCUDDER                                      DREYFUS       DREYFUS
                                  SCUDDER       GROWTH         SCUDDER      DREYFUS ZERO     GROWTH       SOCIALLY
                                    BOND      AND INCOME    INTERNATIONAL   COUPON 2000    AND INCOME    RESPONSIBLE
                                 SUBACCOUNT   SUBACCOUNT     SUBACCOUNT      SUBACCOUNT    SUBACCOUNT    SUBACCOUNT
- --------------------------------------------------------------------------------------------------------------------
<S>                              <C>          <C>           <C>             <C>            <C>           <C>
FROM OPERATIONS
Net investment income (loss)...  $ 322,760    $   24,844     $  (13,372)     $  174,464    $   36,293    $   (7,630)
Net realized gain (loss)
  on investments...............    (10,942)       55,320          3,629          50,561     1,417,384        77,482
Net unrealized appreciation
  (depreciation) of investments
  during the year..............   (198,871)      406,632        370,601        (134,226)     (484,771)       61,554
                                 ----------   ----------     ----------      ----------    -----------   ----------
Net increase in net assets
  from operations..............    112,947       486,796        360,858          90,799       968,906       131,406
                                 ----------   ----------     ----------      ----------    -----------   ----------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net
  premiums.....................    323,646       442,431        682,287         432,012     1,384,695       440,029
Administrative charges.........     (2,437)         (841)          (967)         (1,938)       (2,831)         (362)
Surrenders and forfeitures.....   (349,330)      (80,116)       (62,391)       (379,163)     (138,624)      (18,392)
Transfers between investment
  portfolios...................  2,013,802     3,090,019      3,965,920       2,005,547     7,996,700     1,069,773
Net repayments (withdrawals)
  due to policy loans..........       (119)                          69              26          (297)         (205)
Withdrawals due to
  death benefits...............    (43,086)                                                    (1,695)
                                 ----------   ----------     ----------      ----------    -----------   ----------
Net increase in net assets
  derived from contract
  transactions.................  1,942,476     3,451,493      4,584,918       2,056,484     9,237,948     1,490,843
                                 ----------   ----------     ----------      ----------    -----------   ----------
Total increase in net assets...  2,055,423     3,938,289      4,945,776       2,147,283    10,206,854     1,622,249
NET ASSETS
  Beginning of year............  3,633,897       606,749        642,660       2,830,540     2,330,878       158,889
                                 ----------   ----------     ----------      ----------    -----------   ----------
  End of year..................  $5,689,320   $4,545,038     $5,588,436      $4,977,823    $12,537,732   $1,781,138
                                 ==========   ==========     ==========      ==========    ===========   ==========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-24
<PAGE>   83
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                          FEDERATED U.S.                  NEUBERGER    NEUBERGER      NEUBERGER &
                                            GOVERNMENT      FEDERATED      & BERMAN     & BERMAN    BERMAN LIMITED
                                            BOND FUND      UTILITY FUND    BALANCED      GROWTH      MATURITY BOND
                                            SUBACCOUNT      SUBACCOUNT    SUBACCOUNT   SUBACCOUNT     SUBACCOUNT
- -------------------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>            <C>          <C>          <C>
FROM OPERATIONS
Net investment income (loss)............    $   56,573      $   45,124     $   (11)     $   (257)      $   (233)
Net realized gain on investments........         4,801          24,018                        27          2,039
Net unrealized appreciation
  (depreciation) of investments during
  the year..............................        (1,677)        162,819       1,338         7,212            463
                                            ----------      ----------     -------      --------       --------
Net increase in net assets from
  operations............................        59,697         231,961       1,327         6,982          2,269
                                            ----------      ----------     -------      --------       --------
FROM VARIABLE ANNUITY CONTRACT
  TRANSACTIONS
Contractholders' net premiums...........       102,926         333,893                    13,916         34,685
Administrative charges..................          (422)           (597)
Surrenders and forfeitures..............       (13,145)        (11,974)                      (15)
Transfers between investment
  portfolios............................     1,336,413       1,641,638      41,860        87,340         39,498
Withdrawals due to death benefits.......                       (62,597)
                                            ----------      ----------     -------      --------       --------
Net increase in net assets derived from
  contract transactions.................     1,425,772       1,900,363      41,860       101,241         74,183
                                            ----------      ----------     -------      --------       --------
Capital Contribution from
  Providentmutual Life and Annuity
  Company of America....................                                    25,000        25,000         25,000
                                            ----------      ----------     -------      --------       --------
Total increase in net assets............     1,485,469       2,132,324      68,187       133,223        101,452
NET ASSETS
  Beginning of year.....................       497,233         647,427       --           --            --
                                            ----------      ----------     -------      --------       --------
  End of year...........................    $1,982,702      $2,779,751     $68,187      $133,223       $101,452
                                            ==========      ==========     =======      ========       ========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-25
<PAGE>   84
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Statements of Changes in Net Assets for the Year Ended December 31, 1996
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                           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 loss........................   $  (104)     $   (325)     $   (19)      $  (156)       $ (1,037)
Net realized gain on investments...........         2         2,082           57             1              10
Net unrealized appreciation (depreciation)
  of investments during the year...........    (1,957)        1,185        1,566         3,026           5,653
                                              -------      --------      -------       -------        --------
Net increase (decrease) in net assets from
  operations...............................    (2,059)        2,942        1,604         2,871           4,626
                                              -------      --------      -------       -------        --------
FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS
Contractholders' net premiums..............    23,812        34,622          (14)          119          43,293
Surrenders and forfeitures.................                     (10)
Transfers between investment portfolios....    35,865        54,949       16,135        68,582         408,937
                                              -------      --------      -------       -------        --------
Net increase in net assets derived from
  contract transactions....................    59,677        89,561       16,121        68,701         452,230
                                              -------      --------      -------       -------        --------
Capital Contribution from Providentmutual
  Life and Annuity Company of America......    25,000        25,000       25,000        25,000          25,000
                                              -------      --------      -------       -------        --------
Total increase in net assets...............    82,618       117,503       42,725        96,572         481,856
NET ASSETS
  Beginning of year........................     --           --           --             --            --
                                              -------      --------      -------       -------        --------
  End of year..............................   $82,618      $117,503      $42,725       $96,572        $481,856
                                              =======      ========      =======       =======        ========
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-26
<PAGE>   85
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes To Financial Statements
 
- --------------------------------------------------------------------------------
 
1. ORGANIZATION
 
     The Providentmutual Variable Annuity Separate Account (Separate Account)
was established by Providentmutual Life and Annuity Company of America
(Providentmutual) under the provisions of Pennsylvania law and commenced
operations on April 14, 1992. In December 1992, Providentmutual redomesticated
to the State of Delaware. Providentmutual is a wholly-owned subsidiary of
Provident Mutual Life Insurance Company (Provident Mutual). The Separate Account
is an investment account to which net proceeds from individual flexible premium
deferred variable annuity contracts (the Contracts) are allocated until maturity
or termination of the Contracts.
 
     The Contracts are distributed through career agents, brokers and personal
producing general agents.
 
     Providentmutual has structured the Separate Account as a unit investment
trust registered with the Securities and Exchange Commission under the
Investment Company Act of 1940, as amended. The Separate Account is comprised of
thirty-three Subaccounts: the Growth, Money Market, Bond, Managed, Aggressive
Growth and International Subaccounts invest in the corresponding portfolios of
the Market Street Fund, Inc.; the Fidelity High Income, Fidelity Equity-Income,
Fidelity Growth and Fidelity Overseas Subaccounts invest in the corresponding
portfolios of the Variable Insurance Products Fund; the Fidelity Asset Manager,
Fidelity Index 500, Fidelity Contrafund and Fidelity Investment Grade Bond
Subaccounts invest in the corresponding portfolios of the Variable Insurance
Products Fund II; the OCC Equity (formerly Quest for Value Equity), OCC Small
Cap (formerly Quest for Value Small Cap) and OCC Managed (formerly Quest for
Value Managed) Subaccounts invest in the corresponding portfolios of the OCC
Accumulation Trust; the Scudder Bond, Scudder Growth and Income and Scudder
International Subaccounts invest in the corresponding portfolios of the Scudder
Variable Life Investment Fund; the Dreyfus Zero Coupon 2000, Dreyfus Growth and
Income and Dreyfus Socially Responsible Subaccounts invest in the corresponding
portfolios of the Dreyfus Variable Investment Fund; and the Federated Fund for
U.S. Government Securities II (formerly Federated U.S. Government Bond Fund) and
Federated Utility Fund II (formerly Federated Utility Fund) Subaccounts invest
in the corresponding portfolios of the Federated Insurance Series (formerly
Insurance Management Series); 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 Worldwide 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.
See original contract documents for availability of Subaccounts as investment
options for a particular variable annuity contract.
 
                                      F-27
<PAGE>   86
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes To Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. ORGANIZATION, CONTINUED
     Net premiums from the Contracts are allocated to the Subaccounts in
accordance with contractholders instructions and are recorded as variable
annuity contract transactions in the statements of changes in net assets. Such
amounts are used to provide money to pay contract values under the Contracts.
The Separate Account's assets are the property of Providentmutual.
 
     Transfers between investment portfolios include transfers between the
Subaccounts and the Guaranteed Account (not shown), which is part of
Providentmutual's General Account.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     The following is a summary of the significant accounting policies followed
by the Separate Account 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 operation of the Separate Account is included in the Federal income tax
return of Providentmutual. Under the provisions of the Contracts,
Providentmutual has the right to charge the Separate Account for Federal income
tax attributable to the Separate Account. No charge is currently being made
against the Separate Account 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 contract
transactions during the period. Actual results could differ from those
estimates.
 
                                      F-28
<PAGE>   87
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS
 
     At December 31, 1997, the investments of the respective Subaccounts are as
follows:
 
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
                                                         SHARES       COST      MARKET VALUE
- --------------------------------------------------------------------------------------------
<S>                                                    <C>         <C>          <C>
Market Street Fund, Inc.:
  Growth Portfolio...................................   2,065,115  $32,061,596  $40,187,145
  Money Market Portfolio.............................  29,558,266  $29,558,266  $29,558,266
  Bond Portfolio.....................................     731,795   $7,693,174   $8,035,105
  Managed Portfolio..................................     960,610  $13,246,660  $16,388,015
  Aggressive Growth Portfolio........................     491,297   $8,664,640  $10,901,871
  International Portfolio............................   1,367,327  $16,945,769  $18,609,318
Variable Insurance Products Fund:
  High Income Portfolio..............................   1,358,203  $16,449,625  $18,444,392
  Equity-Income Portfolio............................   3,249,628  $61,829,531  $78,900,963
  Growth Portfolio...................................   1,748,713  $49,916,434  $64,877,265
  Overseas Portfolio.................................     100,591   $1,927,397   $1,931,345
Variable Insurance Products Fund II:
  Asset Manager Portfolio............................   1,674,281  $25,404,377  $30,153,803
  Index 500 Portfolio................................     510,446  $45,242,124  $58,389,961
  Contrafund Portfolio...............................   1,869,371  $30,053,309  $37,275,257
  Investment Grade Bond Portfolio....................      83,708   $1,010,206   $1,051,370
OCC Accumulation Trust:
  Equity Portfolio...................................     560,911  $15,585,034  $20,484,486
  Small Cap Portfolio................................     688,593  $14,152,168  $18,158,198
  Managed Portfolio..................................   1,352,478  $41,933,453  $57,318,003
Scudder Variable Life Investment Fund:
  Bond Portfolio.....................................   1,156,761   $7,764,930   $7,946,949
  Growth and Income Portfolio........................   1,377,378  $13,666,463  $15,812,300
  International Portfolio............................     755,328   $9,961,835  $10,657,678
Dreyfus Variable Investment Fund:
  Zero Coupon 2000 Portfolio.........................     475,559   $5,853,747   $5,849,377
  Growth and Income Portfolio........................     819,896  $16,901,790  $17,037,442
  Socially Responsible Portfolio.....................     218,207   $4,815,238   $5,448,634
</TABLE>
 
                                      F-29
<PAGE>   88
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
                                                         SHARES       COST      MARKET VALUE
- --------------------------------------------------------------------------------------------
<S>                                                    <C>         <C>          <C>
Federated Insurance Series:
  Fund for U.S. Government Securities II Portfolio...     341,684   $3,462,281   $3,601,347
  Utility Fund II Portfolio..........................     359,028   $4,188,476   $5,130,507
Neuberger & Berman Advisers Management Trust:
  Balanced Portfolio.................................      40,546     $685,049     $721,721
  Growth Portfolio...................................      30,619     $851,969     $935,110
  Limited Maturity Bond Portfolio....................      69,512     $959,716     $981,512
American Century Variable Portfolios, Inc.:
  American Century VP Capital Appreciation
     Portfolio.......................................      16,647     $167,235     $161,139
Van Eck Worldwide Insurance Trust:
  Van Eck Worldwide Bond Portfolio...................      84,018     $898,030     $923,361
  Van Eck Worldwide Hard Assets Portfolio............       9,976     $165,161     $156,819
  Van Eck Worldwide Emerging Markets Portfolio.......      84,723   $1,179,793     $931,951
Alger American Fund:
  Alger American Small Capitalization Portfolio......      51,191   $2,112,700   $2,239,590
</TABLE>
 
                                      F-30
<PAGE>   89
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
     During the years ended December 31, 1997 and 1996, transactions in
investment shares were as follows:
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                     MARKET STREET FUND, INC.
- ------------------------------------------------------------------------------------------------------------------------
                                              GROWTH PORTFOLIO        MONEY MARKET PORTFOLIO         BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
                                             1997          1996         1997          1996          1997         1996
- ------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>          <C>           <C>           <C>          <C>
Shares purchased........................      388,406      353,660    49,458,951    48,257,103      299,562      176,063
Shares received from reinvestment of:
  Dividends.............................       39,547       38,004     1,340,251     1,086,441       26,180       23,197
  Capital gain distributions............      197,982       56,193
                                          -----------   ----------   -----------   -----------   ----------   ----------
Total shares acquired...................      625,935      447,857    50,799,202    49,343,544      325,742      199,260
Total shares redeemed...................      (62,876)     (65,428)  (47,463,144)  (38,849,836)     (84,040)     (41,198)
                                          -----------   ----------   -----------   -----------   ----------   ----------
Net increase in shares owned............      563,059      382,429     3,336,058    10,493,708      241,702      158,062
Shares owned, beginning of year.........    1,502,056    1,119,627    26,222,208    15,728,500      490,093      332,031
                                          -----------   ----------   -----------   -----------   ----------   ----------
Shares owned, end of year...............    2,065,115    1,502,056    29,558,266    26,222,208      731,795      490,093
                                          ===========   ==========   ===========   ===========   ==========   ==========
Cost of shares acquired.................  $10,722,252   $7,269,012   $50,799,202   $49,343,544   $3,458,106   $2,101,906
                                          ===========   ==========   ===========   ===========   ==========   ==========
Cost of shares redeemed.................  $   850,640   $  883,404   $47,463,144   $38,849,836   $  907,232   $  460,127
                                          ===========   ==========   ===========   ===========   ==========   ==========
</TABLE>
 
                                      F-31
<PAGE>   90
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                     MARKET STREET FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------
                                                                            AGGRESSIVE
                                               MANAGED PORTFOLIO         GROWTH PORTFOLIO       INTERNATIONAL PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
                                               1997         1996         1997         1996         1997         1996
- -----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>          <C>          <C>
Shares purchased..........................     239,027      217,165      176,404      143,742      229,002      338,046
Shares received from reinvestment of:
  Dividends...............................      29,247       25,583        3,772        2,905       11,165       11,412
  Capital gain distributions..............       6,347       26,337          748       29,259       87,406       46,267
                                            ----------   ----------   ----------   ----------   ----------   ----------
Total shares acquired.....................     274,621      269,085      180,924      175,906      327,573      395,725
Total shares redeemed.....................    (101,367)     (94,568)     (79,376)     (23,509)    (184,734)     (80,224)
                                            ----------   ----------   ----------   ----------   ----------   ----------
Net increase in shares owned..............     173,254      174,517      101,548      152,397      142,839      315,501
Shares owned, beginning of year...........     787,356      612,839      389,749      237,352    1,224,488      908,987
                                            ----------   ----------   ----------   ----------   ----------   ----------
Shares owned, end of year.................     960,610      787,356      491,297      389,749    1,367,327    1,224,488
                                            ==========   ==========   ==========   ==========   ==========   ==========
Cost of shares acquired...................  $4,306,753   $3,730,420   $3,564,490   $2,907,441   $4,278,967   $4,989,324
                                            ==========   ==========   ==========   ==========   ==========   ==========
Cost of shares redeemed...................  $1,302,140   $1,258,679   $1,172,747   $  355,445   $2,178,170   $  953,471
                                            ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
                                      F-32
<PAGE>   91
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                          VARIABLE INSURANCE PRODUCTS FUND
- ------------------------------------------------------------------------------------------------------------------------------
                                                                                                               OVERSEAS
                        HIGH INCOME PORTFOLIO     EQUITY-INCOME PORTFOLIO        GROWTH PORTFOLIO              PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------
                          1997         1996         1997          1996          1997          1996          1997        1996
- ------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>          <C>          <C>           <C>           <C>           <C>           <C>          <C>
Shares purchased.....     556,624      497,171       738,222       948,858       353,805       625,760       97,803      9,008
Shares received from
  reinvestment of:
  Dividends..........      65,635       31,527        43,550         2,439         9,845         2,459          229
  Capital gain
    distributions....       8,112        6,168       218,961        69,930        44,069        62,080          908
                       ----------   ----------   -----------   -----------   -----------   -----------   ----------   --------
Total shares
  acquired...........     630,371      534,866     1,000,733     1,021,227       407,719       690,299       98,940      9,008
Total shares
  redeemed...........    (109,047)     (53,745)     (116,095)      (72,484)     (104,758)      (27,427)      (6,793)      (564)
                       ----------   ----------   -----------   -----------   -----------   -----------   ----------   --------
Net increase in
  shares owned.......     521,324      481,121       884,638       948,743       302,961       662,872       92,147      8,444
Shares owned,
  beginning of
  year...............     836,879      355,758     2,364,990     1,416,247     1,445,752       782,880        8,444
                       ----------   ----------   -----------   -----------   -----------   -----------   ----------   --------
Shares owned, end of
  year...............   1,358,203      836,879     3,249,628     2,364,990     1,748,713     1,445,752      100,591      8,444
                       ==========   ==========   ===========   ===========   ===========   ===========   ==========   ========
Cost of shares
  acquired...........  $7,933,056   $6,332,243   $21,544,493   $19,840,748   $13,852,376   $20,153,196   $1,896,772   $162,451
                       ==========   ==========   ===========   ===========   ===========   ===========   ==========   ========
Cost of shares
  redeemed...........  $1,173,099   $  581,561   $ 1,735,903   $ 1,117,224   $ 2,350,230   $   641,881   $  121,787   $ 10,039
                       ==========   ==========   ===========   ===========   ===========   ===========   ==========   ========
</TABLE>
 
                                      F-33
<PAGE>   92
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                        VARIABLE INSURANCE PRODUCTS FUND II
- ----------------------------------------------------------------------------------------------------------------------------
                            ASSET MANAGER                                           CONTRAFUND            INVESTMENT GRADE
                              PORTFOLIO             INDEX 500 PORTFOLIO              PORTFOLIO             BOND PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------
                          1997         1996         1997          1996          1997          1996         1997       1996
- ----------------------------------------------------------------------------------------------------------------------------
<S>                    <C>          <C>          <C>           <C>           <C>           <C>           <C>        <C>
Shares
  purchased..........     387,965      278,005       245,745       166,250       846,924       724,270     71,947     14,613
Shares received from
  reinvestment of:
  Dividends..........      48,526       39,874         3,170         1,306         9,341                    1,225
  Capital gain
    distributions....     121,726       32,878         6,432         3,358        24,687         3,706
                       ----------   ----------   -----------   -----------   -----------   -----------   --------   --------
Total shares
  acquired...........     558,217      350,757       255,347       170,914       880,952       727,976     73,172     14,613
Total shares
  redeemed...........    (131,563)    (146,266)       (5,997)       (5,528)      (46,360)      (22,255)    (3,410)      (667)
                       ----------   ----------   -----------   -----------   -----------   -----------   --------   --------
Net increase in
  shares owned.......     426,654      204,491       249,350       165,386       834,592       705,721     69,762     13,946
Shares owned,
  beginning of
  year...............   1,247,627    1,043,136       261,096        95,710     1,034,779       329,058     13,946
                       ----------   ----------   -----------   -----------   -----------   -----------   --------   --------
Shares owned, end of
  year...............   1,674,281    1,247,627       510,446       261,096     1,869,371     1,034,779     83,708     13,946
                       ==========   ==========   ===========   ===========   ===========   ===========   ========   ========
Cost of shares
  acquired...........  $9,113,810   $5,494,521   $26,020,287   $13,621,230   $15,732,802   $10,770,383   $883,549   $173,988
                       ==========   ==========   ===========   ===========   ===========   ===========   ========   ========
Cost of shares
  redeemed...........  $1,839,942   $2,124,398   $   327,595   $   311,911   $   598,941   $   266,200   $ 39,648   $  7,683
                       ==========   ==========   ===========   ===========   ===========   ===========   ========   ========
</TABLE>
 
                                      F-34
<PAGE>   93
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                     OCC ACCUMULATION TRUST
- -----------------------------------------------------------------------------------------------------------------------
                                             EQUITY PORTFOLIO         SMALL CAP PORTFOLIO         MANAGED PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
                                             1997         1996         1997         1996         1997          1996
- -----------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>          <C>          <C>          <C>           <C>
Shares purchased........................     214,672      162,103      220,838      162,087       333,304       413,755
Shares received from reinvestment of:
  Dividends.............................       3,476        2,142        3,052        4,346        12,218         9,660
  Capital gain distributions............      12,375        4,293       21,523       11,176        37,524         6,160
                                          ----------   ----------   ----------   ----------   -----------   -----------
Total shares acquired...................     230,523      168,538      245,413      177,609       383,046       429,575
Total shares redeemed...................     (29,505)     (14,069)     (33,520)     (30,188)      (88,884)      (29,711)
                                          ----------   ----------   ----------   ----------   -----------   -----------
Net increase in shares owned............     201,018      154,469      211,893      147,421       294,162       399,864
Shares owned, beginning of year.........     359,893      205,424      476,700      329,279     1,058,316       658,452
                                          ----------   ----------   ----------   ----------   -----------   -----------
Shares owned, end of year...............     560,911      359,893      688,593      476,700     1,352,478     1,058,316
                                          ==========   ==========   ==========   ==========   ===========   ===========
Cost of shares acquired.................  $7,519,820   $4,592,764   $5,908,364   $3,646,820   $14,890,450   $13,972,601
                                          ==========   ==========   ==========   ==========   ===========   ===========
Cost of shares redeemed.................  $  528,336   $  250,929   $  564,212   $  529,972   $ 1,874,842   $   630,417
                                          ==========   ==========   ==========   ==========   ===========   ===========
</TABLE>
 
                                      F-35
<PAGE>   94
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                               SCUDDER VARIABLE LIFE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------
                                                                         GROWTH AND INCOME
                                                BOND PORTFOLIO               PORTFOLIO          INTERNATIONAL PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
                                               1997         1996         1997         1996         1997         1996
- -----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>          <C>          <C>          <C>          <C>
Shares purchased..........................     385,038      367,411      901,830      420,073      362,848      367,511
Shares received from reinvestment of:
  Dividends...............................      58,342       58,022       20,474        6,977        7,622        2,055
  Capital gain distributions..............       2,585                    22,214        1,768        3,992
                                            ----------   ----------   ----------   ----------   ----------   ----------
Total shares acquired.....................     445,965      425,433      944,518      428,818      374,462      369,566
Total shares redeemed.....................    (134,571)     (86,886)     (52,203)     (19,789)     (40,903)      (2,168)
                                            ----------   ----------   ----------   ----------   ----------   ----------
Net increase in shares owned..............     311,394      338,547      892,315      409,029      333,559      367,398
Shares owned, beginning of year...........     845,367      506,820      485,063       76,034      421,769       54,371
                                            ----------   ----------   ----------   ----------   ----------   ----------
Shares owned, end of year.................   1,156,761      845,367    1,377,378      485,063      755,328      421,769
                                            ==========   ==========   ==========   ==========   ==========   ==========
Cost of shares acquired...................  $2,995,282   $2,843,858   $9,963,127   $3,671,539   $5,230,236   $4,599,283
                                            ==========   ==========   ==========   ==========   ==========   ==========
Cost of shares redeemed...................  $  888,200   $  589,564   $  392,623   $  139,882   $  474,635   $   24,108
                                            ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
                                      F-36
<PAGE>   95
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                 DREYFUS VARIABLE INVESTMENT FUND
- -----------------------------------------------------------------------------------------------------------------------
                                                 ZERO COUPON            GROWTH AND INCOME        SOCIALLY RESPONSIBLE
                                               2000 PORTFOLIO               PORTFOLIO                  PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
                                              1997         1996         1997         1996          1997         1996
- -----------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>          <C>          <C>           <C>          <C>
Shares purchased.........................     178,897      228,907      277,054       477,085      135,060       81,633
Shares received from reinvestment of:
  Dividends..............................      21,457       18,860       10,424         6,707          788          186
  Capital gain distributions.............                    1,345       59,160        65,140        6,135        3,323
                                           ----------   ----------   ----------   -----------   ----------   ----------
Total shares acquired....................     200,354      249,112      346,638       548,932      141,983       85,142
Total shares redeemed....................    (129,825)     (66,959)    (168,058)      (34,778)     (12,434)      (5,663)
                                           ----------   ----------   ----------   -----------   ----------   ----------
Net increase in shares owned.............      70,529      182,153      178,580       514,154      129,549       79,479
Shares owned, beginning of year..........     405,030      222,877      641,316       127,162       88,658        9,179
                                           ----------   ----------   ----------   -----------   ----------   ----------
Shares owned, end of year................     475,559      405,030      819,896       641,316      218,207       88,658
                                           ==========   ==========   ==========   ===========   ==========   ==========
Cost of shares acquired..................  $2,451,313   $3,073,171   $7,078,888   $11,274,699   $3,325,662   $1,653,499
                                           ==========   ==========   ==========   ===========   ==========   ==========
Cost of shares redeemed..................  $1,563,893   $  791,662   $3,122,555   $   583,074   $  225,772   $   92,804
                                           ==========   ==========   ==========   ===========   ==========   ==========
</TABLE>
 
                                      F-37
<PAGE>   96
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                            FEDERATED INSURANCE SERIES
- --------------------------------------------------------------------------------------------------------------------
                                                                      FUND FOR
                                                                  U.S. GOVERNMENT
                                                              SECURITIES II PORTFOLIO     UTILITY FUND II PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
                                                                 1997          1996          1997           1996
- --------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>           <C>           <C>            <C>
Shares purchased..........................................       187,156       155,414       140,162        189,045
Shares received from reinvestment of:
  Dividends...............................................         8,648         7,430         6,422          5,693
  Capital gain distributions..............................                         332         5,679            525
                                                              ----------    ----------    ----------     ----------
Total shares acquired.....................................       195,804       163,176       152,263        195,263
Total shares redeemed.....................................       (50,622)      (14,996)      (28,608)       (18,587)
                                                              ----------    ----------    ----------     ----------
Net increase in shares owned..............................       145,182       148,180       123,655        176,676
Shares owned, beginning of year...........................       196,502        48,322       235,373         58,697
                                                              ----------    ----------    ----------     ----------
Shares owned, end of year.................................       341,684       196,502       359,028        235,373
                                                              ==========    ==========    ==========     ==========
Cost of shares acquired...................................    $2,003,403    $1,637,184    $1,905,479     $2,157,050
                                                              ==========    ==========    ==========     ==========
Cost of shares redeemed...................................    $  517,189    $  150,038    $  305,915     $  187,545
                                                              ==========    ==========    ==========     ==========
</TABLE>
 
                                      F-38
<PAGE>   97
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                        NEUBERGER & BERMAN ADVISERS
                                                                              MANAGEMENT TRUST
- ---------------------------------------------------------------------------------------------------------------------
                                                                                                   LIMITED MATURITY
                                                       BALANCED PORTFOLIO    GROWTH PORTFOLIO       BOND PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------
                                                         1997      1996       1997       1996       1997       1996
- ---------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>        <C>       <C>        <C>        <C>        <C>
Shares purchased.....................................    37,500     4,283     26,907      5,195     62,507     11,388
Shares received from reinvestment of:
  Dividends..........................................       114                                      1,137
  Capital gain distributions.........................       294                  871
                                                       --------   -------   --------   --------   --------   --------
Total shares acquired................................    37,908     4,283     27,778      5,195     63,644     11,388
Total shares redeemed................................    (1,645)              (2,327)       (27)    (1,353)    (4,167)
                                                       --------   -------   --------   --------   --------   --------
Net increase in shares owned.........................    36,263     4,283     25,451      5,168     62,291      7,221
Shares owned, beginning of year......................     4,283     --         5,168      --         7,221      --
                                                       --------   -------   --------   --------   --------   --------
Shares owned, end of year............................    40,546     4,283     30,619      5,168     69,512      7,221
                                                       ========   =======   ========   ========   ========   ========
Cost of shares acquired..............................  $643,054   $66,858   $781,196   $126,671   $877,259   $157,410
                                                       ========   =======   ========   ========   ========   ========
Cost of shares redeemed..............................  $ 24,854   $     9   $ 55,238   $    660   $ 18,532   $ 56,421
                                                       ========   =======   ========   ========   ========   ========
</TABLE>
 
                                      F-39
<PAGE>   98
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                AMERICAN CENTURY             VAN ECK
                                                                    VARIABLE                WORLDWIDE
                                                                PORTFOLIOS, INC.         INSURANCE TRUST
- -----------------------------------------------------------------------------------------------------------
                                                                    AMERICAN
                                                                   CENTURY VP                VAN ECK
                                                              CAPITAL APPRECIATION          WORLDWIDE
                                                                    PORTFOLIO             BOND PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
                                                                1997         1996        1997        1996
- -----------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>         <C>         <C>
Shares purchased............................................    11,508       8,077       75,793      15,517
Shares received from reinvestment of:
  Dividends.................................................                                468
  Capital gain distributions................................       266
                                                              --------     -------     --------    --------
Total shares acquired.......................................    11,774       8,077       76,261      15,517
Total shares redeemed.......................................    (3,195)         (9)      (2,829)     (4,931)
                                                              --------     -------     --------    --------
Net increase in shares owned................................     8,579       8,068       73,432      10,586
Shares owned, beginning of year.............................     8,068       --          10,586       --
                                                              --------     -------     --------    --------
Shares owned, end of year...................................    16,647       8,068       84,018      10,586
                                                              ========     =======     ========    ========
Cost of shares acquired.....................................  $116,229     $84,678     $812,049    $168,730
                                                              ========     =======     ========    ========
Cost of shares redeemed.....................................  $ 33,569     $   103     $ 30,337    $ 52,412
                                                              ========     =======     ========    ========
</TABLE>
 
                                      F-40
<PAGE>   99
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. INVESTMENTS, CONTINUED
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                      VAN ECK                            ALGER
                                                                     WORLDWIDE                         AMERICAN
                                                                  INSURANCE TRUST                        FUND
- ----------------------------------------------------------------------------------------------------------------------
                                                          VAN ECK               VAN ECK                  ALGER
                                                         WORLDWIDE             WORLDWIDE               AMERICAN
                                                        HARD ASSETS         EMERGING MARKETS     SMALL CAPITALIZATION
                                                         PORTFOLIO             PORTFOLIO               PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------
                                                       1997      1996        1997       1996        1997        1996
- ----------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>        <C>       <C>          <C>       <C>          <C>
Shares purchased...................................     7,648     2,662       87,201     7,735       40,894     11,790
Shares received from reinvestment of:
  Dividends........................................        73                     38
  Capital gain distributions.......................        54                                         1,128
                                                     --------   -------   ----------   -------   ----------   --------
Total shares acquired..............................     7,775     2,662       87,239     7,735       42,022     11,790
Total shares redeemed..............................      (354)     (107)     (10,248)       (3)      (2,609)       (12)
                                                     --------   -------   ----------   -------   ----------   --------
Net increase in shares owned.......................     7,421     2,555       76,991     7,732       39,413     11,778
Shares owned, beginning of year....................     2,555     --           7,732     --          11,778      --
                                                     --------   -------   ----------   -------   ----------   --------
Shares owned, end of year..........................     9,976     2,555       84,723     7,732       51,191     11,778
                                                     ========   =======   ==========   =======   ==========   ========
Cost of shares acquired............................  $129,621   $42,864   $1,212,177   $93,586   $1,740,549   $476,692
                                                     ========   =======   ==========   =======   ==========   ========
Cost of shares redeemed............................  $  5,619   $ 1,705   $  125,930   $    40   $  104,052   $    489
                                                     ========   =======   ==========   =======   ==========   ========
</TABLE>
 
                                      F-41
<PAGE>   100
 
- --------------------------------------------------------------------------------
The Providentmutual Variable Annuity Separate Account
of Providentmutual Life and Annuity Company of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
4. RELATED PARTY TRANSACTIONS
 
     Certain deductions are made from the Subaccounts and/or the premiums by
Providentmutual. The deductions may include (1) surrender charges, (2)
administration fees, (3) transfer processing fees, (4) mortality and expense
risk charges and (5) premium taxes. 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.
 
     There are no sales expenses deducted from premiums at the time the premiums
are paid. If a contract has not been in force for six full years for Market
Street VIP and Market Street VIP/2 contracts and seven full years for an Options
VIP contract, upon surrender or for certain withdrawals, a surrender charge is
deducted from the proceeds. However, subject to certain restrictions, up to 10%
of the contract account value as of the beginning of a contract year may be
surrendered or withdrawn free of surrender charges. For Options VIP contracts,
the 10% is cumulative if unused.
 
     An annual administrative fee of $30 is deducted from the contract account
value on each contract anniversary date beginning one year from the issue date
of the contract. In addition, to compensate for costs associated with
administration of the Market Street VIP/2 and Options VIP contracts,
Providentmutual deducts a daily asset-based administration charge from the
assets of the Separate Account equal to an annual rate of .15%. This daily
asset-based administration charge is reported in the mortality and expense risk
charges in the statements of operations.
 
     During any given contract year, the first four transfers by Market Street
VIP contractholders and the first twelve transfers by Market Street VIP/2 and
Options VIP contractholders of amounts in the Subaccounts are free of charge. A
fee of $25 is assessed for each additional transfer. No transfer fees were
incurred during the years ended December 31, 1997 and 1996.
 
     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.
 
     The Separate Account is charged a daily mortality and expense risk charge
at an annual rate of 1.20% for the Market Street VIP contracts and 1.25% for the
Market Street VIP/2 and Options VIP contracts. Providentmutual reserves the
right to increase this charge for the Market Street VIP contracts, but in no
event will it be greater than 1.25%.
 
     State premium taxes, when applicable, will be deducted depending upon when
such taxes are paid to the taxing authority. The premium taxes are deducted
either from premiums as they are received or from the proceeds upon withdrawal
from or surrender of the contract or upon application of the proceeds to a
payment option.
 
                                      F-42
<PAGE>   101
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Report of Independent Accountants
 
- --------------------------------------------------------------------------------
 
To the Shareholder and Board of Directors of
Providentmutual Life and Annuity
  Company of America
 
We have audited the accompanying statements of financial condition of
Providentmutual Life and Annuity Company of America (a wholly-owned stock life
insurance subsidiary of Provident Mutual Life Insurance Company) as of December
31, 1997 and 1996, and the related statements of operations, capital and
surplus, and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. 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. 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 Providentmutual Life and
Annuity Company of America as of December 31, 1997 and 1996, and the results of
its operations and its 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 financial statements, in 1996 the Company adopted
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 4, 1998
 
                                      F-43
<PAGE>   102
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
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-$311,637;
     1996-$288,732).........................................  $  320,363    $294,294
    Held to maturity, at amortized cost (market:
     1997-$65,305; 1996-$80,638)............................      62,753      79,526
Equity securities, at market (cost: 1997-$1,714;
  1996-$2,566)..............................................       1,776       1,582
Mortgage loans..............................................      46,871      42,187
Real estate.................................................       2,494       3,146
Policy loans and premium notes..............................       6,725       6,352
Other invested assets.......................................         302         276
Short-term investments......................................         552       8,453
                                                              ----------    --------
Total Investments...........................................     441,836     435,816
                                                              ----------    --------
Cash........................................................       1,063         472
Investment income due and accrued...........................       7,046       6,609
Deferred acquisition costs..................................      83,291      62,520
Reinsurance recoverable.....................................      74,674      80,346
Deferred Federal income taxes...............................          --         673
Separate account assets.....................................     627,081     373,802
Other assets................................................       1,342       1,981
                                                              ----------    --------
Total Assets................................................  $1,236,333    $962,219
                                                              ==========    ========
LIABILITIES
Policy Liabilities:
  Future policyholder benefits..............................  $  516,591    $511,447
  Other policy obligations..................................       8,147       6,836
                                                              ----------    --------
  Total Policy Liabilities..................................     524,738     518,283
                                                              ----------    --------
Payable to parent...........................................       1,837       4,936
Federal income taxes payable:
  Current...................................................       3,928       4,737
  Deferred..................................................       2,363       --
Separate account liabilities................................     624,872     372,005
Other liabilities...........................................       8,506       8,109
                                                              ----------    --------
Total Liabilities...........................................   1,166,244     908,070
                                                              ----------    --------
COMMITMENTS AND CONTINGENCIES -- NOTE 9
CAPITAL AND SURPLUS
Common stock, $10 par value; authorized 500,000 shares;
  issued and outstanding 250,000 shares.....................       2,500       2,500
Contributed capital in excess of par........................      44,165      37,665
Unassigned surplus..........................................      20,565      13,087
Net unrealized appreciation on securities...................       2,859         897
                                                              ----------    --------
Total Capital and Surplus...................................      70,089      54,149
                                                              ----------    --------
Total Liabilities, Capital and Surplus......................  $1,236,333    $962,219
                                                              ==========    ========
</TABLE>
 
See accompanying notes to financial statements
                                      F-44
<PAGE>   103
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Statements of Operations (Dollars in thousands)
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------
                                                                1997        1996        1995
- ----------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>         <C>
REVENUES
Premiums....................................................  $13,904     $13,541     $12,930
Policy and contract charges.................................   11,729       6,068       2,467
Net investment income.......................................   32,314      32,213      32,112
Other income................................................    4,815       2,994       3,715
Realized gains on investments...............................       69         112         730
                                                              -------     -------     -------
Total Revenues..............................................   62,831      54,928      51,954
                                                              -------     -------     -------
BENEFITS AND EXPENSES
Policy and contract benefits................................   15,606      12,861      11,081
Change in future policyholder benefits......................   19,254      24,092      25,462
Commissions and operating expenses..........................   15,271       8,564       9,684
Policyholder dividends......................................      773         541         353
                                                              -------     -------     -------
Total Benefits and Expenses.................................   50,904      46,058      46,580
                                                              -------     -------     -------
Income Before Income Taxes..................................   11,927       8,870       5,374
Income tax expense (benefit):
  Current...................................................    2,470       2,612       3,728
  Deferred..................................................    1,979         988      (1,339)
                                                              -------     -------     -------
Total Income Tax Expense....................................    4,449       3,600       2,389
                                                              -------     -------     -------
Net Income..................................................  $ 7,478     $ 5,270     $ 2,985
                                                              =======     =======     =======
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-45
<PAGE>   104
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Statements of Capital and Surplus For the Years Ended December 31, 1997, 1996
and 1995 (Dollars in thousands)
 
- --------------------------------------------------------------------------------
 
<TABLE>
<CAPTION>
                                                                                          NET
                                                          CONTRIBUTED                  UNREALIZED
                                        COMMON              CAPITAL                   APPRECIATION       TOTAL
                                        STOCK    COMMON    IN EXCESS    UNASSIGNED   (DEPRECIATION)   CAPITAL AND
                                        SHARES   STOCK      OF PAR       SURPLUS     ON SECURITIES      SURPLUS
- -----------------------------------------------------------------------------------------------------------------
<S>                                     <C>      <C>      <C>           <C>          <C>              <C>
Balance at January 1, 1995............  2,500    $2,500     $29,665      $ 4,832        $(2,320)        $34,677
  Net income..........................   --       --         --            2,985         --               2,985
  Change in unrealized appreciation
    (depreciation)....................   --       --         --            --             5,074           5,074
                                        -----    ------     -------      -------        -------         -------
Balance at December 31, 1995..........  2,500    2,500       29,665        7,817          2,754          42,736
  Net income..........................   --       --         --            5,270         --               5,270
  Capital contribution from parent....   --       --          8,000        --            --               8,000
  Change in unrealized appreciation
    (depreciation)....................   --       --         --            --            (1,857)         (1,857)
                                        -----    ------     -------      -------        -------         -------
Balance at December 31, 1996..........  2,500    2,500       37,665       13,087            897          54,149
  Net income..........................   --       --         --            7,478         --               7,478
  Capital contribution from parent....   --       --          6,500        --            --               6,500
  Change in unrealized appreciation
    (depreciation)....................   --       --         --            --             1,962           1,962
                                        -----    ------     -------      -------        -------         -------
Balance at December 31, 1997..........  2,500    $2,500     $44,165      $20,565        $ 2,859         $70,089
                                        =====    ======     =======      =======        =======         =======
</TABLE>
 
See accompanying notes to financial statements
 
                                      F-46
<PAGE>   105
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
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................................................  $   7,478   $   5,270   $   2,985
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Interest credited to variable universal life and
      investment products...................................     15,076      19,684      16,780
    Policy fees assessed on variable universal life and
      investment products...................................    (11,729)     (6,068)     (2,467)
    Amortization of deferred policy acquisition costs.......      9,445       5,433       5,263
    Capitalization of deferred policy acquisition costs.....    (31,404)    (25,182)    (19,579)
    Deferred Federal income taxes...........................      1,979         988      (1,339)
    Depreciation and amortization expense...................        625         798         816
    Realized gains on investments...........................        (69)       (112)       (730)
    Change in investment income due and accrued.............       (437)         66         845
    Change in reinsurance recoverable.......................      5,672         772     (21,413)
    Change in policy liabilities and other policyholders'
      funds of traditional life products....................    (12,255)     (2,124)     30,526
    Change in other liabilities.............................        431        (210)     (1,993)
    Change in current Federal income taxes payable..........       (809)       (928)      2,473
    Other, net..............................................     (2,676)      3,756       2,349
                                                              ---------   ---------   ---------
        Net cash (used in) provided by operating
          activities........................................    (18,673)      2,143      14,516
                                                              ---------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from sales of investments:
    Available for sale securities...........................     21,382       6,956      12,817
    Equity securities.......................................        100         200      46,114
    Real estate.............................................        772          --         940
    Other invested assets...................................        333         158          --
  Proceeds from maturities of investments:
    Held to maturity securities.............................     19,184      17,323      16,030
    Available for sale securities...........................     28,439      21,467      20,422
    Mortgage loans..........................................      2,599       7,873       8,065
  Purchases of investments:
    Held to maturity securities.............................     (2,029)    (15,887)    (16,418)
    Available for sale securities...........................    (72,520)    (38,542)    (58,802)
    Equity securities.......................................       (609)       (157)    (44,930)
    Mortgage loans..........................................     (7,179)    (11,342)     (8,418)
    Real estate.............................................        (99)        (36)       (213)
    Other invested assets...................................       (302)         --          --
  Net withdrawals of separate account seed money............         --        (335)       (650)
  Policy loans and premium notes, net.......................       (373)       (906)       (989)
  Net sales of short-term investments.......................      7,901       4,203       1,596
                                                              ---------   ---------   ---------
        Net cash used in investing activities...............     (2,401)     (9,025)    (24,436)
                                                              ---------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Variable universal life and investment product deposits...    232,307     185,984     124,336
  Variable universal life and investment product
    withdrawals.............................................   (217,142)   (186,630)   (114,416)
  Capital contribution from parent..........................      6,500       8,000          --
                                                              ---------   ---------   ---------
        Net cash provided by financing activities...........     21,665       7,354       9,920
                                                              ---------   ---------   ---------
        Net change in cash..................................        591         472          --
Cash, beginning of year.....................................        472          --          --
                                                              ---------   ---------   ---------
Cash, end of year...........................................  $   1,063   $     472   $      --
                                                              =========   =========   =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for income taxes................  $   3,280   $   3,540   $   1,438
                                                              =========   =========   =========
  Foreclosure of mortgage loans.............................  $      --   $      --   $     667
                                                              =========   =========   =========
</TABLE>
 
See accompanying notes to financial statements
                                      F-47
<PAGE>   106
 
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Organization
 
     Providentmutual Life and Annuity Company of America (the Company) is a
stock life insurance company and a wholly-owned subsidiary of Provident Mutual
Life Insurance Company (Provident Mutual).
 
     The Company sells life and annuity products principally through a personal
producing general agency (PPGA) and brokerage sales force. The Company is
licensed to operate in 48 states, which are responsible for product regulation.
Sales in 14 states accounted for 74% 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.
 
  Basis of Presentation
 
     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 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 97, "Accounting and Reporting by Insurance Enterprises for Certain
        Long-Duration Contracts and for Realized Gains and Losses from the Sale
        of Investments,"
 
     -- 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."
 
                                      F-48
<PAGE>   107
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
  Basis of Presentation -- continued
     The cumulative effective on capital and surplus of adopting the above
pronouncements primarily consists of the initial deferral of acquisition costs,
change in policy reserve valuation basis, the establishment of deferred taxes,
the elimination of statutory asset valuation and interest maintenance reserves
and the establishment of investment valuation allowances.
 
     As a result of the change in accounting principles, net income for 1995 as
previously reported, has been restated as follows (in thousands):
 
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
                                                                  1995
- ------------------------------------------------------------------------
<S>                                                             <C>
Net income, as previously reported..........................    $  1,581
Effect of changing to a different basis of accounting:
  Deferred acquisition costs................................      14,316
  Net policyholder liabilities..............................     (14,165)
  Deferred income taxes.....................................       1,339
  Adjustment in valuation of investments....................         567
  Other, net................................................        (653)
                                                                --------
Net income, as adjusted.....................................    $  2,985
                                                                ========
</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
thousands):
 
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
                                                                  1995
- ------------------------------------------------------------------------
<S>                                                             <C>
Balance at beginning of year, as previously reported........    $ 29,382
Add adjustment for the cumulative effect on prior years of
  applying retroactively the new basis of accounting:
  Deferred acquisition costs................................      45,971
  Net policyholder liabilities..............................     (41,068)
  Deferred income taxes.....................................       2,144
  Adjustment in valuation of investments....................         854
  Asset valuation reserve...................................       3,939
  Other, net................................................      (4,225)
                                                                --------
Balance at beginning of year, as adjusted...................      36,997
Net income..................................................       2,985
Add adjustment for the cumulative effect on prior years of
  applying accounting change -- securities..................      (2,320)
Change in unrealized gains (losses) on investment
  securities................................................       5,074
                                                                --------
Balance at end of year......................................    $ 42,736
                                                                ========
</TABLE>
 
                                      F-49
<PAGE>   108
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
  Basis of Presentation -- continued
     The Company prepares financial statements for filing with regulatory
authorities in conformity with the accounting practices prescribed or permitted
by the Insurance Department of 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 elimination of statutory asset
valuation and interest maintenance reserves and the establishment of investment
valuation allowances.
 
     Amounts disclosed in the footnotes are denoted in thousands of dollars.
 
     Statutory net income was $1,792, $1,448 and $1,581 for the years ended
December 31, 1997, 1996 and 1995, respectively. Statutory surplus was $47,225
and $39,530 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 report 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 applicable Federal income taxes.
 
     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
                                      F-50
<PAGE>   109
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
  Invested Assets -- continued
be impaired, a reserve is established for the difference between the unpaid
principal of the mortgage loan 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 lower of cost or fair value less accumulated
depreciation from the date of foreclosure. The straight-line method of
depreciation is used for real estate.
 
     Other invested assets consist of 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 $1,170 and $1,274 at December 31, 1997 and 1996,
respectively. Changes in the reserves are reflected as realized capital gains
and losses.
 
                                      F-51
<PAGE>   110
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to 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 2.5% to 5.0%.
 
     Variable Life and Investment-Type Products
 
     Variable life products are all flexible premium variable universal life.
     Investment-type products consist primarily of 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
 
     Premiums for individual life policies are recognized when due.
 
     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 accounts chosen by the
     policyholder. For other account balances, credited interest rates ranged
     from 3.8% to 8.2% in 1997.
 
                                      F-52
<PAGE>   111
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
  Premiums, Charges and Benefits -- continued
     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 incident 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 $31,404, $25,182 and
     $19,579, respectively. Amortization of deferred policy acquisition costs
     was $9,445, $5,433 and $5,263 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 also 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 69% 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.
 
  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.
 
                                      F-53
<PAGE>   112
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
  Separate Accounts
 
     Separate account assets and liabilities represent segregated funds
administered and invested by the Company for the benefit of annuity
contractholders and variable life insurance policyholders.
 
     Premiums received and the accumulated value portion of benefits paid are
excluded from the amounts reported in the 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. Separate account assets are carried at fair values determined as
of the balance sheet date.
 
  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.
 
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
- ------------------------------------------------------------------------------------------
<S>                                         <C>         <C>           <C>         <C>
ASSETS
Fixed maturities:
  Available for sale....................    $320,363      $320,363    $294,294    $294,294
  Held to maturity......................     $65,305       $62,753     $80,638     $79,526
Equity securities.......................      $1,776        $1,776      $1,582      $1,582
Commercial mortgage loans...............     $49,379       $46,871     $43,976     $42,187
LIABILITIES FOR INVESTMENT-TYPE
  INSURANCE CONTRACTS
Supplementary contracts without life
  contingencies.........................      $7,304        $7,185      $5,736      $5,835
Individual annuities....................    $977,658    $1,012,040    $802,622    $829,783
</TABLE>
 
                                      F-54
<PAGE>   113
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
2.  FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
     The underlying investment risk of the Company's variable life and variable
annuity contracts is assumed by the owner. 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.
 
     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.
 
                                      F-55
<PAGE>   114
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to 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:
 
<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...................................  $    563      $    12        $    2      $    573
Obligations of states and political
  subdivisions...............................     4,083          187         --            4,270
Corporate securities.........................   274,262        8,651         1,076       281,837
Mortgage-backed securities...................    32,729          958             4        33,683
                                               --------      -------        ------      --------
     Subtotal -- fixed maturities............   311,637        9,808         1,082       320,363
Equity securities............................     1,714          487           425         1,776
                                               --------      -------        ------      --------
          Total..............................  $313,351      $10,295        $1,507      $322,139
                                               ========      =======        ======      ========
</TABLE>
 
                                      F-56
<PAGE>   115
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to 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...................................  $  4,704      $   417        $   10      $  5,111
Corporate securities.........................    54,563        1,899            28        56,434
Mortgage-backed securities...................     3,486          274         --            3,760
                                               --------      -------        ------      --------
          Total..............................  $ 62,753      $ 2,590        $   38      $ 65,305
                                               ========      =======        ======      ========
</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...................................  $    567       $    4        $   13      $    558
Obligations of states and political
  subdivisions...............................     4,853          197         --            5,050
Corporate securities.........................   246,887        5,907         1,103       251,691
Mortgage-backed securities...................    36,425          680           110        36,995
                                               --------       ------        ------      --------
     Subtotal -- fixed maturities............   288,732        6,788         1,226       294,294
Equity securities............................     2,566          355         1,339         1,582
                                               --------       ------        ------      --------
          Total..............................  $291,298       $7,143        $2,565      $295,876
                                               ========       ======        ======      ========
</TABLE>
 
<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...................................  $  4,821       $  278        $   27      $  5,072
Corporate securities.........................    71,136          979           346        71,769
Mortgage-backed securities...................     3,569          228         --            3,797
                                               --------       ------        ------      --------
          Total..............................  $ 79,526       $1,485        $  373      $ 80,638
                                               ========       ======        ======      ========
</TABLE>
 
                                      F-57
<PAGE>   116
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. MARKETABLE SECURITIES, CONTINUED
     The amortized cost and estimated fair value of fixed maturity securities at
December 31, 1997, by contractual maturity, are as follows:
 
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                                                           ESTIMATED
                                                              AMORTIZED       FAIR
                     AVAILABLE FOR SALE                         COST         VALUE
- -------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
Due in one year or less.....................................  $ 32,283      $ 32,366
Due after one year through five years.......................   107,134       109,530
Due after five years through ten years......................   100,827       104,315
Due after ten years.........................................    71,393        74,152
                                                              --------      --------
          Total.............................................  $311,637      $320,363
                                                              ========      ========
</TABLE>
 
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
                                                                           ESTIMATED
                                                              AMORTIZED       FAIR
                      HELD TO MATURITY                          COST         VALUE
- -------------------------------------------------------------------------------------
<S>                                                           <C>          <C>
Due in one year or less.....................................  $  2,215      $  2,231
Due after one year through five years.......................    22,403        23,047
Due after five years through ten years......................    34,541        36,123
Due after ten years.........................................     3,594         3,904
                                                              --------      --------
          Total.............................................  $ 62,753      $ 65,305
                                                              ========      ========
</TABLE>
 
     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:
 
<TABLE>
<S>                                                        <C>       <C>     <C>
- ----------------------------------------------------------------------------------
                                                            1997     1996    1995
- ----------------------------------------------------------------------------------
Fixed maturities.........................................  $1,135    $ 71    $ 561
Equity securities........................................  (1,360)      6      253
Mortgage loans...........................................     104      35     (103)
Real estate..............................................     133     --        19
Other invested assets....................................      57     --      --
                                                           ------    ----    -----
                                                           $   69    $112    $ 730
                                                           ======    ====    =====
</TABLE>
 
                                      F-58
<PAGE>   117
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
3. MARKETABLE SECURITIES, CONTINUED
     Net unrealized appreciation (depreciation) on available for sale securities
as of December 31, 1997 and 1996 is summarized as follows:
 
<TABLE>
<S>                                                           <C>        <C>
- --------------------------------------------------------------------------------
                                                               1997       1996
- --------------------------------------------------------------------------------
Net unrealized appreciation before adjustments for the
  following:................................................  $ 8,788    $ 4,578
  Amortization of deferred policy acquisition costs.........   (4,389)    (3,198)
  Deferred Federal income taxes.............................   (1,540)      (483)
                                                              -------    -------
Net unrealized appreciation.................................  $ 2,859    $   897
                                                              =======    =======
</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 $34,784 from the held to maturity portfolio to the available
for sale portfolio. An additional transfer of fixed income securities with a
combined cost of $5,000 and an estimated fair value of $5,050 was made from the
available for sale portfolio to the held to maturity portfolio. The $50
difference between the amortized cost and the estimated fair value has been
amortized to realized capital gains/losses.
 
     Net investment income, by type of investment, is as follows for the years
ending December 31, 1997, 1996 and 1995:
 
<TABLE>
<S>                                                   <C>        <C>        <C>
- -----------------------------------------------------------------------------------
                                                       1997       1996       1995
- -----------------------------------------------------------------------------------
Gross investment income:
Fixed maturities:
  Available for sale................................  $22,559    $21,379    $20,222
  Held to maturity..................................    5,692      6,699      7,725
Equity securities...................................       92         87        211
Mortgage loans......................................    3,924      3,750      3,592
Real estate.........................................      591        759        747
Policy loans and premium notes......................      214        158        113
Short-term investments..............................      258        363        521
Other, net..........................................        9         27         35
                                                      -------    -------    -------
                                                       33,339     33,222     33,166
Less: investment expenses...........................   (1,025)    (1,009)    (1,054)
                                                      -------    -------    -------
Net investment income...............................  $32,314    $32,213    $32,112
                                                      =======    =======    =======
</TABLE>
 
                                      F-59
<PAGE>   118
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
4. MORTGAGE LOANS
 
     Impaired mortgage loans and the related reserves are as follows at December
31, 1997 and 1996:
 
<TABLE>
<S>                                                           <C>       <C>
- ------------------------------------------------------------------------------
                                                               1997      1996
- ------------------------------------------------------------------------------
 
Impaired mortgage loans.....................................  $3,655    $3,878
Reserves....................................................    (704)     (848)
                                                              ------    ------
Net impaired mortgage loans.................................  $2,951    $3,030
                                                              ======    ======
</TABLE>
 
     A reconciliation of the reserve balance, including general reserves, for
mortgage loans for 1997 and 1996 is as follows:
 
<TABLE>
<S>                                                           <C>       <C>
- ------------------------------------------------------------------------------
                                                               1997      1996
- ------------------------------------------------------------------------------
 
Balance at January 1........................................  $1,274    $1,309
Losses charged, net of recoveries...........................    (104)      (35)
Releases due to foreclosures................................    --        --
                                                              ------    ------
Balance at December 31......................................  $1,170    $1,274
                                                              ======    ======
</TABLE>
 
     The average recorded investment in impaired loans was $3,767 and $4,378
during 1997 and 1996, respectively. Interest income recognized on impaired loans
during 1997, 1996 and 1995 was $284, $405 and $434, respectively. All interest
income on impaired mortgage loans was recognized on the cash basis.
 
5. REAL ESTATE
 
     Real estate totalled $2,494 and $3,146 as of December 31, 1997 and 1996,
respectively. Depreciation expense was $113, $112 and $106 for the years ended
December 31, 1997, 1996 and 1995, respectively. Accumulated depreciation for
real estate totalled $435 and $353 at December 31, 1997 and 1996, respectively.
 
6. FEDERAL INCOME TAXES
 
     The Company files a consolidated Federal income tax return with Provident
Mutual. The tax liability is accrued on a separate company basis which includes
an allocation of an equity tax by Provident Mutual.
 
                                      F-60
<PAGE>   119
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
6. FEDERAL INCOME TAXES, CONTINUED
     The provision for Federal income taxes from operations differs from the
normal relationship of Federal income tax to pretax income as follows:
 
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
                                                          YEAR ENDED DECEMBER 31,
- -----------------------------------------------------------------------------------
                                                          1997      1996      1995
- -----------------------------------------------------------------------------------
<S>                                                      <C>       <C>       <C>
Federal income tax at statutory rate...................  $4,174    $3,105    $1,881
  Current year equity tax..............................     900       800       625
  True down of prior years' equity tax.................    (625)     (305)     --
  Other................................................    --        --        (117)
                                                         ------    ------    ------
Provision for Federal income tax from operations.......  $4,449    $3,600    $2,389
                                                         ======    ======    ======
</TABLE>
 
     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 income tax return purposes.
Components of the Company's net deferred income tax (liability) asset is as
follows at December 31, 1997 and 1996:
 
<TABLE>
<S>                                                           <C>        <C>
- --------------------------------------------------------------------------------
                                                               1997       1996
- --------------------------------------------------------------------------------
DEFERRED TAX ASSET
Reserves....................................................  $26,650    $21,679
Invested assets.............................................      409        445
Policyholder dividends......................................      159        115
Other.......................................................   (1,491)      (714)
                                                              -------    -------
  Total deferred tax asset..................................   25,727     21,525
                                                              -------    -------
DEFERRED TAX LIABILITY
Deferred policy acquisition costs...........................   26,550     19,249
Net unrealized gain on available for sale securities........    1,540      1,603
                                                              -------    -------
  Total deferred tax liability..............................   28,090     20,852
                                                              -------    -------
Net deferred tax (liability) asset..........................  $(2,363)   $   673
                                                              =======    =======
</TABLE>
 
     Under current tax 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,
 
                                      F-61
<PAGE>   120
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
6. FEDERAL INCOME TAXES, CONTINUED
1983. The aggregate accumulation at December 31, 1983 was $2,037. 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.
 
7. 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 purpose
of ceded reinsurance is to limit losses from large exposures.
 
     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 $73,108 of individual fixed annuity
account values coinsured by the Company, or approximately 17.2% of total
individual fixed annuity account values outstanding.
 
                                      F-62
<PAGE>   121
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
7. REINSURANCE, CONTINUED
     The tables below highlight the amounts shown in the accompanying financial
statements which are net of reinsurance activity:
 
<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..................  $2,153,084    $1,591,141     $ 50,233     $612,176
                                           ==========    ==========     ========     ========
Premiums.................................  $   14,367    $      614     $    151     $ 13,904
                                           ==========    ==========     ========     ========
Future policyholder benefits.............                $   74,674     $  3,102
                                                         ==========     ========
December 31, 1996:
Life insurance in force..................  $1,591,685    $1,282,667     $ 42,330     $351,348
                                           ==========    ==========     ========     ========
Premiums.................................  $   14,240    $      801     $    102     $ 13,541
                                           ==========    ==========     ========     ========
Future policyholder benefits.............                $   80,346     $  4,332
                                                         ==========     ========
December 31, 1995:
Life insurance in force..................  $1,142,970    $  923,876     $ 46,163     $265,257
                                           ==========    ==========     ========     ========
Premiums.................................  $   13,693    $      916     $    153     $ 12,930
                                           ==========    ==========     ========     ========
Future policyholder benefits.............                $   81,118     $  4,518
                                                         ==========     ========
</TABLE>
 
     The Company has a reinsurance contract with a third party to cede 65
percent (75 percent prior to July 1, 1992) of the premiums and reserves related
to its single premium deferred annuity (SPDA) product. There were no deposits
ceded in 1997 and $5,317 during 1996, respectively. Reinsurance recoverables
were $71,995 and $77,801 at December 31, 1997 and 1996, respectively.
 
     A coinsurance agreement exists between Provident Mutual and the Company
with respect to annuities. Prior to 1992, the agreement covered SPDA's issued
after 1984. The agreement was amended in 1992 to include single premium
immediate annuities and supplementary contracts. Pursuant to this agreement, the
Company has no reinsurance recoverables at December 31, 1997 and 1996. Deposits
ceded during 1997 and 1996 were $2,351 and $2,320, respectively.
 
     Approximately $1,169,702 and $1,007,498 of the Company's life insurance in
force is ceded to Provident Mutual under two reinsurance agreements and a
modified coinsurance agreement at December 31, 1997 and 1996, respectively.
Premiums ceded were $3,889 and $436 during 1997 and 1996, respectively.
Reinsurance recoverables at December 31, 1997 and 1996 were $74 and $471,
respectively.
 
                                      F-63
<PAGE>   122
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
8. RELATED PARTY TRANSACTIONS
 
     Provident Mutual and its subsidiaries provide certain investment and
administrative services to the Company. Generally fees for these services are
based on an allocation of costs upon either a specific identification basis or a
proportional cost allocation basis which management believes to be reasonable.
These costs include direct salaries and related benefits, including pension and
other post-retirement benefits, as well as overhead costs. These costs were
$13,964, $10,013 and $9,238 for 1997, 1996 and 1995, respectively.
 
     The contractual obligations under the Company's SPDA contracts in force and
issued before September 1, 1988 are guaranteed by Provident Mutual. Total SPDA
contracts affected by this guarantee in force at December 31, 1997 and 1996
approximated $90,995 and $105,004, respectively.
 
9. COMMITMENTS AND CONTINGENCIES
 
  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
mortgage loans, 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, but which are not deemed to be material.
 
     At December 31, 1997, the Company had outstanding mortgage loan commitments
of approximately $2,200. The mortgage loan commitments, which expire through
April 1998, 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.
 
     Derivative products 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. There was no hedge position
activity for the years ended December 31, 1997 and 1996.
 
     Periodically the Company enters securities lending agreements to earn
additional investment income on its securities. The borrower must first provide
cash collateral prior to or at the inception of the loan. 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
$14,771 and $14,777, respectively, in debt security investments (3.9% and 4.0%,
respectively, of the total debt security portfolio) are considered "below
 
                                      F-64
<PAGE>   123
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- continued
 
- --------------------------------------------------------------------------------
 
9. COMMITMENTS AND CONTINGENCIES, CONTINUED
  Investment Portfolio Credit Risk -- continued
 
     Bonds -- continued
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
$385 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.
 
     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 and 1996, there were no delinquent mortgage loans
(i.e., loans where payments on principal and/or interest are over 90 days past
due).
 
     The Company had no loans in any state where principal balances in the
aggregate exceeded 20% of the Company's capital and surplus.
 
  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 which, in the
opinion of management and legal counsel, will not have a material 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 $236, $82 and $343 in 1997, 1996 and 1995,
respectively. Of those amounts, $117, $58 and $285 in 1997, 1996 and 1995,
respectively, are creditable against future years' premium taxes.
 
                                      F-65
<PAGE>   124
- --------------------------------------------------------------------------------
Providentmutual Life and Annuity Company
of America
Notes to Financial Statements -- concluded
 
- --------------------------------------------------------------------------------
 
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 was submitted to the Insurance Department of the Commonwealth of
Pennsylvania and is awaiting approval.
 
                                      F-66
<PAGE>   125
 
                                     PART C
 
                               OTHER INFORMATION
 
Item 24.  Financial Statements and Exhibits
 
   
<TABLE>
       <S>  <C>   <C>  <C>
       (a)  Financial Statements
            All required financial statements are included in Part A and Part B of
            this Registration Statement.
            (1)   (a)  Resolution of the Board of Directors of Providentmutual Life
                       and Annuity Company of America authorizing establishment of
                       the Providentmutual Variable Annuity Separate Account.
                  (b)  Resolution of the Board of Directors of Providentmutual Life
                       and Annuity Company of America authorizing additional
                       Subaccounts of the Providentmutual Variable Annuity Separate
                       Account.
                  (c)  Resolution of the Board of Directors of Providentmutual Life
                       and Annuity Company of America authorizing additional
                       Subaccounts of the Providentmutual Variable Annuity Separate
                       Account.
                  (d)  Resolution of the Board of Directors of Providentmutual Life
                       and Annuity Company of America authorizing additional
                       Subaccounts of the Providentmutual Variable Annuity Separate
                       Account.
                  (e)  Resolution of the Board of Directors of Providentmutual Life
                       and Annuity Company of America authorizing additional
                       Subaccounts of the Providentmutual Variable Annuity Separate
                       Account.
            (2)   Not applicable.
            (3)   (a)  Form of Underwriting Agreement among Providentmutual Life
                       and Annuity Company of America, PML Securities, Inc. and the
                       Providentmutual Variable Annuity Separate Account.
                  (b)  Form of Selling Agreement between PML Securities, Inc. and
                       Sentinel Financial Services Company.
            (4)   Form of Flexible Premium Deferred Variable Annuity Contract
                  (PL512).
                  (a)  Amendment of Contract Provisions Rider (PL470.13A).
                  (b)  Qualified Plan Rider (PL471).
                  (c)  403(b) Annuity Loan Rider (PL515).
                  (d)  Death Benefit Rider "Step Up" (PL547).
                  (e)  Death Benefit Rider "Rising Floor" (PL548).
                  (f)  Simple IRA Rider (PL549).
                  (g)  SEP IRA Rider (PL550).
                  (h)  Qualify as an IRA Rider (PL553).
                  (i)  Qualify as a TSA Under 403(b) Rider (PL554).
                  (j)  Amendment for a Charitable Remainder Trust Rider (PL558).
                  (k)  Systematic Withdraw Plan Rider (PL600).
            (5)   Form of Application and 1717 Capital Management Company
                  Suitability Statement.
                  (a)  Initial Allocation Schedule.
</TABLE>
    
 
                                       C-1
<PAGE>   126
 
   
<TABLE>
<S>        <C>        <C>        <C>
           (6)        (a)        Charter of Providentmutual Life and Annuity Company of America.
                      (b)        By-Laws of Providentmutual Life and Annuity Company of America.
           (7)        Not applicable.
           (8)        (a)        Participation Agreement among Market Street Fund, Inc., Providentmutual Life and Annuity
                                 Company of America and PML Securities, Inc.
                      (b)        Participation Agreement among Variable Insurance Products Fund, Fidelity Distributors
                                 Corporation and Providentmutual Life and Annuity Company of America.
                      (c)        Participation Agreement among Variable Insurance Products Fund II, Fidelity Distributors
                                 Corporation and Providentmutual Life and Annuity Company of America.(1)
                      (d)        Form of Fund Participation Agreement among Neuberger & Berman Advisers Management Trust,
                                 Advisers Managers Trust and Providentmutual Life and Annuity Company of America.
                      (e)        Fund Participation Agreement among TCI Portfolios, Inc., Investors Research Corporation,
                                 and Providentmutual Life and Annuity Company of America.
                      (f)        Participation Agreement between Van Eck Investment Trust and Providentmutual Life and
                                 Annuity Company of America.
                      (g)        Service Agreement between Providentmutual Life and Annuity Company of America and Provident
                                 Mutual Life Insurance Company of Philadelphia.
                      (h)        Support Agreement between Provident Mutual Life Insurance Company and Providentmutual Life
                                 and Annuity Company of America.
           (9)        Consent of Adam Scaramella, Esquire.
           (10)       (a)        Consent of Sutherland, Asbill & Brennan, L.L.P.
                      (b)        Consent of Scott V. Carney, FSA, MAAA.
                      (c)        Consent of Coopers & Lybrand, L.L.P., Independent Accountants.
           (11)       No financial statements will be omitted from Item 23.
           (12)       Not applicable.
           (13)       Schedule for computation of performance data.
           (14)       Powers of Attorney.
</TABLE>
    
 
- ---------------
 
   
(1 )Incorporated herein by reference to Post-Effective Amendment No. 4, filed on
    May 1, 1998, File No. 33-83138.
    
 
Item 25.  Directors and Officers of the Depositor
 
   
<TABLE>
<CAPTION>
         NAME AND PRINCIPAL BUSINESS ADDRESS*               POSITION AND OFFICES WITH DEPOSITOR
         ------------------------------------               -----------------------------------
<S>                                                        <C>
Robert W. Kloss**......................................    President and Director
Mary Lynn Finelli**....................................    Director
Alan F. Hinkle**.......................................    Director, Vice President and Actuary
James D. Kestner**.....................................    Director
Sarah C. Lange**.......................................    Director
J. Kevin McCarthy**....................................    Director
</TABLE>
    
 
                                       C-2
<PAGE>   127
 
   
<TABLE>
<CAPTION>
         NAME AND PRINCIPAL BUSINESS ADDRESS*               POSITION AND OFFICES WITH DEPOSITOR
         ------------------------------------               -----------------------------------
<S>                                                        <C>
James Potter**.........................................    Director, Secretary and Legal Officer
Linda M. Springer**....................................    Director
Joan C. Tucker.........................................    Director and Vice President
James D. Benson**......................................    Assistant Financial Reporting Officer
Scott V. Carney**......................................    Vice President and Actuary
Katherine DePeri**.....................................    Actuarial Compliance Officer
Rosanne Gatta**........................................    Treasurer
Anthony Giampietro**...................................    Assistant Treasurer
Louise S. Goldman**....................................    Tax Officer
Deborah Thiel Hall**...................................    Compliance Officer
Timothy P. Henry**.....................................    Vice President
Joseph T. Laudadio.....................................    Underwriting Officer
William P. Loesche**...................................    Assistant Secretary
Todd R. Miller**.......................................    Financial Reporting Officer
Edward Schmid, Jr.**...................................    Investment Officer
Andrew J. Stack**......................................    Marketing Officer
Stephen L. White**.....................................    Vice President and Actuary
</TABLE>
    
 
- ---------------
 
  * Unless otherwise indicated, the principal business address is 300
    Continental Drive, Newark, DE 19713.
   
 ** Principal business address is 1050 Westlakes Drive, Berwyn, PA 19312.
    
 
Item 26.  Persons Controlled by or Under Common Control With the Depositor or
Registrant
 
   
<TABLE>
<CAPTION>
                                                   PERCENT OF VOTING
             NAME               JURISDICTION       SECURITIES OWNED          PRINCIPAL BUSINESS
             ----               ------------       -----------------         ------------------
<S>                             <C>             <C>                        <C>
Provident Mutual                Pennsylvania    Mutual Company             Life & Health Insurance
  Life Insurance Company*
  (Provident Mutual)
Providentmutual Life and        Delaware        Ownership of all           Life & Health Insurance
  Annuity Company                               voting securities
  of America*                                   by Provident Mutual
Provident Mutual International  Delaware        Ownership of all           Life & Health Insurance
  Life Insurance Company                        voting securities
                                                by Provident Mutual
Providentmutual                 Pennsylvania    Ownership of all           Holding Company
  Holding Company (PHC)*                        voting securities
                                                by Provident Mutual
1717 Capital Management         Pennsylvania    Ownership of all           Broker/Dealer
  Company*                                      voting securities by
                                                PHC
1767 Brokerage Services, Inc.   Pennsylvania    Ownership of all voting    Insurance Agency
                                                securities by PHC
</TABLE>
    
 
                                       C-3
<PAGE>   128
 
<TABLE>
<CAPTION>
                                                   PERCENT OF VOTING
             NAME               JURISDICTION       SECURITIES OWNED          PRINCIPAL BUSINESS
             ----               ------------       -----------------         ------------------
<S>                             <C>             <C>                        <C>
Providentmutual Investment      Pennsylvania    Ownership of all           Investment Adviser
  Management Company*                           voting securities
                                                by PHC
Washington Square               Pennsylvania    Ownership of all           Administrative Services
  Administrative Services,                      voting securities
  Inc.                                          by PHC
Institutional Concepts, Inc.*   New York        Ownership of all           Insurance Agency
                                                voting securities
                                                by PHC
Provestco, Inc.*                Delaware        Ownership of all           Real Estate Investment
                                                voting securities
                                                by PHC
PNAM, Inc.*                     Delaware        Ownership of all           Holding Company
                                                voting securities
                                                by PHC
Sigma American                  Delaware        Ownership of 80.2%         Investment Management
  Corporation*                                  voting securities by       and Advisory Services
                                                PHC and 19.8% voting
                                                securities by Provident
                                                Mutual
Provident Mutual                Delaware        Ownership of all           Investment Management
  Management Co., Inc.*                         voting securities          and Advisory Services
                                                by Sigma American
Software Development            Pennsylvania    Ownership of 100%          Development and
  Corporation*                                  voting securities          Marketing of Computer
                                                by PHC                     Software
Market Street Fund, Inc.**      Maryland                                   Mutual Fund
</TABLE>
 
- ---------------
 
 * File Consolidated Financial Statements.
** File Separate Financial Statements.
 
Item 27.  Number of Policyowners
 
   
     As of December 31, 1996 there were a total of 11,384 individual flexible
premium deferred variable annuity contracts (File No. 33-65512) in
force -- 4,499 non-qualified and 6,885 qualified.
    
 
Item 28.  Indemnification
 
     The By-Laws of Providentmutual Life and Annuity Company of America provide,
in part in Article XII, as follows:
 
                                  ARTICLE XII
 
           INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER PERSONS
 
     Section 12.01. 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
                    attorneys' fees, necessarily incurred in connection with the
                    defense of any action, suit or
 
                                       C-4
<PAGE>   129
 
                    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 judgment or fine in any such action, suit
                    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. A judgment entered in connection
                    with a compromise or dismissal or settlement of any such
                    action, suit or other proceeding shall not of itself be
                    deemed an adjudication of negligence or misconduct. The
                    indemnification herein provided shall not be exclusive of
                    any other rights to which the persons indemnified may be
                    entitled.
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any such action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
Item 29.  Principal Underwriter
 
     (a) 1717 Capital Management Company (1717) is the principal underwriter of
the Contracts as defined in the investment Company of 1940. 1717 is also
principal underwriter for the Fund, for the Providentmutual Variable Life
Separate Account and for the PMLIC Variable Life and Annuity Separate Accounts.
 
                                       C-5
<PAGE>   130
 
     (b) The following information is furnished with respect to the officers and
directors of 1717:
 
   
<TABLE>
<CAPTION>
            NAME AND PRINCIPAL                   POSITIONS AND OFFICES          POSITIONS AND OFFICES
            BUSINESS ADDRESS*                          WITH 1717                    WITH DEPOSITOR
            ------------------                   ---------------------          ---------------------
<S>                                         <C>                              <C>
Mary Lynn Finelli**.......................  Director                         Director
Alan F. Hinkle**..........................  Director                         Director, Vice President and
                                                                               Actuary
Robert W. Kloss**.........................  Director                         President and Director
J. Kevin McCarthy**.......................  Director                         Director
James Potter**............................  Director                         Director, Secretary and
                                                                               Legal Officer
Joan C. Tucker............................  Director                         Director and Vice President
Louise A. Aviola, Jr. ....................  Vice President and Manager of    None
                                              Operations
Rosanne Gatta**...........................  Treasurer                        Treasurer
Anthony Giampietro**......................  Assistant Treasurer              Assistant Treasurer
Deborah Thiel Hall**......................  Insurance Compliance Officer     Compliance Officer
Michael Krulikowski.......................  Senior Compliance Officer        None
William P. Loesche**......................  Assistant Secretary              Assistant Secretary
Anthony Mastrangelo**.....................  Assistant Financial Reporting    None
                                              Officer
Todd R. Miller**..........................  Assistant Financial Reporting    Financial Reporting Officer
                                              Officer
Alison Naylor.............................  Compliance Officer               None
Linda M. Springer**.......................  Financial Reporting Officer      Director
Adam Scaramella**.........................  Legal Officer and Secretary      None
</TABLE>
    
 
- ---------------
  * Unless otherwise indicated, principal business address is Christiana
    Executive Campus, P.O. Box 15626, Wilmington, DE 19850.
   
 ** Principal business address is 1050 Westlakes Drive, Berwyn, PA 19312.
    
 
Item 30.  Location of Accounts and Records
 
     All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder are maintained by
Providentmutual Life and Annuity Company of America at 300 Continental Drive,
Newark, DE 19713.
 
Item 31.  Management Services
 
     All management contracts are discussed in Part A or Part B.
 
Item 32.  Undertakings
 
     (a) Registrant hereby undertakes to file a post-effective amendment to this
registration statement as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than sixteen
(16) months old for so long as payments under the variable annuity contracts may
be accepted.
 
     (b) Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information; and
 
                                       C-6
<PAGE>   131
 
     (c) Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under this
Form promptly upon written or oral request.
 
     (d) Reliance on No-Action Letter Regarding Section 403(b) Retirement Plan.
Providentmutual and the Variable Account rely on a no-action letter issued by
the Division of Investment Management to the American Council of Life Insurance
on November 28, 1988 and represent that the conditions enumerated therein have
been or will be complied with.
 
                        REPRESENTATION OF REASONABLENESS
 
     Providentmutual Life and Annuity Company of America hereby represents that
the fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by Providentmutual Life and Annuity Company of
America.
 
                                       C-7
<PAGE>   132
 
                                   SIGNATURES
 
   
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, PROVIDENTMUTUAL VARIABLE ANNUITY SEPARATE
ACCOUNT AND PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA, CERTIFY THAT
THEY MEET ALL THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT
PURSUANT TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933 AND HAVE CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN NEW CASTLE COUNTY, STATE OF DELAWARE ON THIS 1ST
DAY OF MAY, 1998.
    
                                            PROVIDENTMUTUAL VARIABLE ANNUITY
                                              SEPARATE ACCOUNT (REGISTRANT)
 
   
<TABLE>
<S>                                                    <C>
              Attest: /s/ JAMES POTTER                                By: /s/ ROBERT W. KLOSS
   ----------------------------------------------        -------------------------------------------------
                                                                          ROBERT W. KLOSS
                                                                             President
</TABLE>
    
 
                                            By: PROVIDENTMUTUAL LIFE AND ANNUITY
                                                COMPANY OF AMERICA (DEPOSITOR)
 
   
<TABLE>
<C>                                                    <S>
 
Attest: /s/ JAMES POTTER                                              By: /s/ ROBERT W. KLOSS
                   ----------------------------------    -------------------------------------------------
                                                                          ROBERT W. KLOSS
                                                                             President
</TABLE>
    
 
     AS REQUESTED BY THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS
BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.
 
   
<TABLE>
<CAPTION>
                SIGNATURES                                     TITLE                         DATE
                ----------                                     -----                         ----
<C>                                            <S>                                      <C>
 
            /s/ ROBERT W. KLOSS                President and Director                   May 1, 1998
- -------------------------------------------      (Principal Executive Officer)
              ROBERT W. KLOSS
 
           /s/ LINDA M. SPRINGER               Financial Reporting Officer              May 1, 1998
- -------------------------------------------      (Principal Financial Officer)
             LINDA M. SPRINGER
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
             MARY LYNN FINELLI
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
              ALAN F. HINKLE
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
             JAMES D. KESTNER
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
              SARAH C. LANGE
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
             J. KEVIN MCCARTHY
</TABLE>
    
 
                                       C-8
<PAGE>   133
 
   
<TABLE>
<CAPTION>
                SIGNATURES                                     TITLE                         DATE
                ----------                                     -----                         ----
<C>                                            <S>                                      <C>
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
               JAMES POTTER
 
                     *                         Director                                 May 1, 1998
- -------------------------------------------
              JOAN C. TUCKER
 
         *By: /s/ ADAM SCARAMELLA
- -------------------------------------------
              ADAM SCARAMELLA
             Attorney-in-Fact
       Pursuant to Power of Attorney
</TABLE>
    
 
                                       C-9
<PAGE>   134
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<CAPTION>
EXHIBITS                                                                  PAGE
- --------                                                                  ----
<C>  <S>  <C>                                                             <C>
 (1) (a)  Resolution of the Board of Directors of Providentmutual Life
          and Annuity Company of America authorizing establishment of
          the Providentmutual Variable Annuity Separate Account.
     (b)  Resolution of the Board of Directors of Providentmutual Life
          and Annuity Company of America authorizing additional
          Subaccounts of the Providentmutual Variable Annuity Separate
          Account.
     (c)  Resolution of the Board of Directors of Providentmutual Life
          and Annuity Company of America authorizing additional
          Subaccounts of the Providentmutual Variable Annuity Separate
          Account.
     (d)  Resolution of the Board of Directors of Providentmutual Life
          and Annuity Company of America authorizing additional
          Subaccounts of the Providentmutual Variable Annuity Separate
          Account.
     (e)  Resolution of the Board of Directors of Providentmutual Life
          and Annuity Company of America authorizing additional
          Subaccounts of the Providentmutual Variable Annuity Separate
          Account.
 (3) (a)  Form of Underwriting Agreement among Providentmutual Life
          and Annuity Company of America, PML Securities, Inc. and the
          Providentmutual Variable Annuity Separate Account.
     (b)  Form of Selling Agreement between PML Securities, Inc. and
          Sentinel Financial Services Company.
 (4)      Form of Flexible Premium Deferred Variable Annuity Contract
          (PL512).
     (a)  Amendment of Contract Provisions Rider (PL470.13A).
     (b)  Qualified Plan Rider (PL471).
     (c)  403(b) Annuity Loan Rider (PL515).
     (d)  Death Benefit Rider "Step Up" (PL547).
     (e)  Death Benefit Rider "Rising Floor" (PL548).
     (f)  Simple IRA Rider (PL549).
     (g)  SEP IRA Rider (PL550).
     (h)  Qualify as an IRA Rider (PL553).
     (i)  Qualify as a TSA Under 403(b) Rider (PL554).
     (j)  Amendment for a Charitable Remainder Trust Rider (PL558).
     (k)  Systematic Withdraw Plan Rider (PL600).
 (5)      Form of Application and 1717 Capital Management Company
          Suitability Statement.
     (a)  Initial Allocation Schedule.
 (6) (a)  Charter of Providentmutual Life and Annuity Company of
          America.
     (b)  By-Laws of Providentmutual Life and Annuity Company of
          America.
 (8) (a)  Participation Agreement among Market Street Fund, Inc.,
          Providentmutual Life and Annuity Company of America and PML
          Securities, Inc.
     (b)  Participation Agreement among Variable Insurance Products
          Fund, Fidelity Distributors Corporation and Providentmutual
          Life and Annuity Company of America.
     (d)  Form of Fund Participation Agreement among Neuberger &
          Berman Advisers Management Trust, Advisers Managers Trust
          and Providentmutual Life and Annuity Company of America.
</TABLE>
    
<PAGE>   135
 
   
<TABLE>
<CAPTION>
EXHIBITS                                                                  PAGE
- --------                                                                  ----
<C>  <S>  <C>                                                             <C>
     (e)  Fund Participation Agreement among TCI Portfolios, Inc.,
          Investors Research Corporation, and Providentmutual Life and
          Annuity Company of America.
     (f)  Participation Agreement between Van Eck Investment Trust and
          Providentmutual Life and Annuity Company of America.
     (g)  Service Agreement between Providentmutual Life and Annuity
          Company of America and Provident Mutual Life Insurance
          Company of Philadelphia.
     (h)  Support Agreement between Provident Mutual Life Insurance
          Company and Providentmutual Life and Annuity Company of
          America.
 (9)      Consent of Adam Scaramella, Esquire.
(10) (a)  Consent of Sutherland, Asbill & Brennan, L.L.P.
     (b)  Consent of Scott V. Carney, FSA, MAAA.
     (c)  Consent of Coopers & Lybrand, L.L.P., Independent
          Accountants.
(11)      No financial statements will be omitted from Item 23.
(13)      Schedule for computation of performance data.
(14)      Powers of Attorney.
</TABLE>
    

<PAGE>   1
                                                                   Exhibit 1(a)

                                  RESOLUTIONS

1.   BE IT RESOLVED, that Providentmutual Life and Annuity Company of America,
     pursuant to the provisions of Section 406.2 of the Pennsylvania Insurance
     Code hereby establishes a separate account designated as the
     Providentmutual Variable Annuity Separate Account (Separate Account) with
     the following investment divisions: Growth, Money Market, Bond, Managed,
     Aggressive Growth and International.

     FURTHER RESOLVED, that the President, a Vice President, Secretary,
     Treasurer, Assistant Secretary, Legal Officer, or Assistant Legal Officer
     each be authorized to take all necessary and appropriate action to
     accomplish the registration of the Separate Account as an investment
     company under the Investment Company Act of 1940 and the registration of
     the variable annuity contracts issued in connection with the Separate
     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 Separate
     Account and for the distribution of variable annuity contracts carrying an
     interest in the Separate 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
     Separate 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 Separate Account.

2.   BE IT RESOLVED, that the following Standards of Conduct with respect to
     investments of the above Separate Account and variable annuity 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 the
     Separate Account, the Company shall not:

     1.   Sell to, or purchase from, such Separate Account established by the
          company any securities or other property, other than variable annuity
          contracts.

     2.   Purchase, or allow to be purchased, for 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 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 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. 



<PAGE>   2

     5.   Borrow money or securities from such Separate Account other than under
          a policy loan provision.

3.   BE IT RESOLVED, that the following Standards of Suitability shall apply to
     Providentmutual Life and Annuity Company of America, its officers,
     directors, employees, affiliates and agents with respect to the suitability
     of a variable annuity contract for an applicant for such contract:

     No recommendation shall be made to an applicant to purchase a variable
     annuity contract, and no variable annuity contract shall be issued, in the
     absence of reasonable grounds to believe that the purchase of such a
     contract is not unsuitable for such applicant on the basis of information
     furnished after reasonable inquiry into the following subjects of concern
     to the applicant:

     1)   the applicant's insurance and investment objectives;

     2)   the applicant's financial situation and needs; and

     3)   other relevant information known to Providentmutual Life and Annuity
          Company of America or the agent making the recommendation.

     A copy of this resolution shall be distributed to the officers, employees,
     affiliates and agents of this Company.

     AND BE IT FURTHER RESOLVED, that the President, a Vice President, Secretary
     or other appropriate officer of the Company are hereby authorized and
     directed to carry into full force and effect the purposes and provisions of
     this resolution.

4.   RESOLVED, that the Certificate of Authority for Providentmutual Life and
     Annuity Company of America be amended, where required, to enable the
     Company to sell variable annuity contracts;

     FURTHER RESOLVED that the President, Vice-President, Secretary, Assistant
     Secretary, Legal Officer or Assistant Legal Officer of the Company each be
     and are hereby authorized to take all necessary and appropriate action to
     effectuate such amendment.


"I hereby certify the above to be a true extract from the minutes of the meeting
of the Board of Directors of Providentmutual Life and Annuity Company of America
held May 9, 1991, wherein the aforementioned Resolutions were adopted."


                                         /s/ W. Peter Loesche
                                        ---------------------------------------
                                         W. Peter Loesche, Assistant Secretary

<PAGE>   1
                                                                   Exhibit 1(b)


                 UNANIMOUS CONSENT OF THE BOARD OF DIRECTORS OF
              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA



        In accordance with Section 141(F) of the Delaware General Corporation
Law, the undersigned Directors of Providentmutual Life and Annuity Company of
America do hereby consent as set forth below:

          WHEREAS, the Board of Directors of Providentmutual Life and Annuity
     Company of America ("PLACA") established the PROVIDENTMUTUAL VARIABLE
     ANNUITY SEPARATE ACCOUNT ("Annuity Account") on May 9, 1991 pursuant to the
     provisions of Section 406.2 of the Pennsylvania Insurance Code; and

          WHEREAS, PLACA has redomesticated as a Delaware Insurance Company and
     is now subject to regulation by the Delaware Insurance Department; and

          WHEREAS, the Annuity Account is now subject to and conforms with the
     provisions of Section 2932 of the Delaware Insurance Code; and

          WHEREAS, the Annuity Account has six subaccounts - Growth; Money
     Market; Bond; Managed; Aggressive Growth and International; and

          WHEREAS, PLACA now desires to establish additional subaccounts, each
     of which will invest in shares of a designated mutual fund portfolio and to
     which net premiums under the contracts shall be allocated in accordance
     with instructions received from owners of the contracts;

          NOW, BE IT RESOLVED, that Providentmutual Life and Annuity Company of
     America pursuant to the provisions of Section 2932 of the Delaware
     Insurance Code hereby does establish and create the following additional
     investment Subaccounts of the Annuity Account: FIDELITY GROWTH SUBACCOUNT;
     FIDELITY EQUITY-INCOME SUBACCOUNT; FIDELITY INDEX 500 SUBACCOUNT; FIDELITY
     HIGH INCOME BOND SUBACCOUNT; FIDELITY ASSET MANAGER SUBACCOUNT; SCUDDER
     BOND SUBACCOUNT; QUEST FOR VALUE EQUITY SUBACCOUNT; QUEST FOR VALUE MANAGED
     SUBACCOUNT; QUEST FOR VALUE SMALL CAP SUBACCOUNT; AND DREYFUS ZERO COUPON
     2000 SUBACCOUNT; 


<PAGE>   2






          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.

     IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
7th day of June, 1993. 


/s/ L. J. Rowell, Jr.                        /s/ Stanley R. Reber
- ----------------------------------------     -----------------------------------
L. J. Rowell, Jr.                            Stanley R. Reber

/s/ John R. McClelland                       /s/ Robert S. Johnson
- ----------------------------------------     -----------------------------------
John R. McClelland                           Robert S. Johnson


/s/ Gerald B. Beam                           /s/ George R. Lambert
- ----------------------------------------     -----------------------------------
Gerald B. Beam                               George R. Lambert


/s/ Alfred F. Wilmouth
- ----------------------------------------
Alfred F. Wilmouth



<PAGE>   1
                                                       Exhibit 1(c)


                   Resolutions for Executive Committee Meeting
               Providentmutual Life and Annuity Company of America
                                 April 13, 1995



        WHEREAS, the Board of Directors of Providentmutual Life and Annuity
Company of America ("PLACA") established the Providentmutual Variable Annuity
Separate Account ("Annuity Account") on May 9, 1991, pursuant to the provisions
of Section 406.2 of the Pennsylvania Insurance Code; and

        WHEREAS, PLACA has redomesticated as a Delaware Insurance Company and is
now subject to regulation by the Delaware Insurance Department; and

        WHEREAS, the Annuity Account is now subject to and conforms with the
provisions of Section 2932 of the Delaware Insurance Code; and

        WHEREAS, the Annuity Account currently has sixteen subaccounts; and

        WHEREAS, PLACA now desires to establish seven additional subaccounts,
each of which will invest in shares of a designated mutual fund portfolio and to
which net premiums under the contracts shall be allocated in accordance with
instructions received from owners of the contracts;

        NOW, BE IT RESOLVED, that Providentmutual Life and Annuity Company of
America pursuant to the provisions of Section 2932 of the Delaware Insurance
Code hereby does establish and create the following additional investment
Subaccounts of the Annuity Account: FIDELITY CONTRAFUND SUBACCOUNT; SCUDDER
GROWTH AND INCOME SUBACCOUNT; SCUDDER INTERNATIONAL SUBACCOUNT; DREYFUS GROWTH
AND INCOME SUBACCOUNT; DREYFUS SOCIALLY RESPONSIBLE SUBACCOUNT; FEDERATED U. S.
GOVERNMENT BOND FUND SUBACCOUNT; AND FEDERATED UTILITY SUBACCOUNT;

        FURTHER RESOLVED, that the President or a Vice President be, and hereby
are authorized to take all necessary and appropriate actions 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(d)


                        Marie Daley, Annuity Services Officer
                        Andrew J. Stack, Marketing Officer
                        Mary Lynn Finelli, Financial Reporting Officer
                        A, Dennis Kolesinskas, Assistant Financial Officer
                        Sarah C. Lange, Vice President-Investment Officer
                        Timothy P. Henry, Investment Officer
                        Edward Schmid, Investment Officer
                        Stephen L. White, Vice President & Actuary
                        Richard D. Pitts, Vice President & Actuary
                        Louise Goldman, Tax Officer
                        Linda E. Senker, Legal Officer & Assistant Secretary
                        Rosanne Gatta, Treasurer
                        Anthony Giampetro, Assistant Treasurer
                        Joseph T. Laudadio, Underwriting Officer
                        William, P. Loesche, Secretary

Upon motion duly made, seconded and carried, it was resolved that the following
resolutions be adopted adding new subaccounts to the Providentmutual Variable
Annuity Separate Account:

          WHEREAS, the Board of Directors of Providentmutual Life and Annuity
     Company of America ("PLACA") established the Providentmutual Variable
     Annuity Separate Account ("Annuity Account") on May 9, 1991, pursuant to
     the provisions of the Section 406.2 of the Pennsylvania Insurance Code; and

          WHEREAS, PLACA redomesticated as a Delaware Insurance Company subject
     to regulation by the Delaware Insurance Department and the Annuity Account
     is subject to and conforms with the provisions of Section 2932 of the
     Delaware Insurance Code; and

          WHEREAS, on September 21, 1995, the Board of Directors added eight
     additional subaccounts, for a total of thirty-one subaccounts; and

          WHEREAS, PLACA 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 contracts shall be allocated in
     accordance with instructions received from owner of the contracts.

          NOW, BE IT RESOLVED, that PLACA, pursuant to the provisions of Section
     2932 of the Delaware Insurance Code, does hereby establish and create the
     following additional investment Subaccounts of the Annuity Account: THE
     ALGER SMALL CAPITALIZATION SUBACCOUNT; THE FIDELITY CONTRAFUND SUBACCOUNT
     AND THE VAN ECK WORLDWIDE EMERGING MARKETS SUBACCOUNT.

          FURTHER RESOLVED, that the President or a Vice President be, and
     hereby are, authorized to take all necessary and appropriate actions 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 and the intent and purposes thereof.
<PAGE>   2
Upon motion duly made, seconded and carried, it was resolved that the following
resolutions be adopted adding new subaccounts to the Providentmutual Variable
Life Separate Account:

          WHEREAS, the Board of Directors of Providentmutual Life and Annuity
     Company of America ("PLACA") established the Providentmutual Variable Life
     Separate Account ("Separate Account") on June 30, 1994, pursuant to the
     provisions of the Section 2932 of the Delaware Insurance Code; and

          WHEREAS, PLACA subsequently added three additional subaccounts: the
     Twentieth Century Growth Subaccount; the Van Eck Gold and Natural Resources
     Subaccount; and the Van Eck Global Bond Subaccount; and

          WHEREAS, PLACA 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 contracts shall be allocated in
     accordance with instructions received from owner of the contracts.

          NOW, BE IT RESOLVED, that PLACA, pursuant to the provisions of Section
     2932 of the Delaware Insurance Code, does hereby establish and create the
     following additional investment Subaccounts of the Separate Account: THE
     ALGER SMALL CAPITALIZATION SUBACCOUNT; THE FIDELITY CONTRAFUND SUBACCOUNT;
     AND THE VAN ECK WORLDWIDE EMERGING MARKETS SUBACCOUNT.

          FURTHER RESOLVED, that the President or a Vice President be, and
     hereby are, authorized to take all necessary and appropriate actions 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 and the intent and purposes thereof.

Mr. Ingram then discussed a proposed private placement annuity product being
developed in conjunction with an investment advisor who has worked with William
E. Simon. The product originated with two agents in PMLIC's Cranford agency. The
contract would have as an investment choice a hedge fund which would operate as
a "fund of funds". A meeting was held with the Delaware Insurance Department,
whose main concern was with disclosure. The contract and related documentation
are currently being developed.

Meeting adjourned at 3:00 P.M.


                                            /s/ Linda E. Senker
                                            ------------------------------------
                                            Linda E. Senker, Assistant Secretary

<PAGE>   1
                                                                     EXHIBIT 1.e


               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA

                               Board of Directors

                                   RESOLUTION

WHEREAS, on May 9, 1991, Providentmutual Life and Annuity Company of America
(the "Company") established a separate account pursuant to the provisions of
Section 406.2 of the Pennsylvania Insurance Code designated as the
"Providentmutual Variable Annuity Separate Account" (the "Account") for use in
conjunction with certain variable annuity contracts ( the "Contracts"); and

WHEREAS, the Company has redomesticated as a Delaware Insurance Company and is
now subject to regulation by the Delaware Insurance Department; and

WHEREAS, the Account is now subject to and conforms with the provisions of
Section 2932 of the Delaware Insurance Code; 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 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 3(a)


                             UNDERWRITING AGREEMENT
                             ----------------------


        AGREEMENT made this ____ day of _____________, 1992, by and among
Providentmutual Life and Annuity Company of America, a Pennsylvania corporation
("Providentmutual"), PML Securities Company, a Pennsylvania corporation ("PML"),
and the Providentmutual Variable Annuity Separate Account, ("Variable Account"),
a separate investment account of Providentmutual.

                                  WITNESSETH:

        WHEREAS, Providentmutual has established and maintains the Variable
Account pursuant to the laws of Pennsylvania, for the purpose of selling
variable annuity contracts ("Contracts"), 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 N-4 pursuant to the Securities Act of
1933 ("1933 Act") ; and

        WHEREAS, the Variable Account is registered as a unit investment trust
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, Providentmutual, the Variable Account and PML wish to enter
into an agreement to have PML act as Providentmutual's principal underwriter for
the sale of the Contracts through the Variable Account;

        NOW, THEREFORE, the parties agree as follows:

                            A. DISTRIBUTION SERVICES
                               ---------------------

        1. PML represents that it is duly registered as a broker-dealer under
the 1934 Act and is a member in good standing of the NASD and, to the extent
necessary to offer the Contracts, shall be duly registered or otherwise
qualified under the securities laws of any state or other jurisdiction.

        2. PML shall act as the principal underwriter for the sale of Contracts
to the public, during the term of this Agreement, in each state and other
jurisdictions in which such Contracts may lawfully be sold. PML shall offer the
Contracts for sale and distribution under guidelines established by
Providentmutual. PML agrees to use its best efforts to solicit applications for
the Contracts at its own expense, and otherwise perform all duties and functions
which are necessary and proper for the distribution of the Contracts; provided,
however, PML shall not be obligated to sell any specific number of Contracts.
Completed

<PAGE>   2


applications for Contracts shall be transmitted directly to Providentmutual for
acceptance or rejection in accordance with underwriting rules established by
Providentmutual. All premium payments under the Contracts shall be made by check
payable to Providentmutual and shall be transmitted promptly in full by PML or
its representatives to Providentmutual.

        3. PML shall be fully responsible for training, supervising and
controlling its representatives soliciting applications for Contracts, for
taking all necessary and appropriate steps to ensure compliance by PML and its
representatives on a continuous basis with the NASD Rules of Fair Practice,
federal and state securities law requirements and all other applicable laws and
regulations concerning the offer and sale of Contracts (and the riders and other
contracts offered in connection therewith), and for ensuring that its
representatives are duly and appropriately licensed or otherwise qualified for
the offer and sale of the Contracts under the federal securities laws and any
applicable securities, insurance or other laws of each state or other
jurisdiction in which the Contracts may be lawfully sold.

        4. Providentmutual agrees that during the term of this Agreement it will
take any action which is required to cause the Contracts to comply as an
insurance product and a registered security with all applicable federal and
state laws and regulations.

        5. PML agrees that it will execute such papers and do such acts as shall
from time to time be reasonably requested by Providentmutual for the purpose of
(a) maintaining the registration of the Contracts under the 1933 Act and the
Variable Account under the 1940 Act, and (b) qualifying and maintaining
qualification of the Contracts for sale under the applicable laws of any state.

        6. PML is hereby authorized to enter into separate written agreements,
on such terms and conditions as PML may determine which are not inconsistent
with this Agreement, with one or more organizations which agree to participate
in the distribution of the Contracts. Such organization (hereafter "Broker")
shall be registered both as a broker/dealer under the 1934 Act and as a member
of the NASD. All such sales agreements shall provide that each Broker will
assume full responsibility for continued compliance by itself and its
representatives with applicable federal and state securities laws, including but
not limited to training, supervision and control of its representatives engaged
in the distribution of the Contracts. PML shall obtain the approval of
Providentmutual prior to entering into an agreement with any such organization.
All Brokers shall act as independent contractors and nothing herein shall
constitute such Brokers or their agents

                                      -2-
<PAGE>   3

or employees as employees of Providentmutual in connection with the sale of the
Contracts.

        7. PML shall take reasonable steps to ensure that any Broker and its
representatives soliciting applications for Contracts shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of such
Contracts (and the riders and other contracts offered in connection therewith)
under the state insurance laws, the federal securities laws, and any applicable
blue-sky laws of each state or other jurisdiction in which Providentmutual is
licensed to sell the Contracts.

        8. PML shall take reasonable steps to ensure that each Broker trains,
supervises and controls its representatives in compliance with applicable laws
and regulations including, but not limited to (a) conducting such training
(including the preparation and utilization of training materials as in the
opinion of PML is necessary to accomplish the purposes of this Agreement and (b)
establish and implement reasonable written procedures for supervision of sales
practices of agents, representatives or brokers selling the Contracts. Each
Broker shall assume any legal responsibilities of Providentmutual for the acts,
commissions, omissions, or defalcations of such representatives insofar as they
relate to the sale of the Contracts. Applications for Contracts solicited by a
Broker through its agents or representatives shall be transmitted directly to
Providentmutual, and if received by PML, shall be forwarded to Providentmutual.
All premium payments under the Contracts shall be made by check payable to
Providentmutual and remitted promptly to Providentmutual as agent for PML.

        9. Providentmutual shall undertake to appoint the qualified
representatives of PML or any Broker appointed by PML as life insurance agents
of Providentmutual and shall apply for proper licenses in the appropriate states
or jurisdictions for these proposed agents. Providentmutual 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
6 of Article A above as independent general agents of Providentmutual for the
sale of the Contracts. PML is responsible for ensuring that Brokers are duly
qualified, under the insurance laws of the applicable jurisdictions, to sell the
Contracts.

        2. Providentmutual and PML wish to ensure that Contracts sold by PML
will be issued to purchasers for whom the Contracts


                                      -3-
<PAGE>   4

will be suitable. PML shall take reasonable steps to ensure that the various
representatives appointed by it shall not make recommendations to an applicant
to purchase a Contract in the absence of reasonable grounds to believe that the
purchase of the Contracts 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 retirement and financial needs, objectives and
situation. PML is not authorized to give any information or to make any
representations concerning the Contracts other than those contained in the
current prospectus filed with the Commission or in such sales literature as may
be authorized by Providentmutual.

        3. Providentmutual, at its sole expense, 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 Contracts, and other documents which PML reasonably
requests for use in connection with the distribution of the Contracts.
Providentmutual shall have responsibility for preparing, filing with the
appropriate federal and state regulatory authorities and printing all required
prospectuses and/or registration statements in connection with the Contracts and
the payments of all related expenses. PML shall not use any sales materials that
have not been approved by Providentmutual; provided, however, that PML shall
have responsibility for approving and filing all sales literature and
advertisements with the NASD and the Commission as required by law or rule.

        4. On behalf of PML, Providentmutual shall cause to be maintained and
preserved, for the periods prescribed, such accounts, books and other documents
as are required of Providentmutual and PML by the 1934 Act, any applicable
releases issued by the Commission under the federal securities laws, and any
other applicable laws and regulations in connection with the offer and sale of
the Contracts. The books, accounts and records of Providentmutual, the Variable
Account and PML as to all transactions hereunder shall be maintained so as to
disclose clearly and accurately the nature and details of the transactions.
Providentmutual shall maintain, on behalf of and as agent for PML, such books
and records of PML pertaining to the offer and sale of the Contracts and
required by the 1934 Act as may be mutually agreed upon from time to time by
Providentmutual and PML, including but not limited to maintaining a record of
representatives licensed, registered and otherwise qualified under the federal
securities laws to sell the Contracts and of the payments of commissions and
service fees made to such representatives; provided that such books and records
shall be the property of PML and shall at all times be subject to such
reasonable peri-



                                      -4-
<PAGE>   5


odic, special or other inspection or examination by the Commission and all other
regulatory bodies having jurisdiction. Providentmutual, on behalf of and as
agent for PML, shall be responsible for sending all required confirmations on
customer transactions upon or before completion thereof in compliance with
applicable laws and regulations, as modified by an exemption or other relief
obtained by Providentmutual, and any applicable releases issued by the
Commission under the federal securities laws. Such confirmation, unless modified
by an exemption or other relief obtained by Providentmutual, shall reflect the
facts of the transaction, and the form thereof will show that it is being sent
on behalf of PML acting in the capacity of agent for Providentmutual.

        5. Providentmutual and the Variable Account shall own and control all
pertinent records relating to the variable annuity operations required to be
prepared and maintained under the 1940 Act and applicable rules and regulations
thereunder. PML agrees that all accounts and records which it maintains for
Providentmutual and the Variable Account shall be the property of
Providentmutual and the Variable Account and that it will surrender promptly to
the designated officers of Providentmutual any or all such accounts and records
upon request. Providentmutual, the Variable Account or the authorized
representative of said parties shall have the right to copy any such records in
the possession of PML Such accounts and records shall be available to properly
constituted governmental authorities as required by federal and state law and/or
regulation. PML shall cause Providentmutual to be furnished with such reports as
Providentmutual may reasonably request for the purpose of meeting its reporting
and recordkeeping requirements under the insurance laws of the Commonwealth of
Pennsylvania and any other applicable states or jurisdictions.

        6. PML and Providentmutual agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with Contracts distributed under this Agreement. PML and
Providentmutual further agree to cooperate fully in any securities regulatory
inspection, inquiry, investigation or proceeding or judicial proceeding with
respect to Providentmutual, PML, their affiliates and their agents or
representatives to the extent that such inspection, inquiry, investigation or
proceeding is in connection with Contract distributed under this Agreement.
Without limitation:

                (a) PML will be notified promptly of any customer complaint or
        notice of any regulatory inspection, inquiry, investigation or
        proceeding or judicial proceeding received by Providentmutual with
        respect to PML or any agent or representative or which may affect



                                       -5-

<PAGE>   6

        Providentmutual's issuance of any Contract marketed under this
        Agreement.

                (b) PML will promptly notify Providentmutual of any customer
        complaint or notice of any regulatory inspection, inquiry, investigation
        or proceeding received by PML or its affiliates with respect to PML or
        any agent or representative in connection with any Contract distributed
        under this Agreement or any activity in connection with any such
        Contract.

                (c) In the case of a substantive customer complaint, PML and
        Providentmutual 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 telecopy.

                                C. COMPENSATION
                                   ------------

        1. On behalf of PML, Providentmutual 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 Contracts in the amounts and on such
terms and conditions as Providentmutual and PML shall determine. Providentmutual
will pay the difference between the amount of the commissions payable with
respect to a Contract and the amount paid to the registered representative for
such Contract to PML for expenses associated with distribution and marketing of
Contracts and supervision of its registered representatives. (See Schedule A.)

        2. Providentmutual shall arrange for the payment of commissions directly
to those Brokers who sell Contracts under Agreements entered into pursuant to
paragraph 6 of Article A above, in amounts as may be agreed to by
Providentmutual and specified in such written agreements.

        3. Providentmutual 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.

        4. Notwithstanding anything in this Agreement to the contrary, no
representative of PML or any Broker shall have an interest in any deductions or
other fees payable to PML.

                                       -6-

<PAGE>   7



                                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, unless prior written consent of Providentmutual to such
        assignment is obtained;

                (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;

                (e) may be terminated for "cause" at any time by
        Providentmutual. "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.

Upon termination of this Agreement, all authorizations, rights, and obligations
shall cease except the obligations to settle accounts hereunder, including
payments or premiums or contributions subsequently received for Contracts in
effect at the time of termination or issued pursuant to applications received by
Providentmutual prior to termination, and all commissions attributable thereto.

        2. In the event of termination for any reason, all records shall
promptly be returned to Providentmutual free from any claim or retention of
rights by PML.

        3. PML shall not disclose or use any records of 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 Providentmutual has authorized such disclosure or such
disclosure is expressly required by applicable federal or state regulatory
authorities.






                                      -7-

<PAGE>   8

        4. PML shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of Providentmutual and/or the Variable Account,
present or future, any materials reasonably related to the administrative and
marketing services provided hereunder and any other information, reports or
other material, as may be requested or required by any governmental agency
having jurisdiction.

        5. PML shall act as an independent contractor and nothing herein
contained shall constitute PML or its agents or employees as employees of
Providentmutual in connection with the sale of the Contracts.

        6. PML shall be liable for its own misconduct and negligence.

        7. The services of PML hereunder are not to be deemed exclusive and PML
shall be free to render similar services to others so long as its services
hereunder are not impaired or interfered with thereby.

        8. 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
including such exemptions from the 1940 Act as the Commission may grant, and the
terms hereof shall be interpreted and construed in accordance therewith. Without
limiting the foregoing, the terms "assign" or "assignment" shall not include any
transaction exempted from section 15(b) (2) of the 1940 Act.

        9. A copy of this Agreement shall be furnished to the Commission.

        10. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.


                                      - 8 -
<PAGE>   9

        11. 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.

                                            PML SECURITIES COMPANY


ATTEST:                                      BY:
        -----------------------------------    -------------------------------


                                               PROVIDENTMUTUAL LIFE AND
                                               ANNUITY COMPANY OF AMERICA


ATTEST:                                      BY:
        -----------------------------------    -------------------------------


                                               THE PROVIDENTMUTUAL VARIABLE
                                               ANNUITY SEPARATE ACCOUNT


ATTEST:                                      BY:
        -----------------------------------    -------------------------------






















                                      -9-

<PAGE>   10

                                  SCHEDULE "A"


As compensation for the sale of Contracts by registered representatives of PML,
Providentmutual will pay a commission to PML equal to 6% of the initial premium
payment for each Contract sold and 2% of each subsequent premium payment for
such Contract.

PML shall pay each of its registered representatives selling a Contract, either
directly or through Providentmutual acting on behalf of PML, 4% of the initial
premium payment for such Contract and 2% of each subsequent premium payment for
such Contract.














                                     - 10 -

<PAGE>   1
                                                                    Exhibit 3(b)


                               SELLING AGREEMENT
                               -----------------

        AGREEMENT dated as of March 1, 1993, by and between PML Securities
Company ("PML"), 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 Sentinel Financial
Services Company a Vermont partnership that is registered as a broker-dealer
with the SEC under the 1934 Act and a member of the NASD ("Broker Dealer") and
licensed as an insurance agent pursuant to the laws of the State of Vermont.

                                    RECITAL


        PML has been appointed as the principal underwriter of the
Providentmutual Life and Annuity Company of America ("PLACA") variable annuity
policies (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, PML appoints and
authorizes Broker Dealer to solicit sales of and provide service with respect to
the Policies which are set forth on 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 hereby accepts such
appointment and agrees to use its 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 variable life insurance and annuities in the state in which
applications for Policies are being solicited or signed and will have an
appropriate appointment or license by PLACA.






<PAGE>   2



        3. COMMISSIONS

                As compensation for the sale of each of the Policies by the
Representatives, PML shall pay to Broker Dealer, either directly or through
PLACA acting on PML's behalf, the commissions set forth on Schedule "B" attached
hereto and incorporated herein by reference (the "Commissions"). The Commissions
shall be subject to chargeback in accordance with the terms and conditions set
forth on such Schedule "B". PML 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 PML
or PLACA other than the Representatives. Broker Dealer shall be solely
responsible for the payment of any Commissions, 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 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 shall settle all accounts with PML and shall
continue to be responsible for all applicable chargebacks.


        5. BROKER DEALER'S OBLIGATIONS

        In addition to other obligations assumed by Broker Dealer under this
Agreement:

        (a) Broker Dealer shall be insurance licensed. Broker Dealer shall have
all Representatives insurance licensed and appointed by PLACA. All insurance
licenses and appointments will be processed in accordance with PLACA procedures.
PLACA may, in its sole discretion, refuse, terminate or non-renew any such
license and appointment, without cause.

        (b) Broker Dealer shall only pay Representatives Compensation to
Representatives who are properly insurance licensed and appointed with PLACA and
registered with the NASD.


                                      -2-

<PAGE>   3

        (c) Broker Dealer shall service the Policies in accordance with the
written administrative procedures established by PML or PLACA from time to time.

        (d) Broker Dealer shall ensure that the Representatives shall use their
best efforts to keep the Policies in force.

        (e) Broker Dealer 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 PML from time to
time.

        (f) Broker Dealer agrees that no sales promotion or other advertising
materials relating to the Policies shall be used unless provided or approved in
writing by PML 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 any of the Representatives. Broker Dealer and the
Representatives shall solicit applications for the Policies only in states where
such Policies have been approved by state authorities.

        (g) Broker Dealer 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 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 PLACA or PML at any time while this Agreement is
in force.

        (h) Broker Dealer 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 PML 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 and shall maintain its
license as an insurance agent pursuant to the laws of the State of Louisiana and
any other state in which such license is required by the applicable insurance
laws and regulations for sale of the Policies.

        (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. 

                                      -3-

<PAGE>   4

        (k) Broker Dealer 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.

        (l) Upon request by PML, Broker Dealer shall furnish such records as are
necessary to establish that the terms of this paragraph 5 are satisfied.


        6. PML'S OBLIGATIONS

        In addition to other obligations assumed by PML under this Agreement:

        (a) PML shall use its best efforts to ensure that PLACA uses its best
efforts to maintain effectiveness of the 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. PML shall keep Broker Dealer advised of any
changes in the Status of the Registration Statements for the Policies.

        (b) PML shall furnish Broker Dealer with information regarding the
states in which the Policies may be sold.

        (c) PML, or its agent, shall furnish Broker Dealer with promotional
material for use at point of sale, applications, prospectuses and policy forms.
A reasonable charge established by PML may be made for such materials.


        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.


        8. INVESTIGATIONS; CUSTOMER COMPLAINTS

        Broker Dealer agrees to cooperate fully in any insurance, securities or
other regulatory or judicial investigation or proceeding arising in connection
with the Policies, Broker Dealer, and/or any of the Representatives. Broker
Dealer 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


                                      -4-
<PAGE>   5

request in order to ascertain whether Broker Dealer is complying with all
applicable laws and/or regulations. Broker Dealer agrees to cooperate with PML
and PLACA in resolving all customer complaints with respect to the Policies,
Broker Dealer, and/or the Representatives.


        9. INDEMNIFICATION

        (a) PML hereby agrees to indemnify and hold harmless Broker Dealer and
each of its affiliates, officers or directors against any losses, expenses
(including reasonable attorneys fees), claims, damages or liabilities to which
Broker Dealer 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 PML'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 hereby agrees to indemnify and hold harmless PML and
PLACA and each of their current and former affiliates, directors, officers and
each person, if any, who controls or has controlled PML 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 PML and
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/or its Representatives performance, non-performance or
breach of this Agreement including, but not 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 PLACA's
exclusive property, shall be drawn payable to "Providentmutual Life and Annuity
Company of America" and shall be transmitted to PLACA within two days of receipt
along with applications and other documents in accordance with the
administrative procedures of PLACA (as developed and amended from time to time
by PLACA) without any deduction or offset for any reason. All applications and
other communications shall be on forms supplied

                                       -5-
<PAGE>   6

by PLACA and are subject to acceptance or rejection by PLACA in PLACA's sole
discretion, or by PML on behalf of PLACA. In the event an application is
rejected, all payments will be returned to the purchaser, and Broker Dealer will
be notified of such action.

        (b) Broker Dealer agrees to make appropriate arrangements for delivery
to the applicant of the Policy accompanied by any additional appropriate        
documents. Broker Dealer or the Representative will obtain, upon delivery of
the Policy to applicant, the required signature on PLACA's policy delivery
receipt and any application amendments and immediately forward such to PLACA.

        (c) Broker Dealer agrees that for a period of two years from the
termination of the Agreement it shall not and shall cause the Representatives
not to directly or indirectly contact policyholders of PLACA for the purpose of
inducing or attempting to induce such policyholders to cancel, lapse or fail to
renew such Policies with 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 and its Representatives are independent contractors
with respect to PML and PLACA and (i) shall not have the right to incur
indebtedness on behalf of PML or PLACA nor hold themselves out as employees of
PML 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 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 PML or PLACA.

        (e) Broker Dealer represents that all of.its 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 expense and shall be, at
least, of the form, type and amount required under the NASD Rules of Fair
Practice. PML may require evidence, satisfactory to it, that such coverage is in
force and Broker Dealer shall give prompt written notice to PML of any notice of
cancellation or change of coverage.

        (f) Broker Dealer represents that it has full power and authority to
enter into this Agreement.

        (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
Broker Dealer may not assign this Agreement without the prior written consent of
PML.





                                      -6-
<PAGE>   7


        (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 PML:                       PML Securities Company
                              220 Continental Drive
                              Christiana Executive Campus
                              P.O. Box 15626
                              Wilmington, Delaware 19850


TO BROKER DEALER:             Sentinel Financial Services Company
                              National Life Drive
                              Montpelier, Vermont 05604



        (i) This Agreement shall be governed by the laws of the State of
Delaware and constitutes the entire agreement and understanding between the
parties hereto with respect to the Policies. PML 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 shall constitute Broker 
Dealer's agreement to any such amendment.

        (j) Notwithstanding the foregoing subparagraph (i), any future insurance
products issued by PLACA 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.

        (1) 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.








                                      -7-
<PAGE>   8
        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.


PML SECURITIES COMPANY

                    By: /s/ Lance A. Reihl            (SEAL)
                       ------------------------------- 

                       ------------------------------- 

                    By:                               (SEAL)
                       ------------------------------- 

                       ------------------------------- 

                                       -8-
<PAGE>   9

                                  SCHEDULE "A"

Flexible Premium Deferred Variable Annuity Contracts (The Market Street VIP)












































<PAGE>   10

                                  SCHEDULE "B"



1.      COMMISSIONS

1.1     For contracts sold by PML's registered representatives, PML shall pay to
        Broker Dealer, either directly or through PLACA acting on behalf of PML,
        1 % of the initial premium payment for each such contract, as
        compensation for Broker Dealer's efforts in marketing and distribution
        of the contracts.

1.2(a)  For contracts sold by registered representatives of Broker Dealer or by
        registered representatives of other broker-dealers which have entered
        into selling agreements with Broker Dealer to distribute the contracts,
        PML shall pay to Broker Dealer, either directly or through PLACA acting
        on PML's behalf, 6% of each initial premium payment for a contract and
        2% of each subsequent premium payment for such contract.

1.2(b)  For contracts sold by registered representatives of other
        broker-dealers which have entered into selling agreements with Broker
        Dealer to distribute the contracts, Broker Dealer shall pay to such
        broker-dealers, either directly or through PLACA acting on Broker
        Dealer's behalf, 5% of the amount of each initial premium payment for a
        contract and 2% of each subsequent premium payment for such contract.

2.      CHARGEBACKS

        If any contract sold by a registered representative of PML, a registered
        representative of Broker Dealer or a registered representative of a
        broker-dealer having a selling agreement with Broker Dealer is
        surrendered or is otherwise cancelled, any commission paid under
        Sections 1.1, 1.2(a) or 1.2(b) above shall be repaid to PML or PLACA, as
        the case may be, by Broker Dealer pursuant to the following table:

        If surrender occurs within the       100% of Commission paid with 
        first six months after a premium     respect to such premium payment
        payment:

        If surrender occurs during the       50% of commission paid with
        seventh through twelfth months       respect to such premium
        after a premium payment:             payment





<PAGE>   1
                                                                       EXHIBIT 4

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                                NEWARK, DELAWARE

      ANNUITANT           JOHN DOE          SEPT. 1, 1993          CONTRACT DATE
CONTRACT NUMBER           123,456           SEPT. 1. 2023          MATURITY DATE



In this Contract, Providentmutual Life and Annuity Company of America will be
referred to as "we," "us" or "our." The Owner ("you," "your") is the Annuitant,
unless another person is named in the application or later becomes the Owner as
allowed by this Contract.

We agree to pay the proceeds as described in this Contract, subject to its
provisions.


ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT, INCLUDING ANY DEATH
BENEFIT THAT MAY BE PAYABLE, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT MAY INCREASE OR DECREASE DAILY, DEPENDING UPON THE INVESTMENT
PERFORMANCE OF THE FUND PORTFOLIOS IN WHICH YOUR CHOSEN SUBACCOUNTS ARE
INVESTED, AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS. NO MINIMUM CONTRACT
ACCOUNT VALUE IS GUARANTEED, EXCEPT FOR ANY AMOUNTS IN THE GUARANTEED ACCOUNT.

                      PLEASE READ THIS CONTRACT CAREFULLY
                   It is a legal contract between you and us.

                   NOTICE OF 10 DAY RIGHT TO EXAMINE CONTRACT

PLEASE EXAMINE THIS CONTRACT CLOSELY. IF FOR ANY REASON YOU ARE NOT SATISFIED
WITH THIS CONTRACT, YOU MAY RETURN IT TO US FOR CANCELLATION BY DELIVERING OR
MAILING IT TO:

   1. OUR HOME OFFICE, 300 CONTINENTAL DRIVE, NEWARK, DELAWARE 19713;

   2. ONE OF OUR AGENCY OFFICES; OR

   3. THE AGENT THROUGH WHOM IT WAS PURCHASED.

THIS CONTRACT MUST BE RETURNED TO US NO LATER THAN 10 DAYS AFTER YOU FIRST
RECEIVE IT. UPON SUCH DELIVERY OR MAILING, THIS CONTRACT WILL BE VOID AS OF THE
DATE WE RECEIVE YOUR CONTRACT AND REQUEST. WE WILL RETURN THE GREATER OF: (i)
THE AMOUNT OF PREMIUMS YOU PAID; AND (ii) THE CONTRACT ACCOUNT VALUE PLUS ANY
CHARGES WE DEDUCTED, EXCEPT THE MORTALITY AND EXPENSE RISK CHARGE, THE
ADMINISTRATION CHARGE, AND THE ADVISORY FEES AND EXPENSES OF THE FUND.

                   Signed for the Company in Newark, Delaware


     /s/ Illegible                                       /s/ Robert W. Kloss
         Secretary                                             President


[PROVIDENTMUTUAL LOGO]                                  [PROVIDENTMUTUAL LOGO]
               FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
             Flexible premiums as stated in the Premiums Provision.
    Policy values are variable, except for amounts in the Guaranteed Account
       After the Maturity Date, Payment Options are on a guaranteed basis. Death
       benefit payable upon death of Annuitant before Maturity Date.
              Non-participating - Contract does not pay dividends.

  FOR INQUIRIES, INFORMATION AND RESOLUTION OF COMPLAINTS CALL: 1-800-654-7796

Form PL512
<PAGE>   2
                   A GUIDE TO THE PROVISIONS OF THIS CONTRACT


<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                        <C>
Contract Schedule .......................................................      3

Description of Subaccounts ..............................................      4

Definitions .............................................................      5

General Provisions ......................................................    5-6

Premiums ................................................................      7

Variable Account ........................................................    7-8

Guaranteed Account ......................................................    8-9

Allocations and Transfers ...............................................      9

Contract Values .........................................................  10-11

Payment of Proceeds .....................................................  11-12

Payment Options .........................................................  13-14
</TABLE>


      A COPY OF THE APPLICATION AND ANY RIDERS ARE INCLUDED AFTER PAGE 14.

                                  ENDORSEMENTS
                        (To be made by the Company only)


Form PL512.2                          Page 2
<PAGE>   3
                               CONTRACT SCHEDULE


ANNUITANT               JOHN DOE                SEPT. 1, 1993    CONTRACT DATE
CONTRACT NUMBER          123,456                SEPT. 1, 2023    MATURITY DATE

<TABLE>
<S>                                             <C>
      Initial Premium Payment:                   $2,000

      Minimum Additional Premium Amount:         $  100
                                                [$   50 for Qualified Contracts]

      Planned Periodic Premium:                  $  100 monthly

      Minimum Withdrawal Amount:                 $  500

      Minimum Transfer Amount:                   $  500

      Minimum Remaining Cash Surrender Value
       After Withdrawal:                         $2,000
</TABLE>


                                CHARGES AND FEES


<TABLE>
<S>                                              <C>
      Annual Mortality and Expense Risk Charge:  1.25%

      Administration Charge:                     0.15% of assets

      Annual Administration Fee:                 $30.00

      Transfer Processing Fee:                   $25 each after first 12
                                                        in Contract Year
</TABLE>

<TABLE>
<CAPTION>
      Surrender Charge:*           CONTRACT YEAR             CHARGE
                                   -------------             ------
<S>                                       <C>                  <C>
                                          1                    6%
                                          2                    5%
                                          3                    4%
                                          4                    3%
                                          5                    2%
                                          6                    1%
                                          7                    0
</TABLE>


*     For the first Contract Year, applies to amount withdrawn or surrendered;
      after the first Contract Year, applies to amount withdrawn or surrendered
      during a Contract Year in excess of 10% of Contract Account Value as of
      the beginning of such Contract Year. See "Surrender Charge" on page 10 for
      details and restrictions.


Form PL512.3

                                     Page 3
<PAGE>   4
                                CONTRACT SCHEDULE
                                   (CONTINUED)

                               ALLOCATION OPTIONS



THE MARKET STREET FUND, INC.:

        Providentmutual Variable Large Cap Growth Subaccount
        Providentmutual Variable Large Cap Value Subaccount
        Providentmutual Variable Small Cap Growth Subaccount
        Providentmutual Variable Small Cap Value Subaccount
        Providentmutual Variable Growth Subaccount
        Providentmutual Variable Aggressive Growth Subaccount
        Providentmutual Variable Bond Subaccount
        Providentmutual Variable Managed Subaccount
        Providentmutual Variable Money Market Subaccount
        Providentmutual Variable International Subaccount

DREYFUS VARIABLE INVESTMENT FUND, OR THE
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.:

        Dreyfus Growth and Income Subaccount
        Dreyfus Socially Responsible Subaccount
        Dreyfus Zero Coupon 2000 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)


INSURANCE MANAGEMENT SERIES:

        Federated Fund for U.S. Government Securities II Subaccount
        Federated Utility Fund II Subaccount


Form ASA1

                                     Page 4
<PAGE>   5
                                CONTRACT SCHEDULE
                                   (CONTINUED)



OCC ACCUMULATION TRUST:

        OCC Equity Subaccount
        OCC Managed Subaccount
        OCC Small Cap Subaccount


SCUDDER VARIABLE LIFE INVESTMENT FUND:

        Scudder Bond Subaccount
        Scudder Growth and Income Subaccount
        Scudder International 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 Subaccount


Form ASA1

                                    Page 4A
<PAGE>   6
                                   DEFINITIONS

ANNUITANT. The person whose life determines the annuity benefits payable under
this Contract and whose death determines the death benefit.

BENEFICIARY. The person to whom we will pay the proceeds payable on your death
or on the death of the Annuitant. If the Contract has Joint Owners, the
surviving Joint Owner will be the designated beneficiary.

CASH SURRENDER VALUE. The Contract Account Value less any applicable surrender
charge.

CONTRACT ACCOUNT VALUE. The sum of the Variable Account Value and the Guaranteed
Account Value.

CONTRACT YEARS, MONTHS, ANNIVERSARIES. Are measured from the Contract Date shown
in the Contract Schedule.

GUARANTEED ACCOUNT. This account is part of our General Account and is not part
of nor dependent upon the investment performance of the Variable Account.

HOME OFFICE. Our office at 300 Continental Drive, Newark, Delaware 19713.

JOINT OWNERS. Joint Owners must be husband and wife as of the Contract Date.

MATURITY DATE. The date when the Contract Account Value will be applied under a
Payment Option, unless you have elected to receive a lump sum payment of the
Cash Surrender Value. The latest Maturity Date is the later of: the Contract
Anniversary nearest Annuitant's age 85; or 10 years after the Contract Date.

NET PREMIUM. The premium paid less any premium tax levied for the year the
premium is paid.

OWNER. The person entitled to exercise all rights and privileges provided in
this Contract.

SUBACCOUNT. The Variable Account has Sub-accounts; the assets of each Subaccount
are invested in a corresponding portfolio of a designated fund listed in the
Contract Schedule.

VALUATION DAY. Each day on which valuation of the assets of a Subaccount is
required by applicable law.

VALUATION PERIOD. The period that starts at the close of business on one
Valuation Day and ends at the close of business on the next succeeding Valuation
Day.

VARIABLE ACCOUNT. Providentmutual Variable Annuity Separate Account which is not
part of our General Account. The Variable Account has Subaccounts each of which
is invested in a corresponding portfolio of a designated fund listed in the
Contract Schedule. Other Subaccounts may be established in the future and will
invest in specified portfolios of designated funds.

WRITTEN NOTICE. A written request or notice in a form satisfactory to us which
is signed by you and received at our Home Office.

                               GENERAL PROVISIONS

THE CONTRACT. We have issued this Contract in consideration of your application
and your payment of the Initial Premium. The entire contract is made up of this
Contract and the attached copy of the application. The statements made in the
application are, in the absence of fraud, deemed representations and not
warranties. We cannot use any statement in defense to a claim or to void this
Contract unless it is contained in the attached application. Only our President,
a Vice President, or Secretary may modify this Contract or waive any of our
rights or requirements. No agent may bind us by making any promise not contained
in this Contract.

INCONTESTABILITY. We will not contest this Contract after it has been in force
during the Annuitant's lifetime for two years from the Contract Date.

OWNER. During the Annuitant's lifetime and before the Maturity Date, you have
all the rights and privileges granted by this Contract. During the Annuitant's
lifetime and before the Maturity Date, you may name a new Owner by giving us
Written Notice. If you are not the Annuitant and you die before the Maturity
Date and before the Annuitant, ownership will pass:

      1.    to your designated beneficiary, if any (as defined in "Proceeds On
            Death of Owner"); otherwise

      2.    to your estate.


Form PL512.5

                                     Page 5
<PAGE>   7
BENEFICIARY. We will pay the Beneficiary any proceeds payable on your death or
the death of the Annuitant. During the Annuitant's lifetime and before the
Maturity Date, you may change the named Beneficiary by giving us Written Notice
of such change.

      We will pay the proceeds under the beneficiary designation in effect at
the date of death. The proceeds will be paid to the surviving Beneficiaries
equally unless you have indicated otherwise. If no Beneficiary is living when
the Annuitant dies, or if none has been named, the proceeds will be paid to you
or to your estate. If no Beneficiary is living when you die, any proceeds will
be paid to your estate.

CHANGE OF OWNER OR BENEFICIARY. Written Notice must be signed by you, dated, and
of a form and content acceptable to us. Your Written Notice will not be
effective until we receive and file it at our Home Office. However, the change
provided in your Written Notice will then be effective as of the date you signed
such notice:

      1.    subject to any payments made or other action we take before we
            receive and file your Written Notice; and

      2.    whether or not you or the Annuitant are alive when we receive and
            file your Written Notice.

ASSIGNMENT. You may assign this Contract or an interest in it at any time before
the Maturity Date during the lifetime of the Annuitant. An assignment must be in
a Written Notice acceptable to us. It will not be binding on us until we receive
and file it at our Home Office. We are not responsible for the validity or
sufficiency of any assignment. Your rights and the rights of any Beneficiary
will be affected by an assignment.

MISSTATEMENT OF AGE OR SEX. If the age or sex of the Annuitant has been
misstated, we will pay the amount which the proceeds would have purchased at the
correct age and sex.

      If we make an overpayment because of an error in age or sex, the
overpayment plus interest at 3% compounded annually will be a debt against this
Contract. If the debt is not repaid, future payments will be reduced
accordingly.

      If we make an underpayment because of an error in age or sex, any annuity
payments will be recalculated at the correct age and sex, and future payments
will be adjusted. The underpayment with interest at 3% compounded annually will
be paid in a single sum.

PERIODIC REPORTS. We will mail you a report showing the following items:

      1.    the number of units credited to this Contract and the dollar value
            of a unit;

      2.    the Contract Account Value and Cash Surrender Value;

      3.    any premiums paid, withdrawals, and charges made since the last
            report; and

      4.    any other information required by law.

      The information in the report will be as of a date not more than two
months before the date of the mailing. We will mail the report to you:

      1.    at least annually, or more often as required by law; and

      2.    to your last address known to us.

MODIFICATION. Upon notice to you, we may modify the Contract, but only if such
modification:

      1.    is necessary to make the Contract or the Variable Account comply
            with any law or regulation issued by a governmental agency to which
            we are subject; or

      2.    is necessary to assure continued qualification of the Contract under
            the Internal Revenue Code or other federal or state laws relating to
            retirement annuities or variable annuity contracts; or

      3.    is necessary to reflect a change in the operation of the Variable
            Account; or


      4.    provides additional variable account and/or fixed accumulation
            options.

      In the event of any such modification, we may make appropriate endorsement
to the Contract.

NON-PARTICIPATION. This Contract is non-participating and does not share in our
profits or surplus earnings.

PROTECTION OF PROCEEDS. No Beneficiary may commute, encumber or alienate any
payments under this Contract before they are due. No annuity payments shall be
subject to the debts, contract or engagements of any Beneficiary nor to any
judicial process to levy upon or attach the same for payment of such debts.

CREDITOR CLAIMS. To the extent permitted by applicable laws, no right or benefit
under this Contract shall be subject to claims of creditors, except as may be
provided by an Assignment.

DISCHARGE OF LIABILITY. We shall be discharged from all liability to the extent
of any withdrawal, surrender or death benefit paid. Any payments made by us
under any Payment Option shall discharge our liability to the extent of each
such payment.

Form PL512.6


                                     Page 6
<PAGE>   8
                                    PREMIUMS

INITIAL PREMIUM. The initial Premium is shown in the Contract Schedule, and is
payable on or before the Contract Date.

ADDITIONAL PREMIUMS. You may make additional premium payments at any time during
the Annuitant's lifetime and before the Maturity Date. The amount of additional
premium payments may very. The minimum additional premium that we will accept is
shown in the Contract Schedule.

NET PREMIUM. The Net Premium is the premium paid less any premium tax levied on
us relating to this Contract for the year the premium is paid.


                              THE VARIABLE ACCOUNT

VARIABLE ACCOUNT. We have established the Providentmutual Variable Annuity
Separate Account (the "Variable Account"). The Variable Account is registered
with the Securities and Exchange Commission as a unit investment trust under
the Investment Company Act of 1940. The Variable Account is also subject to the
laws of the State of Delaware.

      Although we own the assets in the Variable Account, these assets are held
separately from our other assets and are not part of our General Account. The
assets in the Variable Account are used to support the operation of and provide
the variable values and benefits for this Contract and similar Contracts.

      The portion of the assets of the Variable Account equal to the reserves
and other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business that we conduct. We have the
right to transfer to our General Account any assets of the Variable Account
which are in excess of such reserves and other liabilities.

SUBACCOUNTS. The Variable Account currently consists of the Subaccounts listed
in the Contract Schedule and in the current prospectus you received. Each
Subaccount invests in shares of a corresponding series of a designated
investment fund, as shown in the-Contract Schedule (each referred to as the
"Fund"). Shares of a series are purchased and redeemed for a Subaccount at their
net asset value. Any amounts of income, dividends and gains distributed from the
shares of a series will be reinvested in additional shares of that series at its
net asset value. The Fund prospectus you received defines the net asset value
and describes each portfolio of the Fund.

      The dollar amounts of values and benefits of this Contract provided by the
Variable Account depend on the investment performance of the portfolios of the
Fund in which your selected Subaccounts are invested. We do not guarantee the
investment performance of the portfolios. You bear the full investment risk
for amounts applied to the selected Subaccounts.

VARIABLE ACCOUNT VALUE. This Contract's Variable Account Value for any Valuation
Period before the Maturity Date is determined by multiplying:

      1.    the amount of units credited to this Contract for each Subaccount as
            of the end of the Valuation Period; by

      2.    the current unit value for each Subaccount.

      The sum of these amounts equals the Variable Account Value.

UNITS. We credit Net Premiums in the form of units. We will credit units for the
Initial Net Premium on the Contract Date. The number of units of each Subaccount
credited under this contract is determined by dividing:

      1.    the Net Premium allocated to that Subaccount; by

      2.    the unit value for that Subaccount at the end of the Valuation
            Period during which we receive and accept the premium at our Home
            Office.

      We will adjust the units for any transfers (including any Transfer Fee)
in or out of a Subaccount.

      We will cancel the appropriate number of units based on the unit value at
the end of the Valuation Period in which any of the following events occurs:

      1.    the Annual Administration Fee shown in the Contract Schedule is
            assessed;

      2.    the date we receive and file your Written Notice for a withdrawal or
            a cash surrender;

      3.    the Maturity Date occurs;

      4.    the date we receive due proof of the Annuitant's death; or

      5.    the date the Contract Account Value is distributed upon your death.


PL512.7

                                     Page 7
<PAGE>   9
UNIT VALUE. The unit value for each Subaccount for its first Valuation Period is
set at $50. The unit value for each subsequent Valuation Period is determined by
multiplying:

      1.    the unit value at the end of the immediately preceding Valuation
            Period; by

      2.    the net investment factor for the Valuation Period for which the
            value is being determined.

     The unit value for a Valuation Period applies to each day in that period.
The unit value may increase or decrease from one Valuation Period to the next.

NET INVESTMENT FACTOR. The Net Investment Factor is an index that measures the
investment performance of a Subaccount from one Valuation Period to the next.
Each Subaccount has a Net Investment Factor for each Valuation Period, which may
be greater than or less than one.

      The Net Investment Factor for each Subaccount for a Valuation Period
equals 1 plus the fraction obtained by dividing (a) by (b) where:

      (a) is the net result of:

          1. the investment income, dividends, and capital gains, realized or
             unrealized, credited during the current Valuation Period; plus

          2. any amount credited or released from reserves for taxes
             attributable to the operation of the Subaccount; minus

          3. the capital losses, realized or unrealized, charged during the
             current Valuation Period; minus

          4. any amount charged 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 Subaccount; minus

          5. the amount charged for mortality and expense risk for that
             Valuation Period as shown in the Contract Schedule;

          6. the amount charged for administration for that Valuation Period, as
             shown in the Contract Schedule; and

      (b) is the value of the assets in the Subaccount at the end of the
          preceding Valuation Period, adjusted for allocations and transfers
          to and withdrawals and transfers from the Subaccount occuring during
          that preceding Valuation Period.

RESERVED RIGHTS. When permitted by law, we reserve the right to:

       1. create new variable accounts;

       2. combine variable accounts, including the Providentmutual Variable
          Annuity Separate Account;

       3. remove, combine or add Subaccounts and make the new Subaccounts
          available to contractowners at our discretion;

       4. substitute shares of another portfolio of the Fund or shares of
          another investment company for those of the Fund;

       5. add new portfolios to the Fund;

       6. deregister the Variable Account under the Investment Company Act of
          1940 if registration is no longer required;

       7. make any changes required by the Investment Company Act of 1940;
          and

       8. operate the Variable Account as a managed investment company under the
          Investment Company Act of 1940 or any other form permitted by law.

      If a change is made, we will send you a revised prospectus and any notice
required by law.

CHANGE IN INVESTMENT POLICY. The investment policy of a Subaccount may not be
changed unless:

       1. the change is approved, if required, by the Delaware Insurance
          Department; and

       2. a statement of such approval is filed, if required, with the
          insurance department of the state in which this Contract is delivered.

                             THE GUARANTEED ACCOUNT

GUARANTEED ACCOUNT. Amounts in the Guaranteed Account are part of our General
Account. The Guaranteed Account is not part of and does not depend on the
investment performance of the Variable Account.

      We credit interest to amounts in the Guaranteed Account at rates we
determine. We guarantee that the effective annual interest rate will not be less
than 3%. We may credit a higher current interest rate. For the amount in the
Guaranteed Account at the beginning of a calendar year, we will determine such
interest rates in advance of each calendar year. Such rates will apply to the
calendar year which follows the date of determination. For amounts allocated or
transferred to the Guaranteed Account during a calendar year, we will determine
interest rates applicable to such amounts in advance of the date such amount is
received or transferred. Such rates will apply to the end of the calendar year
in which the payment is received or the transfer is made.


Form PL512.8
                                     Page 8
<PAGE>   10
GUARANTEED ACCOUNT VALUE. This Contract's Guaranteed Account Value for any
Valuation Period before the Maturity Date is:

      1.    the sum of the Net Premiums allocated to the Guaranteed Account;
            plus

      2.    any amounts transferred to the Guaranteed Account from a Subaccount
            of the Variable Account; minus

      3.    any amounts withdrawn or transferred from the Guaranteed Account
            together with any associated charges; minus

      4.    any Annual Administration Fee deducted from the amount in the
            Guaranteed Account; plus

      5.    interest we credit to the amount in the Guaranteed Account.

      For the purpose of crediting interest, amounts deducted, transferred and
withdrawn from the Guaranteed Account will be accounted for on a last-in,
first-out basis.

                            ALLOCATIONS AND TRANSFERS

NET PREMIUM ALLOCATION. In your application you selected how you wanted your
Initial Net Premium to be allocated among the Subaccounts and the Guaranteed
Account.

      We will allocate that portion of the Initial Net Premium which is to be
allocated to the Variable Account to the Money Market Subaccount for a 15-day
period. At the end of such period, we will allocate the amount in the Money
Market Subaccount to each of the chosen Subaccounts based on the proportion that
the allocation percentage for such Subaccount bears to the sum of the Subaccount
premium allocation percentages.

      You may change the allocation schedule by Written Notice. Any additional
Net Premiums will be allocated in accordance with the allocation schedule in
effect when such premium is received, unless at the time of payment we receive
Written Notice to the contrary. The portion of a Net Premium to be applied to
each elected Subaccount and the Guaranteed Account must be a whole percentage.

TRANSFER PRIVILEGE. Before the Maturity Date, you may transfer all or part of
the amount in the Subaccount(s) to another Subaccount(s) or to the Guaranteed
Account, or transfer a part of an amount in the Guaranteed Account to the
Subaccount(s), subject to the availability of a Subaccount or shares of a
portfolio and subject to these general restrictions and the additional
restrictions below:

         1.       the minimum transfer amount is shown in the Contract Schedule
                  (or, the entire amount in that Subaccount or the Guaranteed
                  Account, if less); and

         2.       a transfer request that would reduce the amount in that
                  Subaccount or the Guaranteed Account below $500 will be
                  treated as a transfer request for the entire amount in that
                  Subaccount or the Guaranteed Account.

RESTRICTIONS ON TRANSFERS FROM GUARANTEED ACCOUNT. You may transfer a part of
the amount in the Guaranteed Account to the Subaccount(s) of the Variable
Account, subject to these additional restrictions:

         1.       we allow only one transfer each year and this transfer must be
                  within the period that is 30 days before and 30 days after the
                  Contract Anniversary. An unused transfer option does not carry
                  over to the next year; and

         2.       the maximum transfer amount is 25% of the Contract's
                  Guaranteed Account Value on the date of the transfer, unless
                  the balance after the transfer is less than $500.

      We will make the transfer on the Contract Anniversary if your Written
Notice is received prior to the Contract Anniversary; if your Written Notice is
received after the Contract Anniversary, we will make the transfer as of the
date we receive your request at our Home Office.

TRANSFER PROCESSING FEE. There is no limit to the number of transfers that you
can make between the Subaccounts or to the Guaranteed Account. However, we only
allow one transfer each year from the Guaranteed Account (See "Restrictions on
Transfers from Guaranteed Account"). The first twelve transfers during each
Contract Year are free. We will assess a transfer fee for each additional
transfer during that Contract Year. The amount of this fee is shown in the
Contract Schedule. For the purposes of assessing the fee, each Written Notice of
transfer is considered to be one transfer, regardless of the number of
Subaccounts or the Guaranteed Account affected by the transfer. The transfer fee
will be deducted from the amount being transferred.


Form PL512.9
                                     Page 9
<PAGE>   11
                                 CONTRACT VALUES

CONTRACT ACCOUNT VALUE. The Contract Account Value is the sum of the Variable
Account Value and the Guaranteed Account Value.

CASH SURRENDER VALUE. The Cash Surrender Value is the Contract Account Value,
less any applicable Surrender Charge. The Cash Surrender Value will be
determined on the date we receive your Written Notice for surrender and this
Contract at our Home Office.

      You may surrender this Contract for its Cash Surrender Value at any time
before the earlier of the death of the Annuitant or the Maturity Date. You may
elect to have the Cash Surrender Value (less any applicable deduction for
premium tax) paid in a single sum or under a Payment Option. This Contract ends
when we pay the Cash Surrender Value or apply such sum under a Payment Option.

WITHDRAWALS. You may withdraw part of the Cash Surrender Value at any time
before the earlier of the death of the Annuitant or the Maturity Date, subject
to these limits:

         1.       the minimum withdrawal amount is shown in the Contract
                  Schedule;

         2.       the maximum withdrawal is the amount that would leave a
                  minimum Cash Surrender Value of the amount shown in the
                  Contract Schedule; and

         3.       a withdrawal request which would reduce the amount in a
                  Subaccount or the Guaranteed Account below $500 will be
                  treated as a request for a full withdrawal of the amount in
                  that Subaccount or Guaranteed Account.

      On the date we receive your Written Notice for a withdrawal at our Home
Office we will withdraw the amount of the withdrawal from the Contract Account
Value. We will then deduct any applicable Surrender Charge from the remaining
Contract Account Value. No Surrender Charge will be applied to a withdrawal made
after the first Contract Year if such is the first or second withdrawal during
such Contract Year and the amount of the first withdrawal or the total amount of
the first and second withdrawals is not in excess of 10% of the Contract Account
Value as of the beginning of that Contract Year.

      You may specify the amount to be withdrawn from certain Subaccounts or the
Guaranteed Account for your partial withdrawal. If you do not specify this
information to us, or the amount in the designated Subaccounts or Guaranteed
Account is inadequate to comply with your request, we will make the withdrawal
based on the proportion that your Subaccount Values and the Guaranteed Account
Value bear to the Contract Account Value prior to the withdrawal.

SURRENDER CHARGE. The applicable percentage from the Surrender Charge Table in
the Contract Schedule will be deducted upon any withdrawal or surrender and will
be applied as follows:

         a.       to the entire withdrawal amount if such withdrawal is made
                  during the first Contract Year;

         b.       to the entire withdrawal amount if such withdrawal is the
                  third or subsequent withdrawal in any one Contract Year;

         c.       to that portion of the total amount of the first and second
                  withdrawals during a Contract Year which is in excess of 10%
                  of the Contract Account Value as of the beginning of the
                  Contract Year;

         d.       for a surrender which occurs during the first Contract Year,
                  to the entire amount of such surrender paid in a single sum;

         e.       for a surrender which occurs after the first Contract Year, to
                  the amount of the surrender paid in a single sum which is in
                  excess of 10% of the Contract Account Value as of the
                  beginning of such Contract Year, less the amount withdrawn
                  during that Contract Year without imposition of the Surrender
                  Charge.

      Any Surrender Charge will be deducted from the Subaccount(s) and the
Guaranteed Account based on the proportion that your Subaccount Values and the
Guaranteed Account Value bear to the Contract Account Value immediately after
the withdrawal or surrender. In no event will the Surrender Charge exceed 8.5%
of the total premiums received under the Contract.

ANNUAL ADMINISTRATION FEE. We will assess the Annual Administration Fee shown in
the Contract Schedule:

         1.       for the prior Contract Year, on the Contract Anniversary; or

         2.       for the current Contract Year on the date this Contract is
                  surrendered for its Cash Surrender Value or on the Maturity
                  Date (unless the Contract is surrendered on a Contract
                  Anniversary or the Maturity Date is a Contract Anniversary and
                  the fee is assessed under 1 above).

      The fee will be assessed against the Subaccount(s) and Guaranteed Account
based on the proportion that your Subaccount Values and the Guaranteed Account
Value bear to the Contract Account Value.

Form PL512.10
                                    Page 10
<PAGE>   12
      If the fee is obtained from the Subaccounts, we will cancel the
appropriate number of units credited to this Contract based on the Unit Value at
the end of the Valuation Period when the fee is assessed. If the fee is obtained
from the Guaranteed Account, we will reduce this Contract's Guaranteed Account
Value by the amount of the fee.

MATURITY DATE. No Surrender Charge will be applied to the Contract Account Value
on the Maturity Date if the proceeds are applied under a Payment Option. If the
proceeds are paid in a lump sum on the Maturity Date, the proceeds will equal
the Cash Surrender Value on such date.

      You may change the Maturity Date, subject to these limitations:

         1.       we must receive your Written Notice at our Home Office at
                  least 30 days before the current Maturity Date;

         2.       the requested Maturity Date must be a date that is at least 30
                  days after we receive your Written Notice; and

         3.       the requested Maturity Date must be not later than the first
                  day of the month after the Annuitant's 90th birthday, or any
                  earlier date required by law.

TERMINATION. We may pay you the Cash Surrender Value and end this Contract if,
before the Maturity Date, all of these events simultaneously exist:

         1.       you have not paid any premiums for at least two years;

         2.       the Contract Account Value is less than $2,000; and

         3.       the total premiums paid, less any partial withdrawals, is less
                  than $2,000.

      We will mail you a notice of our intention to end this Contract at least
six months in advance. This Contract will automatically terminate on the date
specified in the notice, unless we receive an additional premium payment before
the termination date specified in the notice. This additional premium payment
must be for at least the minimum additional premium amount specified in the
Contract Schedule.

BASIS OF VALUES. Any paid-up annuity, cash surrender or death benefits that may
be available are at least equal to the minimum required by law in the state in
which this Contract is delivered. A detailed statement of the method used to
compute the minimum values has been filed, where required, with the insurance
officials of the jurisdiction in which this Contract is delivered.


                               PAYMENT OF PROCEEDS

PROCEEDS. Proceeds means the amount we will pay when the first of the following
events occurs: the Maturity Date; the Contract is surrendered; or we receive due
proof of death of the Annuitant or the Owner. This Contract ends when we pay the
proceeds.

      "Due Proof of Death" is proof of death that is satisfactory to us. Such
proof may consist of:

         1.       a certified copy of the death certificate; and/or

         2.       a certified copy of the decree of a court of competent
                  jurisdiction as to the finding of death.

      We will deduct any applicable premium tax from the proceeds described
below, unless we already deducted the tax from the premiums when paid. (See the
"Net Premium" provision.)

PROCEEDS ON MATURITY DATE. If you have not elected to receive the proceeds in a
lump sum, the proceeds we will pay is the Contract Account Value, which we will
apply under a Payment Option on the Maturity Date. (See the "Maturity Date"
provision and the "Payment Options" section.) If the proceeds are paid in a lump
sum, we will pay the Cash Surrender Value.

PROCEEDS ON SURRENDER. If you surrender this Contract before the earlier of the
death of the Annuitant or the Maturity Date, the proceeds we will pay is the
Cash Surrender Value. (See the "Maturity Date" provision concerning changing the
Maturity Date and having the Contract Account Value applied under a Payment
Option.)

PROCEEDS ON DEATH OF ANNUITANT BEFORE MATURITY DATE. If the Annuitant dies
before the Maturity Date, the proceeds we will pay to the Beneficiary is the
death benefit.

      If the Annuitant dies before the end of the sixth Contract Year, the death
benefit will equal the greater of:

         1.       the premiums paid, less any withdrawals including applicable
                  surrender charges; or

         2.       the Contract Account Value on the date we receive due proof of
                  the Annuitant's death.

Form PL512.11
                                     Page 11
<PAGE>   13
      If the Annuitant dies after the end of the sixth Contract Year, the death
benefit will equal the greatest of:

         1.       the Contract Account Value as of the end of the sixth Contract
                  Year less any subsequent withdrawals; or

         2.       the Contract Account Value on the date we receive due proof of
                  the Annuitant's death; or

         3.       the premiums paid less any withdrawals including applicable
                  surrender charges.

      The proceeds will be paid in a lump sum or under a Payment Option. If you
are the Annuitant, the proceeds must be distributed in accordance with the rules
set forth in "Proceeds on Death of an Owner" for an Owner's death before the
Maturity Date. No death benefit is payable if this Contract is surrendered
before the Annuitant's death.

PROCEEDS ON DEATH OF AN OWNER. If any Owner dies before the Maturity Date, the
Contract Account Value (or if the deceased Owner is the Annuitant, the proceeds
payable on the Annuitant's death) must be distributed to the Beneficiary within
five years after the date of such death.

      If any Owner dies on or after the Maturity Date, any remaining payments
must be distributed at least as rapidly as under the Payment Option in effect on
the date of such death.

      These distribution requirements will be considered satisfied as to any
portion of the proceeds:

         1.       payable to or for the benefit of a designated beneficiary; and

         2.       which is distributed over the life (or period not exceeding
                  the life expectancy) of that Beneficiary, provided that such
                  distributions begin within one year of the Owner's death.

      The designated beneficiary is the person designated by the Owner as
Beneficiary and to whom the ownership of the Contract passes by reason of an
Owner's death and must be a natural person. However, if the Owner's spouse is
the designated beneficiary, the Contract may be continued with the surviving
spouse as the new Owner. If the Contract has Joint Owners, the surviving Joint
Owner will be the designated beneficiary.

      If you are not an individual, the Annuitant as determined in accordance
with section 72(s) of the Internal Revenue Code (i.e. the individual the events
in the life of whom are of primary importance in effecting the timing or amount
of the payout under the Contract) will be treated as Owner for purposes of these
distribution requirements, and any change in the Annuitant will be treated as
the death of the Owner.

PAYMENTS. We will usually pay any proceeds, withdrawals, or cash surrenders
within seven business days after:

         1.       we receive and file your Written Notice for a withdrawal or a
                  cash surrender; or

         2.       we receive and file due proof of death of the Owner or
                  Annuitant.

      However, we can postpone the payment of proceeds, withdrawals, or cash
surrenders or the transfer of amounts between Subaccounts if:

         1.       the New York Stock Exchange is closed, other than customary
                  weekend and holiday closings, or trading on the exchange is
                  restricted as determined by the Securities and Exchange
                  Commission; or

         2.       the Securities and Exchange Commission permits by an order
                  the postponement for the protection of contractholders; or

         3.       the Securities and Exchange Commission determines that an
                  emergency exists that would make the disposal of securities
                  held in the Variable Account or the determination of their
                  value not reasonably practicable; or

         4.       the Fund is permitted by law or regulation to postpone payment
                  of proceeds.

      If a recent check or draft has been submitted, we have the right to defer
payment of the Contract Account Value, Cash Surrender Value or death benefit
until such check or draft has been honored.

      We have the right to defer payment of any withdrawal, transfer or Cash
Surrender Value from the Guaranteed Account for up to six months from the date
we receive your Written Notice for a withdrawal or surrender.

INTEREST ON PROCEEDS. We will pay interest on proceeds if we do not pay the
proceeds in a single sum or begin paying the proceeds under a Payment Option:

         1.       within 30 days after the proceeds become payable; or

         2.       within the time required by the applicable jurisdiction, if
                  less than 30 days.

      This interest will accrue from the date the proceeds become payable to the
date of payment, but not for more than one year, at an annual rate of 3%, or the
rate and time required by law, if greater.

CONFORMITY WITH LAWS. To the extent this Contract conflicts with any applicable
laws or the requirements of the Internal Revenue Service concerning
distributions on death, this Contract shall be considered to be amended to
conform with such requirements.

Form PL512.12
                                     Page 12
<PAGE>   14
                                PAYMENT OPTIONS

ELECTION OF OPTION. The following options are available to you during your
lifetime. They are also available to the Beneficiary after your death, if you
have not selected an option for such Beneficiary.

      You may elect to have the Cash Surrender Value, Contract Account Value or
death benefit paid in accordance with any one of the options described below or
in any other manner acceptable to us and permissible under applicable law. If no
election has been made, the automatic option shall be Option B. The amount paid
under these options is fixed and does not depend on the investment performance
of the Variable Account.


OPTION A - Life Annuity: An income payable during the lifetime of the Payee,
ceasing with the last payment due prior to the death of the Payee, according to
the Option Table, Life Only column.


OPTION B - Life Annuity with 10 Years Guaranteed: An income payable during the
lifetime of the Payee with the guarantee that payments shall be made for a
period of not less than 10 years according to the Option Table, 10 Year Period
Certain column.

      Under Option B, if any Beneficiary dies while receiving payment, the
present value of the current dollar amount on the date of death of any remaining
guaranteed payments shall be paid in one sum to the executors or administrators
of the Beneficiary unless otherwise provided in writing. Calculation of such
present value shall be at 3% which is the rate of interest assumed in computing
the amount of annuity payments.

ALTERNATE INCOME OPTION. In lieu of one of the above options you may elect to
settle the Cash Surrender Value, Contract Account Value or death benefit
under an alternate income option based on our single premium immediate annuity
rates in effect at the time of settlement. Such rates will be adjusted to a due
basis and the income thus produced will be increased by 4%. In no case will the
resulting income be less than that which would be payable if the amount were
used to purchase a single premium immediate annuity adjusted to a due basis.

GENERAL PROVISIONS. Annuity payments shall commence and continue subject to the
following provisions:

         A.       This Contract shall be surrendered to us at our Home Office.
                  We shall issue a Supplementary Contract stating the terms of
                  payment under the option elected.

         B.       Proof satisfactory to us of the identity, birth date and sex
                  of any person on whose life an annuity depends shall be
                  provided to us before any annuity payments will be made.

         C.       We shall make each annuity payment by check which shall be
                  personally endorsed by the person upon whose life the annuity
                  depends or other evidence must be furnished that such person
                  is alive.

         D.       No election of any option may be made under this Contract for
                  any Payee unless such election would produce a periodic
                  payment of at least $50 to that Payee. If at any time payments
                  to be made become less than $50 each, we shall have the right
                  to change the frequency of payments to such interval as shall
                  result in the payment of at least $50. Subject to this 
                  condition, payments may be made annually, semi-annually, 
                  quarterly or monthly.

         E.       If the Payee is other than you, the election of a Payment
                  Option shall require our consent.

         F.       We shall deduct from the Cash Surrender Value or the Contract
                  Account Value any Premium Tax at the time income payments
                  commence.


Form PL512.13
                                     Page 13
<PAGE>   15
                                  OPTION TABLE
             GUARANTEED AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF
                              ANNUITY VALUE APPLIED

<TABLE>
<CAPTION>
          GUARANTEED MONTHLY PAYMENTS                                    GUARANTEED MONTHLY PAYMENTS

          Age of Payee                               10 Year             Age of Payee                               10 Year
                                   Life Only         Period                                        Life Only        Period
        Male        Female        (Option A)         Certain           Male         Female        (Option A)        Certain
                                                   (Option B)                                                     (Option B)
        ----        ------        ----------         -------           ----         ------        ----------        -------
<S>                     <C>          <C>              <C>              <C>             <C>           <C>             <C>
                        5*           $2.70            $2.70            45              50            $3.59           $3.58
                        6             2.71             2.71            46              51             3.63            3.62
                        7             2.72             2.72            47              52             3.68            3.67
                        8             2.72             2.73            48              53             3.73            3.72
                        9             2.73             2.73            49              54             3.78            3.76

         5*             10            2.74             2.74            50              55             3.83            3.82
         6              11            2.75             2.75            51              56             3.89            3.87
         7              12            2.76             2.76            52              57             3.95            3.93
         8              13            2.77             2.77            53              58             4.01            3.99
         9              14            2.78             2.78            54              59             4.07            4.05

        10              15            2.79             2.79            55              60             4.14            4.11
        11              16            2.80             2.80            56              61             4.21            4.18
        12              17            2.81             2.81            57              62             4.29            4.25
        13              18            2.82             2.83            58              63             4.37            4.33
        14              19            2.83             2.84            59              64             4.46            4.41

        15              20            2.85             2.85            60              65             4.55            4.50
        16              21            2.86             2.86            61              66             4.64            4.58
        17              22            2.87             2.88            62              67             4.75            4.68
        18              23            2.89             2.89            63              68             4.86            4.78
        19              24            2.90             2.90            64              69             4.97            4.88

        20              25            2.92             2.92            65              70             5.09            4.99
        21              26            2.93             2.93            66              71             5.22            5.10
        22              27            2.95             2.95            67              72             5.36            5.21
        23              28            2.96             2.97            68              73             5.51            5.34
        24              29            2.98             2.98            69              74             5.67            5.46

        25              30            3.00             3.00            70              75             5.83            5.60
        26              31            3.02             3.02            71              76             6.01            5.73
        27              32            3.04             3.04            72              77             6.19            5.87
        28              33            3.06             3.06            73              78             6.39            6.02
        29              34            3.08             3.08            74              79             6.60            6.17

        30              35            3.10             3.10            75              80             6.82            6.32
        31              36            3.13             3.13            76              81             7.06            6.48
        32              37            3.15             3.15            77              82             7.31            6.64
        33              38            3.18             3.18            78              83             7.58            6.80
        34              39            3.20             3.20            79              84             7.87            6.97

        35              40            3.23             3.23            80              85**           8.17            7.13
        36              41            3.26             3.26            81                             8.49            7.29
        37              42            3.29             3.29            82                             8.83            7.45
        38              43            3.32             3.32            83                             9.19            7.61
        39              44            3.35             3.35            84                             9.57            7.77

        40              45            3.39             3.39            85**                           9.96            7.92
        41              46            3.42             3.42
        42              47            3.46             3.46
        43              48            3.50             3.50
        44              49            3.54             3.54

- ----------
</TABLE>

   *Payment shown applies to all younger ages.

  **Payment shown applies to all older ages.

Form PL512.14

                                     Page 14
<PAGE>   16
              FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
             Flexible premiums as stated in the Premiums Provision.
   Policy values are variable, except for amounts in the Guaranteed Account.
      After the Maturity Date, Payment Options are on a guaranteed basis.
      Death benefit payable upon death of Annuitant before Maturity Date.
             Non-participating -- Contract does not pay dividends.



                            [PROVIDENT MUTUAL LOGO]

              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                 300 Continental Drive, Newark, Delaware 19713


Form PL512

<PAGE>   1
                                                                    EXHIBIT 4(a)



               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                                NEWARK, DELAWARE

                                      RIDER
                        AMENDMENT OF CONTRACT PROVISIONS
                             (FOR UNISEX CONTRACTS)

 The Contract is amended as follows:


1.       The MISSTATEMENT OF AGE AND SEX Provision on page 6 is deleted and
         replaced by the following:


         MISSTATEMENT OF AGE. If the age of the Annuitant has been misstated, we
         will pay the amount which the proceeds would have purchased at the
         correct age.

                  If we make an overpayment because of an error in age, the
         overpayment plus interest at 3% compounded annually will be a debt
         against this contract. If the debt is not repaid, future payments will
         be reduced accordingly.

                  If we make an underpayment because of an error in age, any
         annuity payments will be recalculated at the correct age, and future
         payments will be adjusted. The underpayment with interest at 3%
         compounded annually will be paid in a single sum.



2.       Item B of the GENERAL PROVISIONS under PAYMENT OPTIONS on page 12 is
         deleted and replaced by the following:



         B.       Proof satisfactory to us of the identity and birth date of any
                  person on whose life an annuity depends shall be provided to
                  us before any annuity payments will be made.



3.       The OPTION TABLE on Page 13 is deleted and replaced by the following
         table:


                           (continued on reverse side)


Form PLA470.13A
<PAGE>   2
                                  OPTION TABLE

             GUARANTEED AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000 OF
                              ANNUITY VALUE APPLIED

<TABLE>
<CAPTION>
         GUARANTEED MONTHLY PAYMENTS                                         GUARANTEED MONTHLY PAYMENTS

        Age                                         10 Year                  Age                                     10 Year
        of                Life Only              Period Certain               of              Life Only           Period Certain
       Payee             (Option A)                (Option B)                Payee           (Option A)             (Option B)
       -----             ----------                ----------                -----           -----------            ----------
<S>                         <C>                      <C>                     <C>                 <C>                   <C>
          5*                $2.84                    $2.84                   45                  $4.08                 $4.05
          6                  2.85                     2.85                   46                   4.15                  4.12
          7                  2.87                     2.87                   47                   4.23                  4.19
          8                  2.88                     2.88                   48                   4.31                  4.27
          9                  2.89                     2.89                   49                   4.39                  4.34

         10                  2.91                     2.91                   50                   4.48                  4.43
         11                  2.92                     2.92                   51                   4.57                  4.51
         12                  2.94                     2.94                   52                   4.67                  4.60
         13                  2.95                     2.95                   53                   4.77                  4.70
         14                  2.97                     2.97                   54                   4.89                  4.80

         15                  2.99                     2.99                   55                   5.00                  4.90
         16                  3.01                     3.00                   56                   5.13                  5.01
         17                  3.02                     3.02                   57                   5.26                  5.13
         18                  3.04                     3.04                   58                   5.41                  5.25
         19                  3.06                     3.06                   59                   5.56                  5.37

         20                  3.08                     3.08                   60                   5.72                  5.50
         21                  3.11                     3.10                   61                   5.89                  5.64
         22                  3.13                     3.13                   62                   6.07                  5.77
         23                  3.15                     3.15                   63                   6.26                  5.92
         24                  3.18                     3.18                   64                   6.47                  6.07

         25                  3.20                     3.20                   65                   6.68                  6.22
         26                  3.23                     3.23                   66                   6.91                  6.38
         27                  3.26                     3.26                   67                   7.15                  6.54
         28                  3.29                     3.29                   68                   7.41                  6.70
         29                  3.32                     3.32                   69                   7.69                  6.86

         30                  3.35                     3.35                   70                   7.98                  7.03
         31                  3.39                     3.38                   71                   8.29                  7.20
         32                  3.42                     3.42                   72                   8.62                  7.37
         33                  3.46                     3.45                   73                   8.98                  7.54
         34                  3.50                     3.49                   74                   9.35                  7.71

         35                  3.54                     3.53                   75                   9.76                  7.87
         36                  3.58                     3.57                   76                  10.19                  8.03
         37                  3.63                     3.62                   77                  10.65                  8.19
         38                  3.68                     3.66                   78                  11.14                  8.34
         39                  3.73                     3.71                   79                  11.66                  8.49

         40                  3.78                     3.76                   so                  12.22                  8.62
         41                  3.83                     3.82                   81                  12.83                  8.75
         42                  3.89                     3.87                   82                  13.47                  8.87
         43                  3.95                     3.93                   83                  14.16                  8.98
         44                  4.01                     3.99                   84                  14.90                  9.08

                                                                             85**                15.69                  9.17
</TABLE>

   * Payment shown applies to all younger ages.
  ** Payment shown applies to all older ages.


Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of the contract.


                                                       /s/ Robert W. Kloss
                                                                       President
Form PL470.13A

<PAGE>   1
                                                                    EXHIBIT 4(b)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                                NEWARK, DELAWARE



                                QUALIFIED PLAN RIDER


This Rider is part of the Contract. The Contract is issued to or purchased by
the trustee of a pension or profit-sharing plan intended to qualify under
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The following provisions apply and replace any contrary Contract provisions:

   1. Except as allowed by the qualified pension or profit-sharing plan of which
      this Contract is a part, the Contract may not be transferred, sold,
      assigned, discounted or pledged, either as collateral for a loan or as
      security for the performance of an obligation or for any other purpose, to
      any person other than Providentmutual.

   2. The Contract shall be subject to the provisions, terms and conditions of
      the qualified pension or profit-sharing plan of which the Contract is a
      part. Any payment, distribution or transfer under the Contract shall
      comply with the provisions, terms and conditions of such plan as
      determined by the plan administrator, trustee or other designated plan
      fiduciary. Providentmutual shall be under no obligation either: a) to
      determine whether any such payment, distribution or transfer is
      inconsistent with the provisions, terms and conditions of such plan; or b)
      to administer such plan, including any provisions required by the
      Retirement Equity Act of 1984.

   3. Notwithstanding any provision to the contrary in the Contract or the
      qualified pension or profit-sharing plan of which the Contract is a part,
      we reserve the right to amend or modify the Contract or Rider to the
      extent necessary to comply with any law, regulation, ruling or other
      requirement necessary to establish or maintain the qualified status of
      such pension or profit-sharing plan.



Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of this Contract.


                                                             /s/ Robert W. Kloss
                                                                  President
Form PL471 2.92

<PAGE>   1
                                                                    EXHIBIT 4(c)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                                NEWARK, DELAWARE

                            403(b) ANNUITY LOAN RIDER

This Rider is attached to and forms a part of the Contract. This Rider takes
effect on the later of the Issue Date of the Contract or the date specified
herein. This Rider will terminate on the earliest of:

         (1)      the date the Contract is surrendered for the Cash Surrender
                  Value;

         (2)      the Maturity Date;

         (3)      the death of the Annuitant prior to the Maturity Date; or

         (4)      the first day that Indebtedness as defined below, equals or
                  exceeds the Cash Surrender Value.

Any Indebtedness will become due and payable on the date of the termination of
this Rider. No provisions in the Contract will change except as expressly stated
herein.

CONTRACT LOANS
After this Rider has been in effect for at least six (6) months, a 403(b)
Contract Loan may be made by the Annuitant by sending a signed written request
to the Home Office.

MAXIMUM CONTRACT LOAN
The maximum Contract Loan value will be determined in accordance with the
withdrawals and surrender provisions of the contract. The amount of the Contract
Loan, when added to the outstanding balance of a policy loan against a life
insurance policy that is purchased as part of the same section 403(b)
arrangement as the contract, if any, and the outstanding balance of any other
loans from qualified employer plans, may not be more than the lesser of:

   (1)  $50,000 reduced by the excess if any of (a) the highest outstanding
        balance of loans from the section 403(b) arrangement and any other
        qualified employer plans during the one year period ending on the day
        before the date on which the Contract Loan was made, over (b) the
        outstanding balance of loans from the section 403(b) arrangement and any
        other qualified employer plans on the date on which the Contract Loan
        was made; or

   (2)  the greater of (a) fifty percent of the sum of the Cash Surrender Value
        of the annuity contract, the Cash Value of any life insurance policy
        purchased as part of the section 403(b) arrangement, and the
        nonforfeitable accrued benefit of the Owner under any other qualified
        employer plan, or (b) $10,000 provided that the Cash Surrender Value is
        at least $10,500;

provided, however, that at least $10,000 may be borrowed if the Cash Surrender
Value is at least $10,500.

OTHER CONTRACT LOAN RESTRICTIONS

The following restrictions apply to all 403(b) Contract Loans:

         (1)      Only one Contract Loan may be outstanding at a time.

         (2)      Only one Contract Loan may be taken out in any one contract
                  year.

         (3)      The Annuity Value and Cash Surrender Value of this contract
                  are the security for the Contract Loan.

         (4)      The Contract Loan amount must be at least $500 and the Cash
                  Surrender Value not securing the Contract Loan must be at
                  least $500 on the day the Contract Loan is made.

         (5)      The Company has the right to postpone making a Contract Loan
                  for not more than 6 months.


INDEBTEDNESS

Indebtedness is the entire unpaid balance of a Contract Loan plus all unpaid
interest accrued on the Contract Loan.


PAYMENT OF CONTRACT VALUES WHEN THERE IS INDEBTEDNESS

Before payment of either the Cash Surrender Value or the Annuity Value under any
of the contract provisions, the entire indebtedness as of the payment date will
be deducted.

                           (continued on reverse side)
PL515
<PAGE>   2
INTEREST CHARGED AND CREDITED

Interest at a rate of no more than 8% per year will be charged on the
Indebtedness from the date the Contract Loan is made. During the period of any
Contract Loan under the contract, the interest rate credited to the Annuity
Value on amounts securing the Indebtedness may be reduced, but not to less than
3% per year.


CONTRACT LOAN PAYMENTS

A Contract Loan must be repaid as follows, or as may otherwise be required by
federal law or regulation. Substantially equal Contract Loan Payments must be
made at least quarterly to completely repay all Indebtedness within 5 years from
the date of the Contract Loan. However, if the Contract Loan is to be used to
acquire a dwelling that is to be used within a reasonable time as a principal
residence by the Annuitant, then the Contract Loan Payment period may be
increased to as long as 30 years. Contract Loan Payments shall be not less than
the minimum amount as determined by the Company. The Company reserves the right
to change the required minimum amount at any time.


LATE CONTRACT LOAN PAYMENTS AND DEFAULT

If a Contract Loan Payment is not paid when due, the entire loan will be
declared in default. In the event of a default on a contract loan, the Company
shall make every effort to collect on the loan and shall charge interest on the
unpaid portion of the loan until the earlier of the date the loan is repaid in
full or the date the note evidencing the loan can be distributed to the Owner in
accordance with Section 403(b) of the Internal Revenue Code (the "Code"). The
Cash Surrender Value and the Annuity Value of the contract shall not be reduced
until such time as such a reduction would constitute a permissible distribution
under Section 403(b) of the Code, The Owner shall have 31 days in which to
submit a late payment and cure the default. Furthermore, if the default has not
been cured prior to December 31 of the calendar year in which the incidence of
default occurred, any portion of the loan that has not previously been treated
as a distribution for federal income tax purposes shall be deemed to be
distributed to the Owner and federal taxes on such deemed distribution may be
due and payable.


EXTRA CONTRACT LOAN PAYMENTS

Extra Contract Loan Payments and Contract Loan Payments greater than the
scheduled payment amount will be accepted and will be applied to reduce the
remaining term of the scheduled Contract Loan Payment period and/or the amount
of the final payment. Such Contract Loan Payments may not be applied to reduce
the payment amount, change a scheduled payment date, or miss a due date for any
scheduled payment due before the final payment.


TERMINATION DUE TO INSUFFICIENT CONTRACT VALUE

This Rider and the contract to which it is attached will terminate without value
on the first day that Indebtedness equals or exceeds the Cash Surrender Value
and the Annuitant has reached age 59 1/2, separated from service, died, or
become disabled within the meaning of Section 72(m)(7) of the Internal Revenue
Code. Federal taxes may become due and payable by the Annuitant upon termination
of the contract. Notice will be mailed to the Annuitant's last known address at
least thirty-one days before such termination. The termination may be avoided by
making a Contract Loan Payment sufficient for the contract to have a Cash
Surrender Value at least $500 greater than the Indebtedness within thirty-one
days of receiving the notice.


Effective date of this Rider, if later than the Issue Date of the 
contract: _____________.


Attached by Providentmutual Life and Annuity Company of America.


                                                             /s/ Robert W. Kloss
                                                                  President
PL515

<PAGE>   1
                                                                    EXHIBIT 4(d)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY

                                      RIDER

                                  DEATH BENEFIT


           ANNUITANT

     CONTRACT NUMBER


      The following Death Benefit provision replaces the PROCEEDS ON DEATH OF
ANNUITANT BEFORE MATURITY DATE provision found under the PAYMENT OF PROCEEDS
Section of your Contract.

PROCEEDS ON DEATH OF ANNUITANT BEFORE MATURITY DATE. If the Annuitant dies
before the Maturity Date, the proceeds we will pay to the Beneficiary is the
Death Benefit.

      If the Annuitant dies during the first six Contract Years, the Death
Benefit will equal the greater of:

         1.       the Premiums paid, less any withdrawals including any
                  applicable Surrender Charge; or

         2.       the Contract Account Value on the date we receive due proof of
                  the Annuitant's death.

      If the Annuitant dies after the end of the sixth Contract Year and prior
to the Maturity Date, the Death Benefit will equal the greatest of:

         1.       the Guaranteed Minimum Death Benefit described below, plus
                  subsequent premiums paid, less any reduction for a subsequent
                  withdrawal described below; or

         2.       the Premiums paid less any withdrawals including any
                  applicable Surrender Charge; or

         3.       the Contract Account Value on the date we receive due proof of
                  the Annuitant's death.

      The proceeds will be paid in a lump sum or under a Payment Option. If you
are the Annuitant, the proceeds must be distributed in accordance with the rules
set forth in "Proceeds on Death of an Owner" for an Owner's death before the
Maturity Date. No Death Benefit is payable if this Contract is surrendered
before the Annuitant's death.

GUARANTEED MINIMUM DEATH BENEFIT. On each six year Contract Anniversary on or
before the Annuitant's 85th birthday, the Guaranteed Minimum Death Benefit will
equal the greater of:

   (a)  the Guaranteed Minimum Death Benefit as of the previous six year
        Contract Anniversary less any reduction for a subsequent withdrawal
        described below; or

   (b) the Contract Account Value on the current Contract Anniversary.

      After the six year Contract Anniversary on or before the Annuitant's 85th
birthday, the Guaranteed Minimum Death Benefit will not be recalculated under
this provision.

REDUCTION FOR A WITHDRAWAL. When part of the Cash Surrender Value is withdrawn,
the withdrawal will reduce the Death Benefit in the same proportion that the
Contract Account Value was reduced on the date of withdrawal. For each
withdrawal, the Death Benefit reduction is calculated by multiplying the Death
Benefit on the date of withdrawal by a fraction, the numerator of which is the
amount of the withdrawal including any applicable Surrender Charge and the
denominator of which is the Contract Account Value immediately prior to the
withdrawal.

      This Rider does not change any other provisions of the Contract except as
stated above.



 Attached by Providentmutual Life and Annuity Company of America.


                                                              /s/ Robert W Kloss
                                                                       President

Form PL547          
(Rev. 11.97)                                                          (PL547XX1)

<PAGE>   1
                                                                    EXHIBIT 4(e)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA

                         A STOCK LIFE INSURANCE COMPANY


                                      RIDER

                                  DEATH BENEFIT



          ANNUITANT

    CONTRACT NUMBER


      The following Death Benefit provision replaces the PROCEEDS ON DEATH OF
ANNUITANT BEFORE MATURITY DATE provision found under the PAYMENT OF PROCEEDS
Section of your Contract.

PROCEEDS ON DEATH OF ANNUITANT BEFORE MATURITY DATE. If the Annuitant dies
before the Maturity Date, the proceeds we will pay to the Beneficiary is the
Death Benefit.

The Death Benefit will equal the greater of:

         1.       the Guaranteed Minimum Death Benefit; or

         2.       the Contract Account Value on the date we receive due proof of
                  the Annuitant's death.

      The proceeds will be paid in a lump sum or under a Payment Option. If you
are the Annuitant, the proceeds must be distributed in accordance with the rules
set forth in "Proceeds on Death of an Owner" for an Owner's death before the
Maturity Date. No Death Benefit is payable if this Contract is surrendered
before the Annuitant's death.

GUARANTEED MINIMUM DEATH BENEFIT. The Guaranteed Minimum Death Benefit on or
prior to the Contract Anniversary before the Annuitant's 75th birthday will be
the sum of the Premiums paid less any Reduction For A Withdrawal described
below. These amounts will be accumulated with interest at an effective annual
rate of 4.5%.

      The Guaranteed Minimum Death Benefit after the Contract Anniversary before
the Annuitant's 75th birthday will be:

         1.       the Guaranteed Minimum Death Benefit on the Contract
                  Anniversary before the Annuitant's 75th birthday; plus

         2.       the sum of the Premiums paid after the Contract Anniversary
                  before the Annuitant's 75th birthday; less

         3.       any Reduction For A Withdrawal described below after the
                  Contract Anniversary before the Annuitant's 75th birthday.

REDUCTION FOR A WITHDRAWAL. When part of the Cash Surrender Value is withdrawn,
the withdrawal will reduce the Death Benefit in the same proportion that the
Contract Account Value was reduced on the date of withdrawal. For each
withdrawal, the Death Benefit reduction is calculated by multiplying the Death
Benefit on the date of withdrawal by a fraction, the numerator of which is the
amount of the withdrawal including any applicable Surrender Charge and the
denominator of which is the Contract Account Value immediately prior to the
withdrawal.

      This Rider does not change any other provisions of the Contract except as
stated above.


 Attached by Providentmutual Life and Annuity Company of America.

                                                              /s/ Robert W Kloss
                                                                       President

Form PL548          
(Rev. 11.97)                                                          (PL548XX1)

<PAGE>   1
                                                                    EXHIBIT 4(f)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY

                                      RIDER

                 AMENDMENT TO QUALIFY DEFERRED ANNUITY CONTRACT
                    AS A SIMPLE INDIVIDUAL RETIREMENT ANNUITY

      This Rider is attached to and made a part of the Annuity Contract (the
"Contract") to qualify the Contract as a SIMPLE IRA under Section 408(p) of the
Internal Revenue Code (the "Code"), as the same may be amended or supplemented
from time to time. All references to Code Sections are to those Sections as they
may be amended and/or renumbered from time to time. If any provisions of the
Contract conflict with this Rider, the provisions of the Rider will apply.

         1.       The Owner must be the Annuitant. A Contingent Owner may not be
                  designated.

         2.       The Contract is established for the exclusive benefit of the
                  Owner or his/her Beneficiaries and the interest of the Owner
                  is nonforfeitable.

         3.       This Contract may not be transferred, sold, assigned,
                  discounted, or pledged as collateral for a loan.

         4.       The only premiums permitted under this Contract are cash
                  premiums under a qualified salary reduction arrangement as
                  defined in Code Section 408(p), rollover contributions under
                  Code Section 408(d)(3) and such other types of contributions
                  as the law or regulations may permit under a SIMPLE IRA. Both
                  elective deferrals and employer contributions may be
                  permitted. Payments shall not exceed the limits specified in
                  Code Section 408(p) and other applicable sections of the
                  Internal Revenue Code and related regulations.

         5.       The entire interest of the Owner from a qualified retirement
                  plan will be distributed or commence to be distributed, no
                  later than the first day of April following the calendar year
                  in which such individual attains age 70 1/2 (required
                  beginning date), in equal or substantially equal amounts, over
                  (a) the life of such individual (Owner) and his or her
                  designated Beneficiary, or (b) a period not extending beyond
                  the life expectancy of such individual (Owner) or the joint
                  and last survivor expectancy of such individual (Owner) and
                  his or her designated Beneficiary.

                  Minimum Amounts to be distributed from a qualified retirement
                  plan: If the Owner's entire interest is to be distributed in
                  other than a lump sum, then the amount to be distributed each
                  year (commencing with the required beginning date and each
                  year thereafter) must be at least an amount equal to the
                  quotient obtained by dividing the Owner's entire interest by
                  the life expectancy of the Owner or joint and last survivor
                  expectancy of the Owner and designated Beneficiary.

                  Life expectancy and joint and last survivor expectancy are
                  computed by use of the return multiples contained in Section
                  1.72-9 of the Income Tax Regulations. For purposes of this
                  computation, the Owner's life expectancy may be recalculated
                  no more frequently than annually; however, the life expectancy
                  of a nonspouse Beneficiary may not be recalculated.

         6.       If the Owner dies before the entire interest is distributed,
                  the following distribution provisions shall apply:

                  a.       If the Owner dies after distribution of his or her
                           interest has commenced, the remaining portion of such
                           interest will continue to be distributed at least as
                           rapidly as under the method of distribution being
                           used prior to the Owner's death.


                           (continued on reverse side)

Form PL549          
(Rev. 11.97)                                                          (PL549XX1)
<PAGE>   2
          b.    If the Owner dies before distribution of his or her interest
                commences, the Owner's entire interest will be distributed in
                accordance with one of the following three provisions:

                  (1)      The Owner's entire interest will be paid by December
                           31 of the year containing the fifth anniversary of
                           the date of the Owner's death.

                  (2)      If the Owner's interest is payable to a Beneficiary
                           designated by the Owner and the Owner has not elected
                           (1) above, then the entire interest will be
                           distributed in equal or substantially equal payments
                           over the life or life expectancy of the designated
                           Beneficiary or Beneficiaries starting by December 31
                           of the year following the year of the Owner's death.
                           If, however, the Beneficiary is the Owner's surviving
                           spouse, then this distribution is not required to
                           begin before December 31 of the year in which the
                           Owner would have turned 70 112.

                  (3)      If the Beneficiary is the Owner's surviving spouse,
                           the spouse may treat the account (Contract) as his or
                           her own SIMPLE Individual Retirement Annuity.

         C.       For the purposes of the above, life expectancy is computed by
                  use of the expected return multiples in Tables V and VI of
                  Section 1.72-9 of the Income Tax Regulations. For purposes of
                  distributions beginning after the Owner's death, unless
                  otherwise elected by the surviving spouse by the time
                  distributions are required to begin, life expectancies shall
                  be recalculated annually. Such election shall be irrevocable
                  by the surviving spouse and shall apply to all subsequent
                  years. In the case of any other designated Beneficiary, life
                  expectancies shall be calculated using the attained age of
                  such Beneficiary during the calendar year in which
                  distributions are required to begin pursuant to this Section,
                  and payments for any subsequent calendar year shall be
                  calculated based on such life expectancy reduced by one for
                  each calendar year which has elapsed since the calendar year
                  life expectancy was first calculated.

                  Distributions under this Section are considered to have begun
                  if distributions are made on account of the Owner reaching his
                  or her required beginning date or if prior to the required
                  beginning date distributions irrevocably commence to an Owner
                  over a period permitted and in an annuity form acceptable
                  under Section 1.401(a)(9) of the Regulations.

         d.       For purposes of this requirement, an amount paid to a child of
                  the Owner will be treated as if it had been paid to the
                  surviving spouse if the remainder of the interest becomes
                  payable to the surviving spouse when the child reaches the age
                  of majority.

7.       Refund of premiums (other than those attributable to excess
         contributions) will be applied before the close of the calendar year
         following the year of refund toward the payment of future premiums or
         the purchase of additional benefits.

8.       This Contract does not require fixed premiums.

9.       In order to retain its qualification under Section 408(p), we may amend
         this contract as required by changes in the I.R.C. Regulations and
         Published Rulings. Any such amendment will be issued to all Section
         408(p) annuitants.

      The Rider is subject to all the exclusions, definitions, and provisions of
the Contract which are not inconsistent herewith.


Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of the Contract.


                                                              /s/ Robert W Kloss
                                                                       President

Form PL549          
(Rev. 11.97)                                                          (PL549XX1)


<PAGE>   1
                                                                    EXHIBIT 4(g)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY


                                      RIDER


                AMENDMENT TO QUALIFY DEFERRED ANNUITY CONTRACT AS
          A SIMPLE EMPLOYEE PENSION (SEP) INDIVIDUAL RETIREMENT ANNUITY



      This Rider is attached to and made a part of the Annuity Contract (the
"Contract") to qualify the Contract as a SEP IRA under Section 408(k) of the
Internal Revenue Code (the "Code"), as the Code may be amended or supplemented
from time to time. All references to Code Sections are to those Sections as they
may be amended and/or renumbered from time to time. If any provisions of the
Contract conflict with this Endorsement, the provisions of the Endorsement will
apply.

         1.       The Owner must be the Annuitant. A Contingent Owner may not be
                  designated.

         2.       The Contract is established for the exclusive benefit of the
                  Owner or his/her Beneficiaries and the interest of the Owner
                  is nonforfeitable.

         3.       This Contract may not be transferred, sold, assigned,
                  discounted, or pledged as collateral for a loan.

         4.       The only premiums permitted under this Contract are cash
                  premiums made by the employer. The employer must make
                  contributions for each employee who has satisfied the
                  eligibility requirements of Section 408(k)(2) of the Internal
                  Revenue Code. The maximum amount an employer may contribute
                  annually on behalf of each eligible employee is the lesser of
                  15% of compensation (subject to compensation cap) or $30,000.

         5.       The entire interest of the Owner from a qualified retirement
                  plan will be distributed or commence to be distributed no
                  later than the first day of April following the calendar year
                  in which such individual attains age 70 1/2 (required
                  beginning date), in equal or substantially equal amounts, over
                  (a) the life of such individual (Owner) and his or her
                  designated Beneficiary, or (b) a period not extending beyond
                  the life expectancy of such individual (Owner) or the joint
                  and last survivor expectancy of such individual (Owner) and
                  his or her designated Beneficiary.

                  Minimum Amounts to be distributed from a qualified retirement
                  plan: If the Owner's entire interest is to be distributed in
                  other than a lump sum, then the amount to be distributed each
                  year (commencing with the required beginning date and each
                  year thereafter) must be at least an amount equal to the
                  quotient obtained by dividing the Owner's entire interest by
                  the life expectancy of the Owner or joint and last survivor
                  expectancy of the Owner and designated Beneficiary.

                  Life expectancy and joint and last survivor expectancy are
                  computed by use of the return multiples contained in Section
                  1.72-9 of the Income Tax Regulations. For purposes of this
                  computation, the Owner's life expectancy may be recalculated
                  no more frequently than annually; however, the life expectancy
                  of a nonspouse Beneficiary may not be recalculated.

         6.       If the Owner dies before the entire interest is distributed,
                  the following distribution provisions shall apply:

                  a.       If the Owner dies after distribution of his or her
                           interest has commenced, the remaining portion of such
                           interest will continue to be distributed at least as
                           rapidly as under the method of distribution being
                           used prior to the Owner's death.


                           (continued on reverse side)


Form PL550          
(Rev. 11.97)                                                          (PL550XX1)
<PAGE>   2
                  b.       If the Owner dies before distribution of his or her
                           interest commences, the Owner's entire interest will
                           be distributed in accordance with one of the
                           following three provisions:

                           (1)      The Owner's entire interest will be paid by
                                    December 31 of the year containing the fifth
                                    anniversary of the date of the Owner's
                                    death.

                           (2)      If the Owner's interest is payable to a
                                    Beneficiary designated by the Owner and the
                                    Owner has not elected (1) above, then the
                                    entire interest will be distributed in equal
                                    or substantially equal payments over the
                                    life or life expectancy of the designated
                                    Beneficiary or Beneficiaries commencing by
                                    December 31 of the year following the year
                                    of the Owner's death. If, however, the
                                    Beneficiary is the Owner's surviving spouse,
                                    then this distribution is not required to
                                    begin before December 31 of the year in
                                    which the Owner would have turned 70 1/2.

                           (3)      If the Beneficiary is the Owner's surviving
                                    spouse, the spouse may treat the account
                                    (Contract) as his or her own SEP Individual
                                    Retirement Annuity.

                  c.       For the purposes of the above, life expectancy is
                           computed by use of the expected return multiples in
                           Tables V and VI of Section 1.72-9 of the Income Tax
                           Regulations. For purposes of distributions beginning
                           after the Owner's death, unless otherwise elected by
                           the surviving spouse by the time distributions are
                           required to begin, life expectancies shall be
                           recalculated annually. Such election shall be
                           irrevocable by the surviving spouse and shall apply
                           to all subsequent years. In the case of any other
                           designated Beneficiary, life expectancies shall be
                           calculated using the attained age of such Beneficiary
                           during the calendar year in which distributions are
                           required to begin pursuant to this Section, and
                           payments for any subsequent calendar year shall be
                           calculated based on such life expectancy reduced by
                           one for each calendar year which has elapsed since
                           the calendar year life expectancy was first
                           calculated.

                           Distributions under this Section are considered to
                           have begun if distributions are made on account of
                           the Owner reaching his or her required beginning date
                           or if prior to the required beginning date
                           distributions irrevocably commence to an Owner over a
                           period permitted and in an annuity form acceptable
                           under Section 1.401(a)(9) of the Regulations.

                  d.       For purposes of this requirement, an amount paid to a
                           child of the Owner will be treated as if it had been
                           paid to the surviving spouse if the remainder of the
                           interest becomes payable to the surviving spouse when
                           the child reaches the age of majority.

         7.       Refund of premiums (other than those attributable to excess
                  contributions) will be applied before the close of the
                  calendar year following the year of refund toward the payment
                  of future premiums or the purchase of additional benefits.

         8.       This Contract does not require fixed premiums.

         9.       In order to retain its qualification under Section 408(k), we
                  may amend this contract as required by changes in the I.R.C.
                  Regulations and Published Rulings. Any such amendment will be
                  issued to all Section 408(k) annuitants.

      The Rider is subject to all the exclusions, definitions, and provisions of
the Contract which are not inconsistent herewith.


Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of the Contract.

                                                              /s/ Robert W Kloss
                                                                       President


Form PL550          
(Rev. 11.97)                                                          (PL550XX1)

<PAGE>   1
                                                                    EXHIBIT 4(h)

              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY

                                      RIDER

                              AMENDMENT TO QUALIFY
                          DEFERRED ANNUITY CONTRACT AS
                        AN INDIVIDUAL RETIREMENT ANNUITY


  Your Contract is amended as follows:

         (1)      The Owner must be Annuitant. A Contingent Owner may not be
                  designated.

         (2)      The Contract is established for the exclusive benefit of the
                  Owner or his/her Beneficiaries and the interest of the Owner
                  is nonforfeitable.

         (3)      This Contract may not be transferred, sold, assigned,
                  discounted, or pledged as collateral for a loan.

         (4)      Unless such payment qualifies as a rollover contribution
                  described in Section 402(a)(5), 402(a)(7), 403(a)(4),
                  403(b)(8), 405(d)(3)(C) or 408(d)(3) of the Internal Revenue
                  Code of 1986, as amended from time to time, the maximum annual
                  Purchase Payment must be in cash and shall not exceed the
                  lesser of 100% of compensation or $2,000 or such greater
                  amount as may be permitted by amendment to the Internal
                  Revenue Code. For a Spousal IRA, the maximum annual
                  contribution shall not exceed the lesser of $4,000 or 100% of
                  compensation, with no more than $2,000 being contributed to
                  either spouse's IRA, or such greater amounts as may be
                  permitted by amendment to the Internal Revenue Code.

         (5)      The entire interest of the Owner from a qualified retirement
                  plan will be distributed or commence to be distributed, no
                  later than the first day of April following the calendar year
                  in which such individual attains age 70 1/2 (required
                  beginning date), in equal or substantially equal amounts, over
                  (a) the life of such individual (Owner) and his or her
                  designated Beneficiary, or (b) a period not extending beyond
                  the life expectancy of such individual (Owner) or the joint
                  and last survivor expectancy of such individual (Owner) and
                  his or her designated Beneficiary.

                  Minimum Amounts to be distributed from a qualified retirement
                  plan: If the Owner's entire interest is to be distributed in
                  other than a lump sum, then the amount to be distributed each
                  year (commencing with the required beginning date and each
                  year thereafter) must be at least an amount equal to the
                  quotient obtained by dividing the Owner's entire interest by
                  the life expectancy of the Owner or joint and last survivor
                  expectancy of the Owner and designated Beneficiary.

                  Life expectancy and joint and last survivor expectancy are
                  computed by use of the return multiples contained in section
                  1.72-9 of the Income Tax Regulations. For purposes of this
                  computation, the Owner's life expectancy may be recalculated
                  no more frequently than annually; however, the life expectancy
                  of a nonspouse Beneficiary may not be recalculated.

         (6)      If the Owner dies before the entire interest is distributed,
                  the following distribution provisions shall apply:

                  (a)      If the Owner dies after distribution of his or her
                           interest has commenced, the remaining portion of such
                           interest will continue to be distributed at least as
                           rapidly as under the method of distribution being
                           used prior to the Owner's death.


                           (continued on reverse side)


Form PL553          
(Rev. 11.97)                                                          (PL553XX1)
<PAGE>   2
                  (b)      If the Owner dies before distribution of his or her
                           interest commences, the Owner's entire interest will
                           be distributed in accordance with one of the
                           following four provisions:

                           (1)      The Owner's entire interest will be paid by
                                    December 31 of the year containing the fifth
                                    anniversary of the date of the Owner's
                                    death.

                           (2)      If the Owner's interest is payable to a
                                    Beneficiary designated by the Owner and the
                                    Owner has not elected (1) above, then the
                                    entire interest will be distributed in equal
                                    or substantially equal installments over the
                                    life or life expectancy of the designated
                                    Beneficiary or Beneficiaries commencing by
                                    December 31 of the year following the date
                                    of the Owner's death. If the individual
                                    spouse is not the designated Beneficiary the
                                    method of distribution selected must assure
                                    that at least 50% of the present value of
                                    the amount available for distribution is
                                    paid within the life expectancy of the
                                    participant.

                           (3)      If the designated Beneficiary is the Owner's
                                    surviving spouse, the spouse may elect
                                    during the period ending on December 31 of
                                    the year containing the fifth anniversary of
                                    the Owner's date of death to receive equal
                                    or substantially equal payments over the
                                    life or life expectancy of the surviving
                                    spouse, commencing at any date prior to
                                    December 31 of the year in which the
                                    deceased Owner would have attained age 70
                                    1/2.

                           (4)      If the designated Beneficiary is the Owner's
                                    surviving spouse, the spouse may treat the
                                    account (Contract) as his or her own
                                    individual retirement arrangement (IRA).
                                    This election will be deemed to have been
                                    made if such surviving spouse makes a
                                    regular IRA contribution to such account
                                    (Contract), makes a rollover to or from such
                                    account (Contract), or fails to elect any of
                                    the above three provisions.

                  (c)      For the purposes of the above, payments will be
                           calculated by use of the return multiples specified
                           in section 1.72-9 of the Regulations. Life expectancy
                           of a surviving spouse may be recalculated annually.
                           In the case of any other designated Beneficiary, life
                           expectancy will be calculated at the time payment
                           first commences and payments for any 12-consecutive
                           month period will be based on such life expectancy
                           minus the number of whole years passed since
                           distribution first commenced.

                  (d)      For purposes of this requirement, an amount paid to a
                           child of the Owner will be treated as if it had been
                           paid to the surviving spouse if the remainder of the
                           interest becomes payable to the surviving spouse when
                           the child reaches the age of majority.

         (7)      Refund of premiums (other than those attributable to excess
                  contributions) will be applied before the close of the
                  calendar year following the year of refund toward the payment
                  of future premiums or the purchase of additional benefits.

         (8)      This Contract does not require fixed premiums.

         (9)      In order to retain its qualification under Section 408(b), we
                  may amend this policy as required by changes in the I.R.C.
                  Regulations and Published Rulings. Any such amendment will be
                  issued to all Section 408(b) annuitants.

      The Rider is subject to all the exclusions, definitions, and provisions of
the Contract which are not inconsistent herewith.

Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of the Contract.

                                                              /s/ Robert W Kloss
                                                                       President

Form PL553          
(Rev. 11.97)                                                          (PL553XX1)

<PAGE>   1
                                                                    EXHIBIT 4(i)


               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY
                                NEWARK, DELAWARE

                                      RIDER

                 AMENDMENT TO QUALIFY DEFERRED ANNUITY CONTRACT
                       AS A TAX SHELTERED ANNUITY CONTRACT
                UNDER SECTION 403(b) OF THE INTERNAL REVENUE CODE

      The Contract is amended as follows, provided the Contract is purchased for
you by your employer and you are: (1) a public school employee; or (2) an
employee of a tax-exempt organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended from time to time (the Code).

      For purposes of qualifying the Contract applied for as a Tax Sheltered
Annuity under Section 403(b) of the Code, the Contract herein is amended by the
addition of the provisions listed below.

         1.       The Owner must be the Annuitant. A Contingent Owner may not be
                  designated.

         2.       The Contract is established for the exclusive benefit of the
                  Owner or his Beneficiaries and the interest of the Owner is
                  nonforfeitable.

         3.       This Contract may not be transferred, sold, assigned,
                  discounted, or pledged as collateral for a loan or as security
                  for the performance of an obligation or for any other purpose,
                  to any person other than the Company.

         4.       The entire interest of the Owner will not be distributed or
                  commence to be distributed before such individual attains age
                  59-1/2, separates from service, dies or becomes disabled and
                  not later than the first day of April following the calendar
                  year in which such individual attains age 70-1/2 or the
                  calendar year in which such individual retires, if later
                  (required beginning date). However, in the case of a 5% or
                  more Owner of the employer, distributions are required to
                  begin no later than the first day of April following the
                  calendar year in which the 5% Owner attains age 70 1/2. The
                  entire interest will be in equal or substantially equal
                  amounts, over: (a) the life of such individual (Owner) and his
                  or her designated Beneficiary; or (b) a period not extending
                  beyond the life expectancy of such individual (Owner) or the
                  joint and last survivor expectancy of such individual (Owner)
                  and his or her designated Beneficiary.

         5.       Minimum Amounts to be distributed. If the Owner's entire
                  interest is to be distributed in other than a lump sum, then
                  the amount to be distributed each year (commencing with the
                  required beginning date and each year thereafter) must be at
                  least an amount equal to the quotient obtained by dividing the
                  Owner's entire interest by the life expectancy of the Owner or
                  joint and last survivor expectancy of the Owner and designated
                  Beneficiary, in accordance with Code Section 403(b)(10).

                  Life expectancy and joint and last survivor expectancy are
                  computed, in accordance with Code Section 403(b)(10), by use
                  of the return multiples contained in Tables V and VI of
                  section 1.72-9 of the Income Tax Regulations. For purposes of
                  this computation, the Owner's life expectancy and, if
                  applicable, the Owner's spouse's life expectancy may be
                  recalculated no more frequently than annually; however, the
                  life expectancy of a nonspouse Beneficiary may not be
                  recalculated.

         6.       If the Owner dies before the entire interest is distributed,
                  the following distribution provisions shall apply:

                  a.       If the Owner dies after distribution of his or her
                           interest has commenced, the remaining portion of such
                           interest will continue to be distributed at least as
                           rapidly as under the method of distribution being
                           used prior to the Owner's death.

                           (continued on reverse side)

Form PL554
(Rev. 11.97)                                                          (PL554XX1)
<PAGE>   2
         b.       If the Owner dies before distribution of his or her interest
                  commences, the Owner's entire interest will be distributed in
                  accordance with one of the following three provisions:

                  (1)      The Owner's entire interest will be paid within five
                           (5) years after the date of the Owner's death.

                  (2)      If the Owner's interest is payable to a Beneficiary
                           designated by the Owner and the Owner has not elected
                           (1) above, then the entire interest will be
                           distributed in substantially equal installments over
                           the life or life expectancy of the designated
                           Beneficiary commencing no later than one (1) year
                           after the date of the Owner's death. If the
                           individual spouse is not the designated Beneficiary
                           the method of distribution selected must assure that
                           at least 50% of the present value of the amount
                           available for distribution is paid within the life
                           expectancy of the participant, in accordance with
                           Code Section 403(b)(10).

                  (3)      If the designated Beneficiary is the Owner's
                           surviving spouse, the spouse may elect within the
                           five year period commencing with the Owner's date of
                           death to receive equal or substantially equal
                           payments over the life or life expectancy of the
                           surviving spouse commencing at any date prior to the
                           date on which the deceased Owner would have attained
                           age 70-1/2.

         c.       For the purposes of the above, payments will be calculated in
                  accordance with Code Section 403(b)(10), by the use of the
                  return multiples specified in Tables V and VI of section
                  1.72-9 of the regulations. Life expectancy of a surviving
                  spouse may be recalculated annually. In the case of any other
                  designated Beneficiary, life expectancy will be calculated at
                  the time payment first commences and payments for any
                  12-consecutive month period will be based on such life
                  expectancy minus the number of whole years passed since
                  distribution first commenced.

         d.       For purposes of this requirement, an amount paid to a child of
                  the Owner will be treated as if it had been paid to the
                  surviving spouse if the remainder of the interest becomes
                  payable to the surviving spouse when the child reaches the age
                  of majority.

7.       This Contract shall be subject to and interpreted in conformity with
         the provisions, terms and conditions of the tax-sheltered annuity plan
         document of which this Contract is a part, if any, and with the terms
         and conditions of section 403(b) of the Code, the regulations
         thereunder, and other applicable law (including without limitation the
         Employee Retirement Income Security Act of 1974, as amended, if
         applicable), as determined by the plan administrator or other
         designated plan fiduciary or, if none, the Owner. The Company shall be
         under no obligation either (a) to determine whether any contribution,
         distribution or transfer under the Contract complies with the
         provisions, terms and conditions of such plan or with applicable law,
         or (b) to administer such plan, including, without limitation, any
         provisions required by the Retirement Equity Act of 1984. The Owner
         shall be responsible for determining that contributions made,
         distributions elected and transfers made under this Contract comply
         with applicable law and the terms of this Rider.

8.       In order to retain its qualification under Code Section 403(b), we may
         amend this Contract as required by changes in the Code, Regulations and
         Published Rulings. Any such amendment will be issued to all Section
         403(b) annuitants.

The Rider is subject to all the exclusions, definitions, and provisions of the
Contract which are not inconsistent herewith.




Attached by Providentmutual Life and Annuity Company of America on the Issue
Date of the Contract.


                                                             /s/ Robert W. Kloss
                                                                       President

Form PL554
(Rev. 11.97)                                                          (PL554XX1)

<PAGE>   1
                                                                    EXHIBIT 4(j)

               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY


                                      RIDER


                   AMENDMENT FOR A CHARITABLE REMAINDER TRUST



       ANNUITANT

CONTRACT NUMBER


The following definition replaces the MATURITY DATE definition found under the
DEFINITIONS Section of your Contract.

         MATURITY DATE. The date when the Contract Account Value will be applied
         under a Payment Option unless you have elected to receive a lump sum
         payment of the Cash Surrender Value. The latest Maturity Date is the
         Contract Anniversary nearest Annuitant's age 100.

The following provision replaces the SURRENDER CHARGE provision found under the
CONTRACT VALUES Section of your Contract.

         SURRENDER CHARGE. The applicable percentage from the Surrender Charge
         Table in the Contract Schedule will be deducted upon any withdrawal or
         surrender and will be applied to that portion of the total of the
         withdrawals or surrender during a Contract Year which exceeds the
         greater of:

                  1. 10% of the Contract Account Value as of the beginning of
                     the Contract Year; or
                  2. any amounts in excess of the total Premiums paid.

                  There is no limit on the number of withdrawals occurring in
                  any Contract Year.

                  If the Contract is being surrendered, the applicable Surrender
                  Charge will be deducted from the Contract Account Value in
                  determining the Cash Surrender Value.

                  For a partial withdrawal, any applicable Surrender Charge will
                  be deducted from the amount withdrawn, unless you request in
                  advance that the Surrender Charge be deducted from the
                  remaining Contract Account Value.

                  In no event will the Surrender Charge exceed 8.5% of the
                  total premiums received under the Contract.

This Rider does not change any other provisions of the Contract except as stated
above.

Attached by Providentmutual Life and Annuity Company of America.





                                                             /s/ Robert W. Kloss
                                                                       President

Form PL558                                                                  1997


<PAGE>   1
                                                                    EXHIBIT 4(k)


               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
                         A STOCK LIFE INSURANCE COMPANY



                       RIDER - SYSTEMATIC WITHDRAWAL PLAN

ANNUITANT:                                                  ISSUE DATE:
CONTRACT NUMBER:

The following optional Plan is added to Section 5. WITHDRAWALS AND SURRENDERS of
the Contract:


SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan may be elected
whereby preauthorized automatic withdrawals of a level dollar amount will be
made from the Contract on a monthly or quarterly basis. The limitations in the
Surrender Charge provision of the Contract concerning number of withdrawals or
timing of withdrawals are waived for withdrawals made under the Systematic
Withdrawal Plan.


In order to elect the Systematic Withdrawal Plan, the Contract must have an
Annuity Value of at least $15,000. The minimum amount which may be withdrawn is
$100 per month or $300 per quarter. The maximum amount which can be withdrawn
free of a Surrender Charge each year is 10% of the Annuity Value as of the
beginning of the Contract Year.


We will notify you if the total amount to be withdrawn in a Contract Year will
result in any Surrender Charge. Unless we are instructed to reduce the
withdrawal amount for that year so that it does not exceed the maximum limit, we
will continue to process withdrawals for the designated amount. Once the total
amount of the withdrawals made during the Contract Year exceeds the maximum
limit, we will apply the applicable Surrender Charge to the remaining payments
made during that Contract Year. If a withdrawal that is not part of the
Systematic Withdrawal Plan is requested and the Systematic Withdrawal Plan is
then in effect, the withdrawal will be subject to the Surrender Charge and we
will then stop making automatic withdrawals under the Plan. The Plan may only be
reinstated after the beginning of the next Contract Year upon Written Notice to
us.


Withdrawals under this Plan will cease upon our receipt of Written Notice. We
reserve the right to discontinue offering systematic withdrawals upon 30 days'
Written Notice.


This Rider does not change any other provisions of the Contract except as stated
above.


Attached by Providentmutual Life and Annuity Company of America on the above
date.

                                                             /s/ Robert W. Kloss
                                                                       President

PL600                                                                       1995

<PAGE>   1
Providentmutual Life and Annuity Company of America
A Stock Life Insurance Company
Newark, Delaware

APPLICATION FOR VARIABLE ANNUITY

Contract Type (select one):
     ____ Options VIP
     ____ VIP/2

1. Proposed Annuitant: First Name - Middle Initial - Last Name
_________________________________________________________________________   

____ Female     ____ Male

Date of Birth: _______________

Address: Street ______________________________________________________________
City _________________________________________ State _____  Zip Code _________

Telephone Number: (    )___________________

S.S. or Tax ID Number: ____________________

2. Contract Owner (if other than Annuitant):
First Name - Middle Initial - Last Name
____________________________________________________________________________

____ Female      ____ Male

Date of Birth: _____________________

Address: Street_______________________________________________________________
City ______________________________________ State _____  Zip Code ____________

Telephone Number: (    )__________________

S.S. or Tax ID Number: ___________________

3. Beneficiary Information:

Primary: _________________________________________ Relationship _____________

Contingent: ______________________________________ Relationship _____________

Owner's Beneficiary
(if Owner is not Annuitant):______________________ Relationship _____________

4. Type of Annuity (check appropriate boxes):
     ___ Non-Qualified
     ___ 1035(a) Exchange
     ___ HR10/Keogh
     ___ 403(b)
     ___ 403(b) 90-24 Transfer
     ___ 457 Plan
     ___ IRA Transfer
<PAGE>   2
     ___ IRA Rollover
     ___ SIMPLE IRA
     ___ IRA/SEP Regular (Tax Year:  _______)
     ___ Pension
     ___ Profit Sharing
     ___ Charitable Remainder Trust ($100,000 minimum premium)

5. Death Benefit Option (choose only one):
(available for Issue Ages 0-70 only)
     ___ Step Up - Account value every sixth year
     ___ Rising Floor - Cumulative premiums plus interest

6.  Is this annuity now applied for intended to replace any insurance or
annuity in this or any other company? ___ Yes    ___ No
If yes, give name of company, amount, plan and policy numbers of
insurance/annuity being replaced.

7. Premium Payments:
     a. Amount Submitted with Application: $ ___________
     b. Planned Subsequent Premium Payments: $ ___________
          ___ Annually
          ___ Semiannually
          ___ APP
          ___ Quarterly
          ___ Monthly

8. SERVICE CENTER ENDORSEMENTS
(Not allowed in Maryland, Pennsylvania, and West Virginia.)

9. Initial Allocation Percentages.  Complete Form PLA17.

I (we) represent that my (our) answers to the above questions are correct and
true to the best of my (our) knowledge, information and belief and agree that
this application shall be a part of any annuity contract issued by the
Company.  I (we) understand that contract account values and surrender values
under any contract issued pursuant to this Application, when based upon assets
allocated to the Providentmutual Variable Annuity Separate Account, are
variable in nature and are NOT guaranteed as to their dollar amount by the
Company or any other insurance company, are NOT guaranteed by the U.S.
Government or any state government, and are NOT federally insured by the FDIC,
the Federal Reserve Board or any other federal or state agency.  I
(we)acknowledge that the variable annuity applied for is not unsuitable for my
(our) insurance investment objectives, financial situation and needs.

I (we) hereby certify or affirm (under penalty of perjury as provided under
Federal Law) that the social security or taxpayer identification number I (we)
am (are) providing is (are) correct and I (we) am (are) not currently subject
to backup withholding.

Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim
containing any materially false information or conceals for the purpose of
misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to
criminal and civil penalties.
<PAGE>   3
Signed at (City and State) _________________________________________________

On (Date) __________________________________________________________________

Signature of Owner _________________________________________________________

Signature of Proposed Annuitant ____________________________________________

The undersigned agent certifies that the information supplied by the applicant
has been truly and accurately recorded on this application.

Agent's Name (print) _____________________________________________________

Signature of Agent _______________________________________________________


PLA16  12.97





TO BE COMPLETED BY THE AGENT

10. a) Do you have knowledge or reason to believe that replacement of existing
insurance or annuities may be involved?   ___Yes      ___No

   b) If the annuity now applied for is intended to replace insurance or
annuities in this or any other company, have you submitted to the applicant a
written proposal setting forth all the facts, advantages and disadvantages in
making this replacement? ___Yes  ___No

11. Has settlement been obtained with this application? ___Yes  ___No

12. Is the premium to be paid from the proceeds of an insurance policy in this
or any other company? ___Yes    ___No 

If yes, give full details in space provided here or below.

PAYMENT INSTRUCTIONS

Make payments to "Providentmutual Life and Annuity Company of America."

F.E./AGENT INFORMATION

F.E. Name _______________________________________________________________

Agent(s) Name(s) (please print) _________________________________________

Telephone (     )________________

Agent's Address for Mailing Contract
Street _________________________________________________________________

City ____________________________________State _______ Zip Code_________
<PAGE>   4
Signature of Agent _____________________________________________________

S.S.N. __________________     Agent's Code _____________

Broker/Dealer __________________________________________________________

Please submit Allocation Form (#PLA17) and, if applicable, Optional Features
Election Form (#16098).

Remarks or Special Instructions:






IMPORTANT: If the full first initial premium is paid when application is made,
this receipt must be used.  This receipt is void if altered.  No other form of
receipt will be recognized by the Company.

RECEIPT FOR ADVANCE PAYMENT OF PREMIUM

Received, in connection with an application to Providentmutual Life and
Annuity Company of America, $____________, which represents the initial
premium for a flexible premium deferred variable annuity. If this application
is not approved, no liability on the part of the Company will exist and the
sum paid will be returned. If any check or draft given in exchange for this
receipt is not paid on presentation, this receipt is void.

Signed at (City and State) __________________________________________________

on (Month, Day, Year) _______________________________________________________

Signature of Agent __________________________________________________________

ALL PREMIUM CHECKS MUST BE PAYABLE TO THE COMPANY; DO NOT MAKE CHECKS PAYABLE
TO THE AGENT OR LEAVE THE PAYEE BLANK.


PLA16 12.97
<PAGE>   5
PC 0124

1717 Capital Management Company
A Provident Mutual Life Insurance Company Subsidiary
P.O. Box 15626, Wilmington, DE  19850-5626, (800) 828-9765

CUSTOMER ACCOUNT QUESTIONNAIRE

FE _________   Code __________

___ New Account  ___ Update Information Only - Existing Account No. _______

I. Account Type

___ Individual
___ Joint
___ UGMA/UTMA
___ IRA
___ TSA/403(b)
___ Keogh
___ Power of Attorney (attach written Power)
___ SEP
___ SIMPLE
___ Pension Plan
___ Profit Sharing
___ 401(k)
___ Other __________________

Name of Custodian/Trustee/Authorized Person (attach written documentation)
_____________________________________________________________________________

Title of Account: ___________________________________________________________

II. Customer Information

Owner Name: _________________________________________________________________
Date of Birth: _______________________

___ Male  ___ Female

S.S. or Tax ID No.:___________________

Residence:
Street _______________________________________________________________________
City _______________________________________ State _______ Zip Code __________

Mailing Address:
Street _______________________________________________________________________
City _____________________________________ State _________ Zip Code __________
E-mail Address:______________________________
Home Phone No. ______________________________
Business Phone No. __________________________
Fax No. _____________________________________

Marital Status:
___ Single
<PAGE>   6
___ Married
___ Divorced/Separated
___ Widowed
No. of Dependents: ______

Customer Citizenship:
___ U.S.
___ Non-Resident Alien
___ Resident Alien
Country ___________________________________

Name of Employer: (former Employer if retired)
______________________________________________________________________________

Occupation: (Profession, Title, etc.)_________________________________________

III. Financial Information and Needs Assessment

A.  Approximate Annual Household Income:
___ <$50,000
___ $50,000-$100,000
___ $100,000-$250,000
___ $250,000-$500,000
___ $500,000-$1,000,000
___ $1,000,000+

Approximate Net Worth:  (exclusive of home, furniture and automobiles)
___ <$100,000
___ $100,000-$250,000
___ $250,000-$500,000
___ $500,000-$1,000,000
___ $1,000,000-$5,000,000
___ $5,000,000+

Estimated Federal Income Tax Bracket:
___ 15%
___ 28%
___ 31%
___ 36%
___ 39.6%

B.  Current Investment Holdings: $______________________
$___________ Bank Accounts, CD's, Money Market
$___________ Stocks
$___________ IRA
$___________ Mutual Funds and UIT's
$___________ Bonds
$___________ Limited Partnerships
$___________ Qualified Plan Assets
$___________ Real Estate (excluding residence)
$___________ Other (specify) ____________________________
Bank References: ________________________________________

C.  Financial Goals:  (check all that apply)
___ Retirement
___ Education
<PAGE>   7
___ Tax Shelter
___ Diversification
___ Other ________________________

Insurance Needs:
___ Survivor Income
___ Estate Planning
___ Business Objective
___ Debt Protection
___ Retirement Planning
___ Other ________________________

Investment Objectives:
___ Capital Appreciation
___ Income
___ Tax Reduction
___ Safety of Principal
___ Speculative

Risk Tolerance:
___ Low   ___ Medium   ___ High

Prior Investment Experience: ____ years

Life Insurance In Force: $______________

Variable Life Insurance/Annuity Objectives:
___ Life Insurance
___ Retirement Fund
___ Tax Advantage
___ Long-Term Accumulation
___ Other _______________________

IV. Source Information

How was account acquired:
___ Relative
___ Insurance Client
___ Solicited
___ Personal Acquaintance
___ Walk-In
___ Referred By
___ Other (specify) ______________________

How long have you known the customer? ____ years

Is customer or immediate family member employed by Broker/Dealer:
___No    ___Yes (give name) _____________________________________

Source of Funds:
___ Current Income
___ Mutual Fund Redemption
___ IRA Rollover
___ Personal Savings
___ Life Ins./Annuity Values (Surrender or Loan)
___ Qualified Plan Distribution
<PAGE>   8
___ CD/Money Market Fund
___ Other (specify) __________________________

V. Joint Accounts Only (if other than spouse, complete separate CAQ)

Name of Joint Account Holder: ________________________________________________
Date of Birth: ____________________
___ Male ___ Female
Social Security No. _________________
Employer: ____________________________________________________________________
Occupation: __________________________________________________________________
<PAGE>   9
VI. Comments or Additional Information
___ Additional comments attached

12300  3.98
Page 1 of 2

ARBITRATION DISCLOSURES:

I/We understand that:

(A) Arbitration is final and binding on the parties.

(B) The parties are waiving their right to seek remedies in court, including the
right to jury trial.

(C) Pre-arbitration discovery is generally more limited than and different from
court proceedings.

(D) The arbitrator's award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.

(E) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.

ARBITRATION AGREEMENT:

It is agreed that any controversy between the undersigned and 1717 Capital
Management Company that may arise between us concerning any aspect of your
business or this agreement, shall be submitted to arbitration conducted before
the National Association of Securities Dealers, Inc. Arbitration must be
commenced by service upon the other party of a proper written demand or notice.

No person shall bring a putative or certified class action to arbitration, nor
seek to enforce any pre-dispute Arbitration Agreement against any person who has
initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative action until:

(i)  the class certification is denied; or

(ii) the class is decertified; or

(iii) the customer is excluded from the class by the court. Such forbearance to
enforce an agreement to arbitrate shall not constitute a waiver of any rights
under this agreement except to the extent stated herein.

This agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.

The information provided on this CAQ (12300) accurately reflects my/our
financial background and investment objectives. I/We understand that the
Registered Representative/Agent is required to make a reasonable effort to
obtain this information prior to the purchase, sale or exchange of any security
and that the Company will rely on the information contained on this 
<PAGE>   10
form in making a suitability determination. This information will be kept
confidential. I/We acknowledge that I/we have read, understand and agree to the
terms of the Arbitration Agreement found above and have received a completed
copy of this questionnaire.

Owner Signature: _________________________________________ Date: ____________

Joint Signature: _________________________________________ Date: ____________

Name of Registered
Representative/Agent: (please print)_________________________________________

Registered Representative/
Agent Signature(s): ______________________________________ Date: ____________

Name of Registered
Representative/Agent: (please print)_________________________________________

Registered Representative/
Agent Signature(s): ______________________________________ Date: ____________

Authorized Signature of
Field Management: ________________________________________ Date: ____________

Signature of Home Office
Principal: ________________________________________________Date: ____________


Page 2 of 2

CUSTOMER ACCOUNT QUESTIONNAIRE (CAQ) INSTRUCTIONS

In recommending to a customer, the purchase, sale, or exchange of any security
for another, the registered representative/agent must demonstrate "grounds for
believing that the recommendation is suitable for such customer upon the basis
of the facts, if any, disclosed by such customer as to his security holdings and
as to his financial situation and needs." (NASD Rule 2310 of the Rules of Fair
Practice). With this in mind, we have developed this CAQ for the purpose of
assisting 1717 Capital Management Company (1717), Provident Mutual Life
Insurance Company (PMLIC) and Providentmutual Life and Annuity Company of
America (PLACA) in the determination of the suitability of each transaction.

Before any security transaction can be accepted, the registered
representative/agent must provide a fully completed and appropriately signed CAQ
prior to, or in concert with, the first security application. This includes all
mutual fund, UIT, variable annuity and variable life insurance applications
submitted to 1717 (not to include Pershing accounts), PMLIC and PLACA. The
registered representative/agent must make every reasonable effort to obtain this
information prior to the sale of any security and the company will rely on this
information in making a suitability judgment. Use of a client privacy privilege
is not an acceptable reason to omit any information on the CAQ. Refusal on the
part of the owner/customer to provide information should be a "red-flag" of
potential problems for the registered representative/agent. Keep in mind, that
1717 reserves the right to return the business, if proper suitability cannot be
determined based upon omission of information. All information provided is
viewed as strictly confidential.
<PAGE>   11
You may submit a copy of a previously submitted CAQ, provided the original in
file is dated within 12 months of the current transaction. However, the
information must be updated relative to the current transaction and the
owner/customer must acknowledge the changes or additions by full signature.

I. Account Type - Check the box for the purchase being made with the CAQ. If you
are attaching a copy of a previously submitted CAQ, update the information to
include the current account type for the accompanying investment. (Where
applicable, complete a whole new CAQ. For institutional accounts (trusts,
corporations, profit sharing, pensions, 401(k), etc.) and court appointed
custodial accounts, the appropriate documentation must accompany the CAQ,
providing the authority to the person identified to transact investments for the
account.

Title of Account - For other than individual, list full legal title of the
account.

II. Customer Information

Owner Name - For joint account, the primary account holder. For UGMA/UTMAs, the
owner is the child, however, provide information about the relationship to the
custodian in Section VI. For institutional accounts, the name of the company
and/or plan (must include a copy of the plan documents).


SSN or Tax ID No. - For individual or joint accounts, the named owner/customer
in Section II. For UGMAs, the minor. For institutions, corporate plans and
trusts, the number assigned by the IRS for tax reporting purposes for the
particular plan.

Residence Address - For individuals, the street address of their residence no
P.O. Boxes or business addresses. We must be able to determine the legal state
of residence for the owner/customer. For businesses or institutional plans,
provide the address for the entity. The registered representative/agent's
address must never be used as a residence or mailing address. In most cases, the
registered representative/agent of record will automatically receive a
statement.

Mailing Address - Provide only if other than residence address. This is where
the owner/customer's copy of investment statements will be mailed. Again, this
must not be the registered representative/agent's address - see above.

Citizenship - If other than a U.S. citizen, provide the name of the country of
citizenship.

III. Financial Information and Needs Assessment - Must be fully completed for
each owner/customer, institution or entity named in Section II above. For
accounts where there is a minor as owner (UGMA/UTMAs), be sure to provide
minor's information, as well as, household information. Must include all Current
Investment Holdings in (B) and all Financial Goals in (C), where applicable.
This information, in its entirety, is pertinent to determining the suitability
of the purchase. All information is confidential.

IV. Source Information - Complete for all accounts.
<PAGE>   12
V. Joint Accounts Only - For our purposes, the "Joint Account Holder" pertains
to spouses and custodians for minors. In all other cases where the joint account
holder is of a separate household, provide a separate CAQ for each. Any
additional information may be provided in the "Comments or Additional
Information" section.

Arbitration Agreement and Signatures (page 2 of 2)

Make sure that the owner/customer reads and fully understands the Arbitration
Agreement prior to signing the CAQ. Each owner/customer must acknowledge his/her
agreement with the information contained on pages 1 of 2 and 2 of 2 of form
12300 3.98.

Each owner/customer to the account must sign and date the CAQ under the
Arbitration Agreement on page 2 of 2. For minor accounts (Custodial, UGMA/UTMA)
only the custodian must sign. For institutional accounts, the designated person
authorized to transact business for the institution must sign under the
agreement.

The registered representative/agent(s) who solicited the sale must sign and
print their name to the agreement, and date the form at the time of completion
of the form. For split cases, please add the name of each additional registered
representative/agent. The Supervisory Principal, or designee, must sign and date
the CAQ where indicated thus acknowledging review and approval of the sale.

A copy of this completed and executed agreement must be left with the
owner/customer at the time of signing.

<PAGE>   1
                                                                    Exhibit 6(a)

                                                                          PAGE 1

                               State of Delaware
                       Office of the Secretary of State




        I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO 
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF 
RESTATED CERTIFICATE OF INCORPORATION OF "PROVIDENTMUTUAL LIFE AND ANNUITY 
COMPANY OF AMERICA" FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF OCTOBER, 
A.D. 1992, AT 10:31 O'CLOCK A.M.

        A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.

                                    * * * * * * * * *



                                   [SEAL] /s/ William T. Quillen
                                         ------------------------------------
                                         William T. Quillen, Secretary of State

                                                        AUTHENTICATION: *3781654
                                                        DATE:  02/10/1993


<PAGE>   2
                                                               STATE OF DELAWARE
                                                              SECRETARY OF STATE
                                                        DIVISION OF CORPORATIONS
                                                       FILED 10:31 AM 10/28/1992
                                                             923045148 - 2314420


                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
               PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA


        Providentmutual Life and Annuity Company of America, a corporation
organized and existing under the laws of the State of Delaware as of the date of
filing of this certificate hereby certifies as follows:

        1. The name of the corporation is Providentmutual Life and Annuity
Company of America. The corporation was originally incorporated in the
Commonwealth of Pennsylvania under the name Washington Square Life Insurance
Company as a domestic insurance corporation. The corporation's original
certificate of incorporation was filed with the State Corporation Bureau of the
Commonwealth of Pennsylvania on January 8, 1958. A number of amendments have
hereafter been made to the said Certificate of Incorporation by means of various
Articles of Amendment, all of which were also filed in Pennsylvania.


        2. Providentmutual Life and Annuity Company of America has been
domesticated from the Commonwealth of Pennsylvania to the State of Delaware
effective as of the date of filing of this certificate, pursuant to Section 4946
of the Delaware Insurance Code (198 Del. C. Section 4946) and all other
applicable provisions of the Delaware and Pennsylvania law and a Certificate of
Incorporation incorporating all of the provisions of the prior Pennsylvania
Certificate of Incorporation as amended has today been filed as the Delaware
Certificate of Incorporation of the Corporation to implement its domestication
to Delaware. The corporation now is filing this Restated Certificate of
Incorporation to replace that Delaware Certificate of Incorporation to eliminate
unnecessary provisions in that Certificate of Incorporation.

        3. Pursuant to Sections 242 and 245 of the General Corporation law of
the State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the original Pennsylvania
Certificate of Incorporation as previously amended and becomes the Certificate
of Incorporation of this corporation.

<PAGE>   3
        The text of the Restated Certificate of Incorporation as heretofore
filed, amended or supplemented in Pennsylvania is hereby restated and further
amended and reads in its entirety as follows:

                          CERTIFICATE OF INCORPORATION
                                       OF
              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA


FIRST: The name of the corporation is Providentmutual Life and Annuity Company
of America.

SECOND: Its registered office in the State of Delaware is to be located at 300
Continental Drive, Christiana Executive Campus, Newark, County of New Castle,
Delaware, 19713, and its registered agent at that address is Providentmutual
Life and Annuity Company of America.

THIRD: The nature of the business of the corporation and the purposes to be
promoted by it are to engage in the business of insurance and any lawful acts
or activities for which corporations may be organized under the general
corporation law of the State of Delaware related to the business of insurance.

FOURTH: The amount of the total authorized capital stock of the corporation
shall be $2,500,000.00. The capital stock shall be represented by 250,000
shares, having a par value of $10.00 each.

FIFTH: The name and mailing address of the Incorporator is as follows:

          NAME                          ADDRESS
          ----                          --------

     Glenn C. Klenton, Esquire          One Rodney Square
                                        P.O. Box 551
                                        Wilmington, Delaware 19899

SIXTH:  The existence of this corporation is to be perpetual.

<PAGE>   4
SEVENTH: This corporation reserves the rights to amend, alter, change and       
repeal any provision contained in this Certificate of Incorporation in the      
manner now or hereafter prescribed by law and all rights conferred on officers,
directors and stockholders herein are granted subject to this reservation.

EIGHTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly      
authorized to make, amend and repeal the By-Laws of this corporation. The
stockholders and directors shall have power to hold their meetings, and keep
the books and records of the corporation, outside the State of Delaware, at
such places as may from time to time be designated.

NINTH: No contract, act or other transaction between this Corporation
and any person or persons, co-partnership, corporation or association shall be
affected or invalidated by the fact that any one or more of the stockholders,
directors, or officers of this Corporation is interested in, or is a
stockholder, director or officer of such other corporation or association or is
a party to or interested in such contract, act or other transaction or in any
way connected with such person or persons, co-partnership, association or
corporation, or that in any transaction between this Corporation and another
corporation, either of them is a stockholder in the other. Any person who may
become a director of this Corporation is hereby relieved from all disability or
liability arising out of any contract entered into in good faith with the
Corporation for the benefit of himself or any person or persons, copartnership,
association or corporation or any person or persons, co-partnership, association
or corporation in which he may have or represent a financial interest.

TENTH: Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them, or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware, on the application in a summary way of (a) this
Corporation, (b) any creditor or stockholder of this corporation, (c) any
receiver or receivers appointed for this Corporation under the provisions of
Section 291, of Title 8 of the Delaware Code, or (d) any trustees is dissolution
appointed

<PAGE>   5

for this Corporation under the provisions of section 279 of said Title 8, may
order a meeting of the creditors or class of creditors, or order the
stockholders or class of stockholders, to be summoned in such a manner as the   
said court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, or of the stockholders or class
of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, or all the stockholders or class of stockholders of this
Corporation, as the case may be, and also on this corporation.

        ELEVENTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, indemnify any and all of   
its Directors and Officers, who shall serve as an officer or Director of this
Corporation at the request of this Corporation, from and against any and all of
the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any other provision of the Certificate of Incorporation, any provision of the
By-laws, any agreement, any vote of Stockholders or disinterested Directors or
otherwise, both as to action in his official capacity while holding such office
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a Director, Officer, Employee, or
Agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.

<PAGE>   6


        IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the corporation this 28th day of October, 1992.

                                   PROVIDENTMUTUAL LIFE AND
                                   ANNUITY COMPANY OF AMERICA


                                   By: /s/ Alfred F. Wilmouth
                                      -----------------------------------------
                                      Alfred F. Wilmouth
                                      President


Attest:

/s/ Joseph A. Kenney, Jr.
- --------------------------
Joseph A. Kenney, Jr.
Secretary

<PAGE>   1
                                                                   Exhibit 6(b)

                                    By-Laws
                                       of

              Providentmutual Life and Annuity Company of America
                            (a Delaware Corporation)

                                   ARTICLE I
                                  Fiscal Year
                                  -----------

        Section 1.01. The fiscal year of the company shall begin on the first
day of January in each year.

                                   ARTICLE II
                           Principal Place of Business
                           ---------------------------

        Section 2.01. The principal place of business shall be located at 300
Continental Drive, Newark, Delaware 19713.

                                  ARTICLE III
                            Meetings of Stockholders
                            ------------------------

        Section 3.01. All meetings of the stockholders shall be held at such
place, within the State of Delaware or the Commonwealth of Pennsylvania, as is
designated in the notice of meeting.

        Section 3.02. The board of directors may fix the date and time of the
annual meeting of the stockholders, but if no such date and time is fixed by the
board the meeting for any calendar year shall be held on the third Tuesday of
February in such year, if not a legal holiday under the laws of Delaware and/or
Pennsylvania, and, if a legal holiday, then on the next succeeding business day,
not a Saturday, at 11 o'clock A.M., and at said meeting the stockholders then
entitled to vote shall elect directors and shall transact such other business as
may properly be brought before the meeting.

        Section 3.03. Special meetings of the stockholders of the company for
any purpose or purposes may be called at any time by the president or a majority
of the board of directors.

        Section 3.04. Written notice of every meeting of the stockholders,
whether annual or special, shall be given to each stockholder of record entitled
to vote at the meeting, not less than 30 days prior to the day named for the
meeting. Every notice of a special meeting shall state the purpose or purposes
thereof.

        Whenever the language of a proposed resolution is included in a written
notice of a meeting of stockholders the resolution may be adopted at such
meeting with such clarifying or other amendments as do not enlarge its original
purpose without further notice to stockholder not present in person or by proxy.

        Section 3.05. The presence in person or by proxy of stockholders
entitled to case two-thirds of the votes which all stockholder are entitled to
cast on the particular matter shall constitute a quorum for the purpose of
considering such matter. Treasury shares shall not be counted in determining the
total number of outstanding shares for voting purposes at any given time. The
stockholders present in person or by proxy at a duly organized meeting can
continue to do business until adjournment, notwithstanding withdrawal of enough
stockholder to leave less than a quorum.
<PAGE>   2

                                      -2-


        If a meeting cannot be organized because a quorum has not attended, the
stockholders entitled to vote and present in person or represented by proxy may
adjourn the meeting to such time and place as they may determine. At any such
adjourned meeting at which a quorum may be present such business may be
transacted as might have been transacted at the meeting as originally called. No
notice of any adjourned meeting of the stockholders of the corporation shall be
required to be given, except by announcement of the time and place thereof at
the meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.

        Except as otherwise specified in these by-laws, or provided by statute,
the acts, at a duly organized meeting, of the stockholders present, in person,
or by proxy, entitled to cast at least a majority of the votes which all
stockholders present in person or by proxy are entitled to cast shall be the
acts of the stockholders.

        Section 3.06. At every meeting of the stockholders, the president or, in
his or her absence, a chairman chosen by the stockholders entitled to cast a
majority of the votes which all stockholders present in person or by proxy are
entitled to cast, shall act as chairman, and the secretary, or, in his absence,
an assistant secretary, or in the absence of both the secretary and assistant
secretaries, a person appointed by the chairman, shall act as secretary .

        Section 3.07. Every stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy.
Every proxy shall be executed in writing by the stockholder or by his duly
authorized attorney in fact and filed with the secretary of the corporation. A
proxy, unless coupled with an interest, shall be revocable at will,
notwithstanding any other agreement or any provision in the proxy to the
contrary, but the revocation of a proxy shall not be effective until notice
thereof has been given to the secretary of the company. No unrevoked proxy shall
be valid after three years from the date of its execution, unless the proxy
provides for a longer period. A proxy shall not be revoked by the death or
incapacity of the maker unless, before the vote is counted or the authority is
exercised, written notice of such death or incapacity is given to the secretary
of the company. A stockholder shall not sell his vote or execute a proxy to any
person for any sum of money or anything of value.

        Every stockholder of record except the holder of shares which have been
called for redemption and with respect to which an irrevocable deposit of funds
has been made, shall have the right, at every stockholders meeting, to one vote
for every share, and to a fraction of a vote equal to every fractional share.
Treasury shares shall not be voted, directly or indirectly, at any meeting of
stockholders or be counted in connection with the expression of consent or
dissent to corporate action in writing without a meeting.








<PAGE>   3

                                      -3-


        Section 3.09. Any action (except any action with respect to an amendment
of the certificate or plan under which a class or classes of stockholders are
by statute entitled to claim the right to valuation of and payment for their    
shares) which may be taken at a meeting of stockholders or of a class of
stockholders may be taken without a meeting, if a consent or consents in
writing to such action, setting forth the action so taken, shall be signed by
stockholders entitled to cast a majority of the total number of votes which all
stockholders of the corporation or of a class of stockholders are entitled by
the certificate to cast upon such action and shall be filed with the secretary
of the corporation. Such action shall not become effective until after at least
ten days' written notice of such action shall have been given to each
stockholder of record entitled to vote thereon.

        Section 3.10. The vote on the election of directors, and other questions
properly brought before any meeting, need not be by ballot except when so
demanded by at least a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, or when so ordered by the chairman of
such meeting.

                                   ARTICLE IV
                               Board of Directors
                               ------------------

        Section 4.01. The board of directors shall have full power to conduct,
manage, and direct the business and affairs of the corporation; and all powers
of the corporation, except those specifically reserved or granted to the
stockholders by statute or by the certificate or by these by-laws, are hereby
granted to and vested in the board of directors.

        Section 4.02. The company shall have a board of directors consisting of
not less than seven members. The number of directors to constitute the whole
board shall be fixed by the board of directors prior to each meeting of
stockholders for the election of directors and stated in the notice of such
meeting. The directors shall be chosen at the annual meeting of stockholders or
at any meeting held in lieu thereof, or at any special meeting of stockholders
for electing directors. All directors of the corporation shall be natural
persons of full age and stockholders in the corporation, but need not be
residents of Pennsylvania. Each director shall have been elected and qualified,
except in the event of his death, resignation or removal.

        Section 4.03. Regular meetings of the board of directors may be held in
such places, within or without the State of Pennsylvania, and at such times as
the board may from time to time determine, and if so determined, notices thereof
need not be given. If the date fixed for any such regular meeting be a legal
holiday under the laws of the state where such meeting is to be held, then the
same shall be held on the next succeeding business day, not a Saturday, or at
such other time as may be determined by resolution of the board of directors.
Special meetings of the board of directors may be held at any time or place,
whenever called by the president or a majority of the directors, notice thereof
being given by the secretary or the president, or the directors calling the
meeting, to each director. Special meetings of the board of directors may also
be held without formal notice, provided all directors are present or those not
present have waived notice thereof.



<PAGE>   4

                                      -4-


        At every meeting of the board of directors, the president, or in his or
her absence, a chairman chosen by a majority of the directors present, shall
preside, and the secretary, or, in his absence, an assistant secretary, or in
the absence of the secretary and the assistant secretaries, any person
appointed by the chairman of the meeting, shall act as secretary.

        Section 4.04. A majority of the directors in office shall be present at
each meeting in order to constitute a quorum for the transaction of business.

        Except as otherwise specified in these by-laws or provided by statute,
the acts of a majority of the directors present at a meeting at which a quorum
is present shall be the acts of the board of directors. In the absence of a
quorum, a majority of the directors present may adjourn the meeting from time to
time until a quorum be present, and no notice of any adjourned meeting need be
given, other than by announcement at the meeting. The directors shall act only
as a board and the individual directors shall have no power as such, provided,
however, that any action which may be taken at a meeting of the board may be
taken without a meeting if a consent or consents in writing setting forth the
action so taken shall be signed by all of the directors.

        Section 4.05. Immediately after each annual election of directors, the
newly elected board of directors shall meet for the purpose of organization,
election of officers, and the transaction of other business, at the place where
said election of directors was held. Notice of such meeting need not be given.
Such organization meeting may be held at any other time or place which shall be
specified in a notice given as hereinbefore provided for special meetings of the
board of directors.

        Section 4.06. The board of directors, by resolution adopted by a
majority of the whole board, may designate an executive committee and one or
more other committees, each committee to consist of two or more directors. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member, and the alternate or
alternates, if any, designated for such member, of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another director
to act at the meeting in the place of any such absent or disqualified member.

        Between meetings of the board, the executive committee shall have and
exercise all of the authority of the board in the management of the business and
affairs of the company and any other committee shall have and exercise the
authority of the board to the extent provided in the resolution designating the
committee.

        A majority of the directors in office designated to a committee, or
directors designated to replace them as provided in this section, shall be
present at each meeting to constitute a quorum for the transaction of business
and the acts of a majority of the directors in office designated to a committee
or their replacements shall be the acts of the committee.






<PAGE>   5

                                      -5-



        Section 4.07. No contract or transaction between the company and one or
more of its directors or officers, or between the company and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for such reason, or solely because
the director or officer is present at or participates in the meeting of the
board which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:

        (1) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the board of directors and noted in
the minutes thereof and the board authorizes, approves or ratifies the
transaction in good faith by a vote sufficient for the purpose without counting
the vote or votes of any interested officers or directors; or

        (2) The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transactions is specifically approved in good faith
by vote of the stockholders; and

        (3) The contract or transaction is fair as to the company as of the time
it is authorized, approved or ratified, by the board of directors or the
stockholders .

Interested directors may be counted in determining the presence of a quorum at a
meeting of the board of directors which authorizes a contract or transaction
specified in this section.

        Section 4.08. The board of directors may declare vacant the office of a
director if he be declared of unsound mind by an order of court, or convicted of
felony, or for any other proper cause, or if within sixty days after notice of
his election, he does not accept such office either in writing or by attending a
meeting of the board of directors.

        In case of any vacancy in the board of directors through death,
resignation, removal, disqualification or otherwise, the remaining directors may
by vote of a majority of said directors, fill such vacancy for the unexpired
term; provided that immediately after filling such vacancy at least 2/3 of the
directors then serving were elected by the holders of the outstanding voting
securities of the company at an annual or special meeting of stockholders called
for that purpose. If at any time less than a majority in number of the board of
directors of that company shall not have been elected by the holders of the
outstanding voting securities of the corporation at an annual or special meeting
called for that purpose, then the board of directors of the company or secretary
shall forthwith call a special meeting of the stockholders to be held as
promptly as possible and in any event within sixty days for the purpose of
filling any existing vacancies on the board of directors.


<PAGE>   6

                                      -6-



        Section 4.09. The stockholders may at any meeting called for the
purpose, by vote remove from office any director and fill the vacancy in the
board thus caused. The board of directors may by vote of not less than a
majority of the directors then in office remove from office any director,
officer or agent elected or appointed by them and may, for misconduct, remove
any thereof elected by the stockholders.

        Section 4.10. Any director of the company may resign at any time by
giving written notice to the president or the secretary of the company. Such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.

        Section 4.11. Each director shall be paid such reasonable fee, if any,
as shall be fixed by the board of directors for each meeting of the board of
directors or committee of directors which he shall attend and may be paid such
other compensation for his services as a director as may be fixed by the board
of directors.


                                   ARTICLE V
                                    Officers
                                    --------

        Section 5.01. The officers of the company shall be chosen by the board
of directors as soon as practicable after the annual meeting of the
stockholders. These shall include a president, one or more vice presidents, a
secretary, and a treasurer and investment officer. The board of directors, or
the executive committee may also in its discretion appoint other officers, who
shall have such authority and perform such duties as the board or the executive
committee may determine. The board of directors may fill any vacancy which may
occur in any office. Any offices, except those of president and secretary, may
be held by the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity, if such an instrument is required by
law or these by-laws to be executed, acknowledge or verified by two or more
officers.

        Section 5.02. The officers of the company shall be elected annually by
the board of directors, and each such officer shall hold his office until the
next annual organization meeting of directors and until his successor shall have
been duly chosen and qualified, or until his death, resignation or removal by
the board of directors.

        Section 5.03. Subject to such limitations as the board of directors may
from time to time prescribe, the officers of the company shall each have such
powers and duties as generally appertain to their respective offices, as well as
such powers and duties as from time to time may be conferred by the board of
directors.








<PAGE>   7
                                      -7-

                                   ARTICLE VI

                                    Notices
                                    -------

        Section 6.01. Whenever under the provisions of the statutes of the
certificate of incorporation or of these by-laws notice is required to be given
to any director, committee member, officer or stockholder, such notice may be
given, in the case of stockholders, in writing, by mail, by depositing the same
in a United States Post Office or letter box, addressed to such stockholder, at
such address as appears on the books of the Company, or, in default of to his
address, to such stockholder at the General Post Office in the City of
Philadelphia, Pennsylvania by telephone, or by mail or by telegram to the last
business address known to the secretary of the corporation, and such notice
shall be deemed to be given at the time when the same shall be thus mailed or
telephone or telegraphed. Notice shall not be construed to mean personal notice.

        Section 6.02. Whenever any written notice is required to be given under
the provisions of these by-laws, or the Insurance Law of the State of
Pennsylvania, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Except in the case of a
special meeting of stockholders, neither the business to be transacted at, nor
the purpose of, the meeting need be specified in the waiver of notice of such
meeting.

        Attendance of a person, either in person or by proxy, at any meeting,
shall constitute a waiver of notice of such meeting, except where a person
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.

        Section 6.03. One or more directors or stockholders may participate in a
meeting of the board, of a committee of the board or of the stockholders by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.

                                  ARTICLE VII
                               General Provisions
                               ------------------

        Section 7.01. All checks, drafts, orders for instructions for the
payment of money and all notes of the company shall be signed by such officer or
officers or such other person or persons and in such manner as the board of
directors may from time to time designate.

        Section 7.03. Except as otherwise provided in these by-laws or as the
board of directors may generally or in particular cases authorize the execution
thereof in some manner, all deeds, leases, transfers, contracts, bonds, notes,
checks, drafts and all other obligations made, accepted or endorsed by the
company and all endorsements, assignments, transfers, stock powers or other
instruments of transfers of securities owned by or standing in the name of the
company shall be signed or executed by an officer of the company, who shall be
the president, a vice president, the secretary or the treasurer.



<PAGE>   8

                                      -8-


        Section 7.04. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its incorporation, the words "Corporate Seal,
Pennsylvania," and such other appropriate legend as the Board of Directors may
from time to time determine. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.

                                  ARTICLE VIII
                       Redemption or Repurchase of Shares
                       ----------------------------------

        Section 8.01. The company shall redeem or repurchase all shares offered
by any noncorporate shareholder subject to the conditions set forth in an
agreement dated May 13, 1981. This agreement has been assented to by the company
and all noncorporate shareholders.

                                   ARTICLE IX
                      Contracts of Insurance and Annuities
                      ------------------------------------

        Section 9.01. 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 or a Vice President, or signed
with the facsimile signature of one of the aforementioned officers engraved,
lithographed or impressed thereon, and attested or countersigned by the actual
signature of any one of the following officers: The Secretary, an Assistant
Secretary, the Treasurer, an Assistant Treasurer, a Registrar, or an Assistant
Registrar.

                                   ARTICLE X
                   Other Contracts, Transfers and Conveyances
                   ------------------------------------------

        Section 10.01. The President, a Vice President, or the Treasurer, 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 to 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








<PAGE>   9

                                      -9-




        (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 IX.

                                   ARTICLE XI
                               Deposits of Money
                               -----------------

        Section 11.01. 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 11.02. 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, a Vice
President, the Treasurer, unless special authority be given therefore by
Resolution of the Board of Directors.

                                  ARTICLE XII
            Indemnification of Directors, Officers and Other Persons
            --------------------------------------------------------

        Section 12.01. 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 attorneys' 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 judgment or fine in, any
such action, suit 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. A judgment entered in connection
with a compromise or dismissal or settlement of any such action, suit or other
proceeding shall not of itself be deemed an adjudication of negligence or
misconduct. The indemnification herein provided shall not be exclusive of any
other rights to which the persons indemnified may be entitled.

                                  ARTICLE XIII
                             Amendments to By-Laws
                             ---------------------

        Section 13.01. The By-Laws of the Company may be changed, altered and
amended from time to time by the Board of Directors.

<PAGE>   1
                                                                    Exhibit 8(a)

                            PARTICIPATION AGREEMENT
                            -----------------------

                                  By and Among

                            MARKET STREET FUND, INC.
                            -----------------------

                                      And

              PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA
              ---------------------------------------------------

                                      And

                             PML SECURITIES COMPANY
                             ----------------------


        THIS AGREEMENT, made and entered into this ____ day of _________ 1993 by
and among PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA, a Delaware
Corporation (hereinafter the "Company"), on its own behalf and on behalf of
PROVIDENTMUTUAL VARIABLE ANNUITY SEPARATE ACCOUNT and PROVIDENTMUTUAL VARIABLE
LIFE SEPARATE ACCOUNT (hereinafter, 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 contracts and
variable annuity contracts to be offered by insurance companies which have
entered 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 



<PAGE>   2

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
annuity and variable life contracts (the "Contracts") under the 1933 Act; and

        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 and Delaware, to set aside and
invest assets attributable to the Contracts; and

        WHEREAS, the Company has registered the Accounts as unit


                                      -2-

<PAGE>   3

investment trusts 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 Contracts 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 promise, 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 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


                                      -3-

<PAGE>   4

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 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 Contracts shall be invested in the Fund, or in the Company's
general account;


                                      -4-

<PAGE>   5

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 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; 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 Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Fund will be recorded in an appropriate title for the
Account or the appropriate subaccount of the 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 dividends and distributions as are payable on the
Portfolio shares in


                                      -5-
<PAGE>   6

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 Contracts are or will
be registered under the 1933 Act and that the Contracts 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 under Section 40-37-109 of
the Pennsylvania Insurance Code Title 18, Section 2932 of the Delaware Insurance
Code and has registered the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act to serve as segregated investment accounts
for the Contracts, and that it will maintain such registrations for so long as
any Contracts are outstanding. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statements
under the 1940


                                      -6-

<PAGE>   7



Act for the Accounts from time to time as required in order to effect the
continuous offering of the Contracts or as may otherwise be required by
applicable law. The Company shall register and qualify the Contracts 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
Contracts are currently and at the time of issuance will be treated as annuity
contracts or life insurance policies 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 Contracts 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 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.

                                      -7-

<PAGE>   8


        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 Delaware 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 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-l, 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-l to finance distribution
expenses.


                                      -8-



<PAGE>   9

        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 Contract owners and applicants. The
Underwriter shall print and distribute, at the Fund's expense, as many copies as
necessary for distribution to existing Contract 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 Contracts 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.

        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 Contract who
requests such Statement or, at the Company's expense,


                                      -9-

<PAGE>   10

to any prospective Contract 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 Contract owners or participants.

        3.4. If and to the extent required by law the Company shall:

                (i)     solicit voting instructions from Contract owners or
                        participants;

                (ii)    vote the Fund shares held in the Accounts in accordance
                        with instructions received from Contract owners or
                        participants; and

                (iii)   vote Fund shares held in the Account 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 contract owners. The Company
reserves the right to vote Fund 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


                                     - 10 -
<PAGE>   11

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.

        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


                                     - 11 -


<PAGE>   12

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 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 the Accounts which are in the public domain
or approved by the Company for distribution to Contract 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,


                                     - 12 -

<PAGE>   13

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.



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-l 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 Contracts 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


                                     - 13 -

<PAGE>   14

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 Contract 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-l under the 1940 Act.



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 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


                                     - 14 -
<PAGE>   15

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 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. 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 contract 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


                                     - 15 -

<PAGE>   16

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 (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 or variable life
insurance 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 (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 Contract owner voting instructions, and the Company's
judgment represents a minority position or would preclude a majority vote, the
Company is permitted to withdraw an Account's or the Accounts' investment in the
Fund. The Underwriter and Fund shall continue to accept and implement orders


                                     - 16 -

<PAGE>   17

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 an
Account's or the Accounts' 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 the Accounts' 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 the
Accounts' 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 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.

        7.7. If and to the extent that Rule 6e-2 and Rule 6e3(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


                                     - 17 -
<PAGE>   18

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.



ARTICLE VIII.  INDEMNIFICATION

8.1.    INDEMNIFICATION BV 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


                                     - 18 -
<PAGE>   19

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
                        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 by or on behalf of the Company (other
                        than statements or representations contained in the
                        Contract or Fund registration statement, the Contract or
                        Fund prospectus or sales literature for the Contracts 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 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 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

                                     - 19 -

<PAGE>   20

                (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 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 Contracts 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


                                     - 20 -

<PAGE>   21


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 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 for the
                        Fund (or any amendment or supplement thereto) 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 Contracts or in the
                        Contract or Fund registration statement, the Contract or
                        Fund prospectus or sales literature for the Contracts 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 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 literature covering the
                        Contracts (or

                                     - 21 -

<PAGE>   22

                        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.

        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 Contracts 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


                                     - 22 -
<PAGE>   23

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 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 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 Contracts or the
                        Contract or Fund registration statement or the Contract
                        or Fund prospectus or sales literature for the Contract
                        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

                                     - 23 -
<PAGE>   24

                                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
                                the registration statement or prospectus or
                                sales literature covering the Contracts (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
                                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


                                     - 24 -

<PAGE>   25

them in connection with the issuance or sale of the Fund Shares or the Contracts
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 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 thereof. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the

                                    - 25 -


<PAGE>   26

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 thereof 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.





                                     - 26 -
<PAGE>   27

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 State of Delaware.

        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 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 Contracts 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 NASD, the SEC, the -Pennsylvania Insurance
Commissioner or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Contracts, the operation of the
Accounts, or the purchase of the Fund shares; or


                                     - 27 -
<PAGE>   28


        (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

        (e) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract owners having an
interest in the 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 Contracts for which those Portfolio shares had
been selected to serve as the underlying investment media. The Company will give
30 days' 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 contract 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 the
Account's investment in the Fund because the Company's disregard of voting
instructions could conflict with the majority of contract owner voting
instructions and if the Company's judgment represents a minority position or
would preclude a


                                     - 28 -

<PAGE>   29

majority vote; or

        (h) at the option of the Company if the Company has withdrawn the
Account or Accounts investment in the Fund because a particular state insurance
regulator's decision applicable to the 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 Subchapter 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 Contract owner initiated
transactions, or as required by state insurance laws or regulations, 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), and the
Company shall not prevent Contract owners from allocating payments to a
Portfolio


                                     - 29 -

<PAGE>   30

that was otherwise available under the Contracts, until 90 days after the
Company shall have notified the Fund or Underwriter 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;

          Mr. Stanley R. Reber
          President
          Market Street Fund, Inc.
          1600 Market Street
          Philadelphia, PA  19103

          If to the Company:

          Ms. Linda E. Senker
          Legal Officer
          Providentmutual Life and Annuity Company of America
          1600 Market Street
          Philadelphia, PA  19103

          If to the Underwriter:

          Mr. Lance Reihl
          President
          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


                                     - 30 -

<PAGE>   31


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 (including without limitation the names and addresses
of the owners of the Contracts) 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


                                     - 31 -

<PAGE>   32

books and records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby.

        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:

                                   PROVIDENTMUTUAL LIFE AND ANNUITY
                                   COMPANY OF AMERICA



SEAL                                By: _______________________________________

                                    Date: _____________________________________


                                    Fund:

                                    MARKET STREET FUND, INC.


SEAL                                By: _______________________________________

                                    Date: _____________________________________



                                    Underwriter:

                                    PML SECURITIES COMPANY

SEAL                                By: _______________________________________

                                    Date: _____________________________________



                                    - 32 -

<PAGE>   1
                                                                     EXHIBIT 8.D


                          FUND PARTICIPATION AGREEMENT

LAST UPDATED 5/28/97

         THIS AGREEMENT made as of the ___ day of __________, 1998, by and
between NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), a Delaware
business trust, ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), a New York common
law trust, NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"), a New
York corporation, and PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA ("LIFE
COMPANY"), a life insurance company organized under the laws of the State of
Delaware.

         WHEREAS, TRUST and MANAGERS TRUST are registered with the Securities
and Exchange Commission ("SEC") under the Investment Company Act of 1940, as
amended ("40 Act") as open-end, diversified management investment companies; and

         WHEREAS, TRUST is organized as a series fund comprised of several
portfolios ("Portfolios"), the currently available of which are listed on
Appendix A hereto; and

         WHEREAS, MANAGERS TRUST is organized as a series fund, comprised of
several portfolios ("Series"), the currently operational of which are listed on
Appendix A hereto; and

         WHEREAS, each Portfolio of TRUST will invest all of its net investable
assets in a corresponding Series of MANAGERS TRUST; and

         WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts of such life
insurance companies ("Participating Insurance Companies") and also offers its
shares to certain qualified pension and retirement plans; and

         WHEREAS, TRUST has received an order from the SEC, dated May 5,1995
(File No. 812-9164), 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 '40 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 and
certain qualified pension and retirement plans (the "Order"); and

         WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having TRUST as one of the underlying funding vehicles for such
Variable Contracts; and
<PAGE>   2
         WHEREAS, N&B MANAGEMENT is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 and as a broker-dealer under
the Securities Exchange Act of 1934, as amended; and

         WHEREAS, N&B MANAGEMENT is the administrator and distributor of the
shares of each Portfolio of TRUST and investment manager of the corresponding
Series of MANAGERS TRUST; and

         WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at net asset value;

         NOW, THEREFORE, in consideration of their mutual promises, LIFE
COMPANY, TRUST, MANAGERS TRUST and N&B MANAGEMENT agree as follows:

                         Article I. SALE OF TRUST SHARES

         1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed in Appendix B for investment
of proceeds from Variable Contracts allocated to the designated Separate
Accounts, such shares to be offered as provided in TRUST's Prospectus.

         1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY shall be the designee of TRUST for receipt of such orders from LIFE
COMPANY and receipt by such designee shall constitute receipt by TRUST; provided
that TRUST receives notice of such order by 8:30 a.m. New York 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 TRUST calculates its net asset
value pursuant to the rules of the SEC.

         1.3 TRUST agrees to redeem for cash, on LIFE COMPANY's request, any
full or fractional shares of TRUST held by LIFE COMPANY, executing such requests
on a daily basis at the net asset value next computed after receipt by TRUST or
its designee of the request for redemption. For purposes of this Section 1.3,
LIFE COMPANY shall be the designee of TRUST for receipt of requests for
redemption from LIFE COMPANY and receipt by such designee shall constitute
receipt by TRUST; provided that TRUST receives notice of such request for
redemption by 8:30 a.m. New York time on the next following Business Day.

         1.4 TRUST shall furnish, on or before the ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of TRUST. LIFE 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 the Portfolio. TRUST 



                                       2
<PAGE>   3
shall notify LIFE COMPANY of the number of shares so issued as payment of such
dividends and distributions.

         1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.

         1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined shall
be transmitted to TRUST by LIFE COMPANY by 8:30 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.

         1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account on the day the order is transmitted by LIFE
COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption
proceeds to LIFE COMPANY by the next Business Day, unless doing so would require
TRUST to dispose of portfolio securities or otherwise incur additional costs,
but in such event, proceeds shall be wired to LIFE COMPANY within seven days and
TRUST shall notify the person designated in writing by LIFE COMPANY as the
recipient for such notice of such delay by 3:00 p.m. New York Time the same
Business Day that LIFE COMPANY transmits the redemption order to TRUST. If LIFE
COMPANY's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another fund administered or
distributed by N&B MANAGEMENT, TRUST shall so apply such proceeds the same
Business Day that LIFE COMPANY transmits such order to TRUST.

         1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend
the right of redemption or postpone the date of payment or satisfaction upon
redemption consistent with Section 22(e) of the 40 Act and any rules thereunder.

         1.9 TRUST agrees that all shares of the Portfolios of TRUST will be
sold only to Participating Insurance Companies which have agreed to participate
in TRUST to fund their Separate Accounts and/or to certain qualified pension and
other retirement plans, all in accordance 


                                       3
<PAGE>   4
with the requirements of Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code") and Treasury Regulation 1.817-5. Shares of the Portfolios of
TRUST will not be sold directly to the general public.

         1.10 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the 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 of Trustees of TRUST, acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
deemed necessary and in the best interests of the shareholders of such
Portfolios.

                   Article II. REPRESENTATIONS AND WARRANTIES

         2.1 LIFE COMPANY represents and warrants that it is an insurance
company duly organized and in good standing under the laws of
____________________ and that it has legally and validly established each
Separate Account as a segregated asset account under such laws, and that
____________________, the principal underwriter for the Variable Contracts, is
registered as a broker-dealer under the Securities Exchange Act of 1934.

         2.2 LIFE COMPANY represents and warrants that it has registered or,
prior to any issuance or sale of the Variable Contracts, will register each
Separate Account as a unit investment trust ("UIT") in accordance with the
provisions of the '40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable Contracts,
unless an exemption from registration is available.

         2.3 LIFE COMPANY represents and warrants that the Variable Contracts
will be registered under the Securities Act of 1933 (the "`33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts and that the Variable Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and further that the sale of the Variable Contracts shall comply in all material
respects with state insurance law suitability requirements.

         2.4 LIFE COMPANY represents and warrants that the Variable Contracts
are currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Code, that it
will maintain such treatment and that it will notify TRUST immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.

         2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as required to be delivered under applicable
federal or state law and interpretations of federal and state securities
regulators thereunder in connection with the offer, sale or acquisition of the
Variable Contracts.


                                       4
<PAGE>   5
         2.6  TRUST represents and warrants that the Portfolio shares offered 
and sold pursuant to this Agreement will be registered under the '33 Act and
sold in accordance with all applicable federal and state laws, and TRUST shall
be registered under the '40 Act prior to and at the time of any issuance or sale
of such shares. TRUST shall amend its registration statement under the '33 Act
and the '40 Act from time to time as required in order to effect the continuous
offering of its shares. 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 TRUST.

         2.7  TRUST represents and warrants that each Portfolio will comply with
the diversification requirements set forth in Section 817(h) of the Code, and
the rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE 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.

         2.8  TRUST represents and warrants that each Portfolio invested in by
the Separate Account 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 LIFE COMPANY immediately upon having a reasonable
basis for believing it has ceased to so qualify or might not so qualify in the
future.

                  Article III. PROSPECTUS AND PROXY STATEMENTS

         3.1  TRUST shall prepare and be responsible for filing with the SEC 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 TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes to which an issuer is subject on the issuance and transfer of its
shares.

         3.2  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 existing Variable Contract owners of LIFE
COMPANY:

              (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 TRUST for
reimbursement by 



                                       5
<PAGE>   6
TRUST. LIFE COMPANY shall monitor such costs and shall use its best efforts to
control these costs. LIFE COMPANY will provide TRUST on a semi-annual basis, or
more frequently as reasonably requested by TRUST, with a current tabulation of
the number of existing Variable Contract owners of LIFE COMPANY whose Variable
Contract values are invested in TRUST. This tabulation will be sent to 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. If
requested by LIFE COMPANY, 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 LIFE COMPANY to
print together in one document the current prospectus for the Variable Contracts
issued by LIFE COMPANY and the current prospectus for the TRUST. Should LIFE
COMPANY wish to print any of these documents in a format different from that
provided by TRUST, LIFE COMPANY shall provide Trust with sixty (60) days' prior
written notice and LIFE COMPANY shall bear the cost associated with any format
change.

         3.3 TRUST will provide, at its expense, LIFE COMPANY with the following
TRUST (or individual Portfolio) documents, and any supplements thereto, with
respect to prospective Variable Contract owners of LIFE COMPANY:

             (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)     camera-ready copy of the annual and semi-annual
                      reports for printing by the LIFE COMPANY.

         3.4 TRUST will provide LIFE COMPANY with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide TRUST with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account promptly after the filing of each
such document with the SEC or other regulatory authority.

                           Article IV. SALES MATERIALS

         4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST
and N&B MANAGEMENT, each piece of sales literature or other promotional material
in which TRUST, MANAGERS TRUST or N&B MANAGEMENT is named, at least fifteen (15)
Business Days 


                                       6
<PAGE>   7
prior to its intended use. No such material will be used if TRUST, MANAGERS
TRUST or N&B MANAGEMENT objects to its use in writing within ten (10) Business
Days after receipt of such material.

         4.2 TRUST and N&B MANAGEMENT will furnish, or will cause to be
furnished, to LIFE COMPANY, each piece of sales literature or other promotional
material in which LIFE COMPANY or its Separate Accounts are named, at least
fifteen (15) Business Days prior to its intended use. No such material will be
used if LIFE COMPANY objects to its use in writing within ten (10) Business Days
after receipt of such material.

         4.3 TRUST and its affiliates and agents shall not give any information
or make any representations on behalf of LIFE COMPANY or concerning LIFE
COMPANY, the Separate Accounts, or the Variable Contracts issued by LIFE
COMPANY, other than the information or representations contained in a
registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports of the Separate Accounts or reports prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by LIFE COMPANY or its designee, except with
the written permission of LIFE COMPANY.

         4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST.

         4.5 For purposes of this Agreement, the phrase "sales literature or
other promotional material" or words of similar import include, without
limitation, 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 (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
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 National Association of Securities Dealers, Inc.
rules, the '40 Act or the '33 Act.

                         Article V. POTENTIAL CONFLICTS

         5.1 The Board of Trustees of TRUST and MANAGERS TRUST (the "Boards")
will monitor TRUST and MANAGERS TRUST, respectively, (collectively the "Funds"),
for the existence of any material irreconcilable conflict between the interests
of the Variable Contract 




                                       7
<PAGE>   8
owners of Participating Insurance Company Separate Accounts investing in the
Funds. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) state insurance regulatory authority action; (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; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
the Funds are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners or by contract
owners of different Participating Insurance Companies; or (f) a decision by a
Participating Insurance Company to disregard voting instructions of Variable
Contract owners.

         5.2 LIFE COMPANY will report any potential or existing conflicts to the
Boards. LIFE COMPANY will be responsible for assisting each appropriate Board in
carrying out its responsibilities under the Conditions set forth in the notice
issued by the SEC for the Funds on April 12, 1995 (the "Notice") (Investment
Company Act Release No. 21003), which LIFE COMPANY has reviewed, by providing
each appropriate Board with all information reasonably necessary for it to
consider any issues raised. This responsibility includes, but is not limited to,
an obligation by LIFE COMPANY to inform each appropriate Board whenever Variable
Contract owner voting instructions are disregarded by LIFE COMPANY. These
responsibilities will be carried out with a view only to the interests of the
Variable Contract owners.

         5.3 If a majority of the Board of a Fund or a majority of its
disinterested trustees or directors, determines that a material irreconcilable
conflict exists, affecting the LIFE COMPANY, LIFE COMPANY, at its expense and to
the extent reasonably practicable (as determined by a majority of disinterested
trustees or directors), will take any steps necessary to remedy or eliminate the
irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Funds or any series
thereof and reinvesting those assets in a different investment medium, which may
include another series of TRUST or MANAGERS TRUST, or another investment company
or submitting the question as to whether such segregation should be implemented
to a vote of all affected Variable Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., Variable Contract owners
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract owners the option of
making such a change; and (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 Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of the relevant Fund, to withdraw its Separate Account's investment in
such Fund, and no charge or penalty will be imposed as a result of such
withdrawal. The responsibility to take such remedial action shall be carried out
with a view only to the interests of the Variable Contract owners.

         For the purposes of this Section 5.3, a majority of the disinterested
members of the applicable Board shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the relevant Fund or N&B MANAGEMENT (or any other investment adviser of the
Funds) be required to establish a new funding medium for 



                                       8
<PAGE>   9
any Variable Contract. Further, LIFE COMPANY shall not be required by this
Section 5.3 to establish a new funding medium for any Variable Contract if any
offer to do so has been declined by a vote of a majority of Variable Contract
owners materially affected by the irreconcilable material conflict.

         5.4 Any Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.

         5.5 No less than annually, LIFE COMPANY shall submit to the Boards such
reports, materials or data as such Boards may reasonably request so that the
Boards may fully carry out the obligations imposed upon them by these
Conditions. Such reports, materials, and data shall be submitted more frequently
if deemed appropriate by the applicable Boards.

                               Article VI. VOTING

         6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as the SEC continues to interpret the '40 Act
as requiring pass-through voting privileges for Variable Contract owners. This
condition will apply to UIT Separate Accounts investing in TRUST and to managed
separate accounts investing in MANAGERS TRUST to the extent a vote is required
with respect to matters relating to MANAGERS TRUST. Accordingly, LIFE COMPANY,
where applicable, will vote shares of a Fund held in its Separate Accounts in a
manner consistent with voting instructions timely received from its Variable
Contract owners. LIFE COMPANY will be responsible for assuring that each of its
Separate Accounts that participates in any Fund calculates voting privileges in
a manner consistent with other participants as defined in the Conditions set
forth in the Notice ("Participants"). The obligation to calculate voting
privileges in a manner consistent with all other Separate Accounts investing in
a Fund will be a contractual obligation of all Participants under the agreements
governing participation in the Funds. Each Participant will vote shares for
which it has not received timely voting instructions, as well as shares it owns,
in the same proportion as its votes those shares for which it has received
voting instructions.

         6.2 If and to the extent 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 '40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Order,
then TRUST, MANAGERS TRUST and/or the Participants, as appropriate, shall take
such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T), as
amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.


                                       9
<PAGE>   10
                          Article VII. INDEMNIFICATION

         7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless TRUST, MANAGERS TRUST, N&B MANAGEMENT and each of their
Trustees, directors, officers, employees and agents and each person, if any, who
controls TRUST or MANAGERS TRUST or N&B MANAGEMENT within the meaning of Section
15 of the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY, which
consent shall not be unreasonably withheld) 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 offer, sale or acquisition of TRUST's shares or the Variable
Contracts 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 Variable
                     Contracts or contained in the Variable 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, 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 LIFE COMPANY by or on behalf of
                     TRUST for use in the registration statement or prospectus
                     for the Variable Contracts or in the Variable Contracts or
                     sales literature (or any amendment or supplement) or
                     otherwise for use in connection with the sale of the
                     Variable Contracts or TRUST shares; or

              (b)    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 TRUST not supplied by LIFE COMPANY, or
                     persons under its control) or wrongful conduct of LIFE
                     COMPANY or persons under its control, with respect to the
                     sale or distribution of the Variable Contracts or TRUST
                     shares; or

              (c)    arise out of any untrue statement or alleged untrue
                     statement of a material fact contained in a registration
                     statement, prospectus, or sales literature of TRUST 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 if such statement or omission or
                     such alleged statement or omission was made in reliance
                     upon and in conformity with information furnished to TRUST
                     for inclusion therein by or on behalf of LIFE COMPANY; or


                                       10
<PAGE>   11
              (d)    arise as a result of any failure by LIFE COMPANY to
                     substantially provide the services and furnish the
                     materials 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 LIFE COMPANY in this
                     Agreement or arise out of or result from any other material
                     breach of this Agreement by LIFE COMPANY.

         7.2  LIFE 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
TRUST, whichever is applicable.

         7.3  LIFE 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 LIFE 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 LIFE COMPANY of any
such claim shall not relieve LIFE 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 an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
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 LIFE
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.

         7.4  Indemnification by N&B MANAGEMENT. N&B MANAGEMENT agrees to
indemnify and hold harmless LIFE COMPANY and each of its directors, officers,
employees, and agents and each person, if any, who controls LIFE COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of N&B MANAGEMENT which consent shall not be unreasonably
withheld) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or 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
offer, sale or acquisition of TRUST's shares or the Variable Contracts and:


                                       11
<PAGE>   12
              (a)    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 TRUST (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, 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 N&B MANAGEMENT
                     or TRUST by or on behalf of LIFE COMPANY for use in the
                     registration statement or prospectus for TRUST or in sales
                     literature (or any amendment or supplement) or otherwise
                     for use in connection with the sale of the Variable
                     Contracts or TRUST shares; or

              (b)    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 Variable Contracts not supplied by
                     N&B MANAGEMENT or persons under its control) or wrongful
                     conduct of TRUST or N&B MANAGEMENT or persons under their
                     control, with respect to the sale or distribution of the
                     Variable Contracts or TRUST shares; or

              (c)    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
                     Variable 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 statements therein not misleading, if
                     such statement or omission or such alleged statement or
                     omission was made in reliance upon and in conformity with
                     information furnished to LIFE COMPANY for inclusion therein
                     by or on behalf of TRUST; or

              (d)    arise as a result of (i) a failure by TRUST to
                     substantially provide the services and furnish the
                     materials under the terms of this Agreement; or (ii) a
                     failure by a Portfolio(s) invested in by the Separate
                     Account to comply with the diversification requirements of
                     Section 817(h) of the Code; or (iii) a failure by a
                     Portfolio(s) invested in by the Separate Account to qualify
                     as a "regulated investment company" under Subchapter M of
                     the Code; or

              (e)    arise out of or result from any material breach of any
                     representation and/or warranty made by N&B MANAGEMENT in
                     this Agreement or arise out of or result from any other
                     material breach of this Agreement by N&B MANAGEMENT.


                                       12
<PAGE>   13
         7.5  N&B MANAGEMENT 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
LIFE COMPANY.

         7.6  N&B MANAGEMENT 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 N&B MANAGEMENT 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 N&B MANAGEMENT of
any such claim shall not relieve N&B MANAGEMENT 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, N&B MANAGEMENT shall be entitled to participate
at its own expense in the defense thereof. N&B MANAGEMENT also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from N&B MANAGEMENT to such party of N&B MANAGEMENT's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and N&B MANAGEMENT
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.

                         Article VIII. TERM; TERMINATION

         8.1  This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.

         8.2  This Agreement shall terminate in accordance with the following
provisions:

              (a)    At the option of LIFE COMPANY or TRUST at any time from the
                     date hereof upon 180 days' notice, unless a shorter time is
                     agreed to by the parties;

              (b)    At the option of LIFE COMPANY, if TRUST shares are not
                     reasonably available to meet the requirements of the
                     Variable Contracts as determined by LIFE COMPANY. Prompt
                     notice of election to terminate shall be furnished by LIFE
                     COMPANY, said termination to be effective ten days after
                     receipt of notice unless TRUST makes available a sufficient
                     number of shares to reasonably meet the requirements of the
                     Variable Contracts within said ten-day period;


                                       13
<PAGE>   14
              (c)    At the option of LIFE COMPANY, upon the institution of
                     formal proceedings against TRUST by the SEC, or any other
                     regulatory body, the expected or anticipated ruling,
                     judgment or outcome of which would, in LIFE COMPANY's
                     reasonable judgment, materially impair TRUST's ability to
                     meet and perform Trust's obligations and duties hereunder.
                     Prompt notice of election to terminate shall be furnished
                     by LIFE COMPANY with said termination to be effective upon
                     receipt of notice;

              (d)    At the option of TRUST, upon the institution of formal
                     proceedings against LIFE COMPANY by the SEC, the National
                     Association of Securities Dealers, Inc., or any other
                     regulatory body, the expected or anticipated ruling,
                     judgment or outcome of which would, in TRUST's reasonable
                     judgment, materially impair LIFE COMPANY's ability to meet
                     and perform its obligations and duties hereunder. Prompt
                     notice of election to terminate shall be furnished by TRUST
                     with said termination to be effective upon receipt of
                     notice;

              (e)    In the event TRUST's shares are not registered, issued or
                     sold in accordance with applicable state or federal law, or
                     such law precludes the use of such shares as the underlying
                     investment medium of Variable Contracts issued or to be
                     issued by LIFE COMPANY. Termination shall be effective upon
                     such occurrence without notice;

              (f)    At the option of TRUST if the Variable Contracts cease to
                     qualify as annuity contracts or life insurance contracts,
                     as applicable, under the Code, or if TRUST reasonably
                     believes that the Variable Contracts may fail to so
                     qualify. Termination shall be effective upon receipt of
                     notice by LIFE COMPANY;

              (g)    At the option of LIFE COMPANY, upon TRUST's breach of any
                     material provision of this Agreement, which breach has not
                     been cured to the satisfaction of LIFE COMPANY within ten
                     days after written notice of such breach is delivered to
                     TRUST;

              (h)    At the option of TRUST, upon LIFE COMPANY's breach of any
                     material provision of this Agreement, which breach has not
                     been cured to the satisfaction of TRUST within ten days
                     after written notice of such breach is delivered to LIFE
                     COMPANY;

              (i)    At the option of TRUST, if the Variable Contracts are not
                     registered, issued or sold in accordance with applicable
                     federal and/or state law. Termination shall be effective
                     immediately upon such occurrence without notice;


                                       14
<PAGE>   15
              (j)    In the event this Agreement is assigned without the prior
                     written consent of LIFE COMPANY, TRUST, MANAGERS TRUST and
                     N&B MANAGEMENT, termination shall be effective immediately
                     upon such occurrence without notice.

         8.3  Notwithstanding any termination of this Agreement pursuant to
Section 8.2 hereof, TRUST at its option may elect to continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST so elects to make additional TRUST shares available, the
owners of the Existing Contracts or LIFE COMPANY, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. In the event of a termination
of this Agreement pursuant to Section 8.2 hereof, TRUST and N&B MANAGEMENT, as
promptly as is practicable under the circumstances, shall notify LIFE COMPANY
whether TRUST elects to continue to make TRUST shares available after such
termination. If TRUST shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either TRUST or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.

         8.4  Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts, until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.

                               Article IX. NOTICES

         Any notice hereunder shall be given by registered or certified mail
return receipt requested 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 TRUST, MANAGERS TRUST or N&B MANAGEMENT:

                    Neuberger&Berman Management Incorporated
                    605 Third Avenue
                    New York, NY 10158-0006
                    Attention: Ellen Metzger, General Counsel


                                       15
<PAGE>   16
                  
                                             If to LIFE COMPANY:







         Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.

                            Article X. MISCELLANEOUS

         10.1 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.

         10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.

         10.3 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.

         10.4 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 SEC granting exemptive
relief therefrom and the conditions of such orders.

         10.5 The parties agree that the assets and liabilities of each Series
are separate and distinct from the assets and liabilities of each other Series.
No Series shall be liable or shall be charged for any debt, obligation or
liability of any other Series. No Trustee, officer or agent shall be personally
liable for such debt, obligation or liability of any Series or Portfolio and no
Portfolio or other investor, other than the Portfolio or other investors
investing in the Series which incurs a debt, obligation or liability, shall be
liable therefor.

         10.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, 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.

         10.7 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.


                                       16
<PAGE>   17
         10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
MANAGERS TRUST, N&B MANAGEMENT and the LIFE COMPANY.

         IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Fund Participation Agreement as of the date and year
first above written.


NEUBERGER & BERMAN                          NEUBERGER & BERMAN
ADVISERS MANAGEMENT TRUST                   MANAGEMENT INCORPORATED

By:                                         By:
   -------------------------------             --------------------------------
Name:                                          Name:
Title:                                         Title:


ADVISERS MANAGERS TRUST                     PROVIDENTMUTUAL LIFE AND
                                            ANNUITY COMPANY OF AMERICA

By:                                         By:
   -------------------------------             --------------------------------
Name:                                          Name:
Title:                                         Title:


                                       17
<PAGE>   18
                                   APPENDIX A
<TABLE>
<CAPTION>
Neuberger&Berman Advisers                       Corresponding Series of
Management Trust and its Series (Portfolios)    Advisers Managers Trust (Series)
- --------------------------------------------    --------------------------------
<S>                                             <C>
Balanced Portfolio                              AMT Balanced Investments

Government Income Portfolio                     AMT Government Income Investments

Growth Portfolio                                AMT Growth Investments

Guardian Portfolio                              AMT Guardian Investments

International Portfolio                         AMT International Investments

Limited Maturity Bond Portfolio                 AMT Limited Maturity Bond Investments

Liquid Asset Portfolio                          AMT Liquid Asset Investments

Mid-Cap Growth Portfolio                        AMT Mid-Cap Growth Investments

Partners Portfolio                              AMT Partners Investments
</TABLE>


                                       18
<PAGE>   19
                                   APPENDIX B



Separate Accounts                                    Selected Portfolios
- -----------------                                    -------------------


                                       19

<PAGE>   1
                                                                    Exhibit 8(e)

                          FUND PARTICIPATION AGREEMENT



        The Providentmutual Life and Annuity Company of America (the "Company")
and TCI Portfolios, Inc. ("TCIP") and its investment adviser, Investors Research
Corporation ("Investors Research") hereby agree to an arrangement whereby shares
of TCI Growth and TCI Balanced (the "Funds") shall be made available to serve as
underlying investment media for variable life insurance contracts ("Contracts")
to be offered to the public by the Company, subject to the following provisions:

1.      ESTABLISHMENT OF SEPARATE ACCOUNT; AVAILABILITY OF FUNDS;
TCIP COMPLIANCE.

        (a) The Company represents that it has established 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, and the
Provident Mutual Variable Separate Account, separate accounts under Pennsylvania
law, and has registered them as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). The Provident Mutual Variable Separate
Account (the "Account") will serve as an investment vehicle for the Contracts.
The Contracts provide for the allocation of net amounts received by the Company
to separate subaccounts of the Account for investment in the shares of a

<PAGE>   2
specified investment company selected among those companies available through
the Account to act as underlying investment media. Selection of a particular
investment company is made by the Contract owner, who may change such selection
from time to time in accordance with the terms of the applicable Contract.

        (b) TCIP represents and warrants that shares of the Funds 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 state and federal law prior to their sale, and that
TCIP is and shall remain registered under the 1940 Act for so long as the shares
of the Funds are sold. TCIP further represents and warrants that the Funds
currently qualify and will make every reasonable effort to continue to qualify
as Regulated Investment Companies 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) as long as Contract owners
remain invested in one or both of the Funds, and that TCIP will notify the
Company immediately upon having a reasonable basis for believing that either of
the Funds has ceased to so qualify or that either of the Funds might not so
qualify in the future. TCIP agrees that its shares will be sold only to
insurance companies and their separate accounts with which it has entered into
participation agreements substantially identical to this Agreement. TCIP further
represents and warrants that the Funds will comply with Section 817(h) of the


                                      -2-


<PAGE>   3


Code, and all regulations issued thereunder, and that TCIP will notify the
Company immediately upon having a reasonable basis for believing that either of
the Funds has ceased to so comply or that either of the Funds might not so
qualify in the future.

2.      MARKETING AND PROMOTION.

        The Company agrees to use reasonable efforts to market its Contracts.
The prospectuses and sales literature for the Contracts will not give undue
emphasis to investment choices offered under the Contracts other than the Funds
to the detriment of the Funds. In addition, the Company shall not impose any
fee, condition, rule or regulation for the use by Contract owners of the Fund as
an investment option that operates to the specific prejudice of the Funds,
vis-a-vis the other investment options offered by the Company to Contract
owners. In marketing and administering its Contracts, the Company will comply in
all material respects with all applicable state and Federal laws.

3.      PRICING INFORMATION; ORDERS; SETTLEMENT.

        (a) TCIP will make shares of the Funds available to be purchased by the
Company on behalf of the Account at the net asset value applicable to each
order. Shares of the Funds shall be purchased and redeemed in such quantity and
at such time determined by the Company to be necessary to meet the requirements
of the Contracts. Issuance and transfer of the shares of the Funds will be by
book entry only.

        (b)     TCIP hereby appoints the Company as its agent for the
limited purpose of accepting purchase and redemption orders for


                                      -3-
<PAGE>   4

Shares of the Funds from the Account, based on allocations of net amounts to
subaccounts of the Account and other transactions relating to the Contracts or
the Account. Such orders for shares of the Funds for the Account, based on
premiums and transaction requests received by the Company from Contract owners
prior to the close of trading each day that the New York Stock Exchange (the
"Exchange") is open (each such day, a "business day") and other Contract
transactions effected as of the close of business on such business day, will be
executed by TCIP at the net asset value for such shares determined as of the
close of the Exchange on such business day. Any orders for shares of the Funds
for the Account, based on premiums or transaction requests received by the
Company from Contract owners on such day but after the close of the Exchange,
will be executed by TCIP at the net asset value determined as of the close of
business on the next business day following the day of receipt of such order.

        (c) TCIP shall furnish as soon as reasonably practicable (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 income dividends and capital gain
distributions as are payable on the shares of the Funds in additional shares of
that Fund. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash. TCIP shall
notify the Company by the end




                                      -4-



<PAGE>   5

of the next following business day of the number of shares so issued as payment
of such dividends and distributions.

        (d) TCIP will provide to the Company closing net asset value, dividend
and capital gain information as of the close of the Exchange each business day
by 6:00 p.m. Eastern Time on such day. The Company will send directly to TCIP or
its specified agent orders to purchase and/or redeem shares of the Funds on the
basis of such closing net asset value by 10:00 a.m. Eastern Time the following
business day. Payment for purchases of shares of the Funds (net of proceeds
payable on contemporaneous redemptions of shares of the Funds) will be wired by
the Company to a custodial account designated by TCIP in writing pursuant to
Section 13(b) of the Agreement to coincide with the order for shares of the
Funds. If TCIP provides incorrect share net value information, the Company shall
be entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct net asset value per share (and, if and to the extent
necessary, the Company shall make adjustments to the number of units credited
and/or unit values for the Contracts for the periods affected) . Any error in
the calculation or reporting of net asset value per share, dividend or capital
gains information greater than or equal to $.01 per share shall be reported
immediately upon discovery to the Company. Any error of a lesser amount shall be
corrected in the next business day's net asset value per share.

        (e)     Payment for net redemptions of shares of the Funds will
be wired by TCIP from the TCIP custodial account to an account


                                      -5-


<PAGE>   6

designated by the Company in writing pursuant to Section 13(b) of the Agreement,
the next business day after the Company transmits the redemption order to TCIP.

4.      EXPENSES.

        (a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by TCIP under this Agreement shall be paid by
Investors Research or TCIP, including the cost of registration of TCIP's shares
with the Securities and Exchange Commission (the "SEC") and in states where
required.

        (b) TCIP shall provide to the Company its proxy material, periodic fund
reports to shareholders and other material that are required by law to be sent
to Contract owners, in each case in a sufficient quantity for distribution to
Contract owners. In addition, TCIP shall provide the Company with a sufficient
quantity of its prospectuses and statements of additional information to be used
in connection with the offerings and transactions contemplated by this
Agreement. The cost of preparing and printing such materials shall be paid by
TCIP (or Investors Research to the extent that TCIP may not bear such costs),
and the cost of distributing such materials shall be paid the Company.

5. REPRESENTATIONS.

        The Company and its agents shall not, without the written consent of
TCIP, make written representations concerning TCIP or its shares except those
contained in the then current prospectuses and statements of additional
information, and in the then current printed sales literature of TCIP. Investors
Research,


                                      -6-


<PAGE>   7

TCIP and their agents shall not, without the written consent of the Company,
make written representations concerning the Company, the Account, or the
Contracts except those contained in the then current prospectus and statement of
additional information and in the then current printed sales literature for the
Contracts.

6.      ADMINISTRATION.

        (a) Administrative services for the Account or for purchasers of
Contracts are the responsibility of the Company and shall not be the
responsibility of TCIP or Investors Research. Administrative services for the
Funds and for purchasers of shares of the Funds are the responsibility of TCIP
or Investors Research.

        (b) TCIP and Investors Research recognize the Company as the sole
shareholder of TCIP shares issued under this Agreement. TCIP and Investors
Research further recognize that they will derive a substantial savings in
administrative expenses, such as significant reductions in postage expense and
shareholder communications and recordkeeping, by virtue of having a sole
shareholder of record rather than multiple shareholders having record ownership
of the shares issued under this Agreement.

        (c) The parties understand that Investors Research customarily pays, out
of its management fee, another affiliated corporation for the type of
administrative services to be provided by the Company with respect to
investments in shares of the Funds issued under this Agreement. In consideration
of the administrative savings resulting from such arrangement, Investors
Research agrees to pay to the Company an amount equal to    basis points (-


                                      -7-



<PAGE>   8

__%) per annum of the average aggregate amount invested by the Company under
this Agreement, commencing with the month in which the average aggregate market
value of investments by the Company (on behalf of the Contract owners) in the
Funds exceeds $10 million. No payment obligation shall arise until the Company's
average aggregate investment in the Funds reaches $10 million, and such payment
obligation, once commenced, shall be suspended with respect to any month during
which the Company's average aggregate investment in the Funds drops below $10
million. The parties agree that Investors Research's payments to the Company,
like Investors Research's payments to its affiliated corporation, are for
administrative services only and do not constitute payment in any manner for
investment advisory services or for costs of distribution.

        (d) For the purposes of computing the payment to the Company
contemplated by this Section 6, the average aggregate amount invested by the
Company over a one month period shall be computed by totalling the Company's
aggregate investment (share net asset value multiplied by total number of shares
held by the Company) on each business day during the month and dividing by the
total number of business days during such month.

        (e) Investors Research will calculate the payment contemplated by this
Section 6 at the end of each calendar quarter and will make such payment to the
Company within 30 days thereafter. The check for such payment will be
accompanied by a statement showing the calculation of the monthly amounts
payable by


                                      -8-



<PAGE>   9

Investors Research and such other supporting data as may be reasonably requested
by the Company.

7.   TERMINATION.

        This agreement shall terminate as to the sale and issuance of new
Contracts:

        (a) at the option of either the Company or TCIP upon six months' advance
written notice to the other; provided, however, that the Company may terminate
this Agreement immediately upon written notice to TCIP as to the sale and
issuance of new Contracts if the Company reasonably determines in good faith
that it is no longer in the interests of Contract owners or consistent with the
purposes of the Contracts to continue to offer the Funds as investment options;

        (b) at the option of the Company if TCIP shares are not available for
any reason to meet the requirements of the Contracts as determined by the
Company, provided that reasonable advance notice of election to terminate shall
be furnished by the Company;

        (c) at the option of either the Company or TCIP, upon institution of
formal proceedings against the broker-dealer or broker-dealers marketing the
Contracts, the Account, the Company, or TCIP by the National Association of
Securities Dealers, Inc. (the "NASD") the SEC or any other regulatory body;

        (d) at the option of TCIP, if TCIP reasonably determines in good faith
that the Company is not offering shares of the Funds in conformity with the
terms of this Agreement;


                                      -9-


<PAGE>   10

        (e) upon termination of the Management Agreement between TCIP and
Investors Research, notice of the occurrence of which shall be promptly
furnished to the Company; PROVIDED, HOWEVER, that this subsection (e) shall not
be deemed to apply if contemporaneously with such termination a new contract of
substantially similar terms is entered into between TCIP and Investors Research;

        (f) upon the requisite vote of Contract owners having an interest in
TCIP to substitute for the TCIP's shares the shares of another investment
company in accordance with the terms of Contracts for which TCIP's shares had
been selected to serve as the underlying investment medium; PROVIDED, HOWEVER,
that the Company shall give 60 days' written notice to TCIP of any proposed vote
to replace the Funds' shares;

        (g) upon assignment of this Agreement unless made with the written 
consent of all other parties hereto;

        (h) if TCIP's shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of shares of the Funds as the
underlying investment medium of Contracts issued or to be issued by the Company,
provided that prompt notice shall be given by either party should such situation
occur;

        (i) termination by the Company by written notice to the TCIP with
respect to either Fund in the event that such Fund fails to meet the Section
817(h) diversification requirements or Subchapter M qualifications specified in
this Agreement or if the


                                     - 10 -

<PAGE>   11

Company reasonably believes that the Fund may fail to meet either
of those requirements; or

8.      CONTINUATION OF AGREEMENT.

        (a) Termination as the result of any cause listed in Section 7 shall not
affect TCIP's obligation to maintain an account in the name of the Company on
behalf of those Contract owners who selected one or both of the Funds as an
investment option prior to the termination of this Agreement (these contracts
referred to hereinafter as "Existing Contracts"); PROVIDED, HOWEVER, TCIP shall
have no administrative services payment obligation to the Company after such
termination. Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Funds, redeem
investments in the Funds and/or invest in the Funds upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 8(a) shall not apply to any terminations under Section 12 and
the effect of such Section 12 terminations shall be governed by Section 12 of
this Agreement.

        (b) Each party's obligation under Section 11 to indemnify other parties
shall survive and not be affected by any termination of this Agreement. In
addition, with respect to Existing Contracts, the provisions of Sections 1(b),
4, 9(b), and 10 shall also survive and not be affected by any termination of
this Agreement.





                                     - 11 -


<PAGE>   12

9.      ADVERTISING MATERIALS; FILED DOCUMENTS.

        (a) Advertising and literature with respect to TCIP prepared by the
Company or its agents for use in marketing its Contracts will be submitted to
TCIP for review before such material is submitted to the SEC or NASD for review.
Advertising and literature with respect to the Company, the Account or the
Contracts prepared by TCIP or Investors Research for use in marketing TCIP or
the Funds will be submitted to the Company for review before use.

        (b) TCIP will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, no-action letters, exemptive
applications and all amendments or supplements to any of the above that relate
to the Funds promptly after the filing of such document with the SEC or other
regulatory authorities. The Company will provide to TCIP at least one complete
copy of all registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, no-action
letters, exemptive applications and all amendments or supplements to any of the
above that relate to the Account promptly after the filing of such document with
the SEC or other regulatory authority.

10.     PROXY VOTING.

        (a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges, unless the Company determines that pass-through
voting privileges are not required


                                     - 12 -


<PAGE>   13



under Rule 6e-2 or Rule 6e-3(T) under the 1940 Act and notifies TCIP of its
determination. It shall be the responsibility of the Company to assure that the
Account and the separate accounts of the other Participating Companies (as
defined in Section 12(a) below) participating in any Fund calculate voting
privileges in a consistent manner as required by the Shared Funding Exemptive
Order (as defined in Section 12(a) below) . TCIP hereby confirms that the
manner in which the Company currently calculates voting privileges is consistent
with the manner in which other Participating Companies so calculate voting
privileges. TCIP and Investors Research will notify the Company if either
becomes aware that another Participating Company has changed the manner in which
it so calculates voting privileges.

        (b) So long as it shall be required to provide pass-through voting
privileges, the Company will distribute to Contract owners all proxy material
furnished by TCIP and will vote shares in accordance with instructions received
from such Contract owners, except as provided in Section 10(a) hereof. The
Company shall vote TCIP shares for which no instructions have been received in
the same proportion as shares for which such instructions have been received.
The Company and its agents shall not oppose or interfere with the solicitation
of proxies for TCIP shares held for Contract owners unless it reasonably
concludes in good faith that under applicable law it has a duty to do so.

        (c)  TCIP will comply with all provisions of the 1940 Act requiring 
voting by shareholders, and in particular the Funds


                                     - 13 -


<PAGE>   14


will either provide for annual meetings or comply with Section 16(c) of the 1940
Act (although the Funds are 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 Funds 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 directors or trustees and with whatever rules the
Commission may promulgate with respect thereto.

11.  INDEMNIFICATION.

        (a) The Company agrees to indemnify and hold harmless TCIP and each of
its directors, officers, employees, agents and each person, if any, who controls
TCIP or its investment adviser within the meaning of the Securities Act of 1933
(the "1933 Act") against any losses, claims, damages or liabilities to which
TCIP or any such director, officer, employee, agent, or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof): (i) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectus, statement of additional
information or sales literature of the Company (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, or arise out of or as a


                                     - 14 -




<PAGE>   15

result of conduct, statements or representations (other than statements or
representations contained in the prospectuses, statements of additional
information or sales literature of TCIP) of the Company or its agents, with
respect to the sale and distribution of Contracts for which the shares of the
Funds are the underlying investment; or (ii) result from a breach of a material
provision of this Agreement. The Company will reimburse any legal or other
expenses reasonably incurred by TCIP or any such director, officer, employee,
agent, investment adviser, or controlling person in connection with
investigating or defending any such expense, loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Company will not be liable in any such case
to the extent that any such expense, loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission or alleged omission made in
such Registration Statement or prospectus in conformity with written materials
furnished to the Company by TCIP specifically for use therein. This indemnity
agreement will be in addition to any liability which Company may otherwise have;
PROVIDED, HOWEVER, that no party shall be entitled to indemnification if such
loss, claim, damage or liability is due to the wilful misfeasance, bad faith,
gross negligence or reckless disregard of duty by the party seeking
indemnification.

        (b) Investors Research agrees to indemnify and hold harmless the Company
and each of its directors, officers, employees, agents and each person, if any,
who controls the Company within


                                     - 15 -


<PAGE>   16

the meaning of the 1933 Act against any losses, claims, damages or liabilities
to which the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof):
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
prospectuses or sales literature of the Funds, TCIP or Investors Research, 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 material fact required
to be stated therein or necessary to make the statements therein not misleading;
or (ii) result from a breach by TCIP or Investors Research of a material
provision of this Agreement. Investors Research will reimburse any legal or
other expenses reasonably incurred by the Company or any such director, officer,
employee, agent, or controlling person in connection with investigating or
defending any such expense, loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that Investors Research will not be liable in any such case to the
extent that any such expense, loss, claim, damage or liability arises out of or
is based upon an untrue statement or omission or alleged omission made in such
Registration Statement or prospectuses in conformity with written materials
furnished to TCIP by the Company specifically for use therein. This indemnity
agreement will be in addition to any liability which Investors Research may
otherwise have; PROVIDED,


                                     - 16 -

<PAGE>   17

HOWEVER, that no party shall be entitled to indemnification if such loss, claim,
damage or liability is due to the wilful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the party seeking indemnification.

        (c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 11. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the indemnified
party proceeds with the defense, 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


                                     - 17 -

<PAGE>   18

plaintiff, the indemnifying party agrees to indemnify the indemnified party from
and against any loss or liability by reason of such settlement or judgment.

12.  POTENTIAL CONFLICTS.

        (a) The Company has received a copy of an application for exemptive
relief, as amended, filed by TCIP on December 21, 1987, with the SEC and the
order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in such
application, the Board of Directors of TCIP (the "Board") will monitor TCIP for
the existence of any material irreconcilable conflict between the interests of
the contractholders of all separate accounts ("Participating Companies")
investing in TCIP. An irreconcilable material conflict may arise for a variety
of reasons, including:

(i) an action by any state insurance regulatory authority; (ii) 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 actions by insurance, tax or securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant proceeding; (iv)
the manner in which the investments of any portfolio are being managed; (v) a
difference in voting instructions given by variable annuity contractholders and
variable life insurance contractholders; or (vi) a decision an insurer to
disregard the voting instructions of contractholders. The Board shall promptly


                                     - 18 -
<PAGE>   19
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof.

        (b) 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 contractholder voting instructions are disregarded.

        (c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material reconcilable conflict exists with regard to
contractholder investments in a Fund, the Board shall give prompt notice to all
Participating Companies. If the Board determines that the Company is responsible
for causing or creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by a majority
of the disinterested Board members), take such action as is necessary to remedy
or eliminate the irreconcilable material conflict. Such necessary action may
include but shall not be limited to:

        (i)     withdrawing the assets allocable to the Account from the Funds
                and reinvesting such assets in a different investment medium or
                submitting the question of whether such segregation should be
                implemented to a vote of all affected contractholders and as
                appropriate, segregating the assets of any appropriate group
                (i.e., annuity contract owners, life insurance contract owners,
                or variable contract owners) that votes in favor of such


                                     - 19 -


<PAGE>   20

                segregation, or offering to the affected contract-holders the
                option of making such a change; and/or

        (ii)    establishing a new registered management investment company or
                managed separate account.

        (d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a majority vote
by all of its contractholders having an interest in TCIP, the Company at its
sole cost, may be required, at the Board's election, to withdraw the Account's
investment in TCIP and terminate this Agreement; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material reconcilable conflict as determined by a majority of the
disinterested members of the Board.

        (e) For the purpose of this Section 12, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will TCIP be
required to establish a new funding medium for any Contract. The Company shall
not be required by this Section 12 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.

        (f) 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 1940
Act or the rules promulgated


                                     - 20 -

<PAGE>   21

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) TCIP and/or the
Participating 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) the applicable
sections 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.

13. MISCELLANEOUS.

        (A) AMENDMENT AND WAIVER. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but only by an
instrument in writing signed by all parties hereto.

        (b) NOTICES. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by telex,
telecopier or registered certified mail, postage prepaid, return receipt
requested, to the party or parties to whom they are directed at the following
dresses, or at such other addresses as may be designated by notice from such
party to all other parties.







                                     - 21 -
<PAGE>   22
        To the Company:

               Providentmutual Life and Annuity
               Company of America
               1600 Market Street
               Philadelphia, PA  19103
               Attention:      Linda E. Senker

        To TCIP or Investors Research:

               TCI Portfolios, Inc.
               4500 Main Street
               Kansas City, Missouri 64111
               Attention:      Patrick A. Looby

Any notice, demand or other communication given in a manner prescribed in this
subsection (b) shall be deemed to have been delivered on receipt.

        (c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.

        (d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this agreement by signing any such counterpart.

        (e) SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

        (f)     APPLICABLE LAW.

        (i) This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania.

                                     - 22 -
<PAGE>   23

        (ii) 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.

        (g) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes all prior agreement
and understandings relating to the subject matter hereof.






                                     - 23 -


<PAGE>   24

        IN WITNESS WHEREOF, the undersigned have executed this Agreement by
their duly authorized officers as of this ____ day of ________________ , 1994.



                                   PROVIDENTMUTUAL LIFE AND ANNUITY   
                                   COMPANY OF AMERICA                 
                                                                      
                                                                      
                                   By  ______________________________ 
                                       Name: _________________________
                                       Title: _______________________ 
                                                                      
                                                                      
                                   INVESTORS RESEARCH CORPORATION     
                                                                      
                                                                      
                                                                      
                                   By  _______________________________
                                       Name:   William M. Lyons           
                                       Title:  Senior Vice President      
                                                                      
                                                                      
                                   TCI PORTFOLIOS, INC.               
                                                                      
                                                                      
                                                                      
                                   By_________________________________
                                      Name:  Patrick A. Looby            
                                      Title:  Vice President             
                                                                      
                                   
                                     - 24 -

<PAGE>   1
                                                                    Exhibit 8(f)

                            PARTICIPATION AGREEMENT
                            -----------------------


Provident Mutual Life Insurance Company and Providentmutual Life and Annuity
Company of America (individually and collectively, the "Insurance Company"), Van
Eck Investment Trust (the "Trust") and the Trust's investment adviser, Van Eck
Securities Corporation ("Underwriter") hereby agree that shares of the series of
the Trust as listed on Exhibit A, as it may, from time to time, be amended (the
"Portfolios"), shall be made available to serve as an underlying investment
medium for Individual Variable Life Insurance Policies (the "Contracts") to be
offered by Insurance Company subject to the following provisions: 

1.   Insurance Company represents that it has established 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, 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, and the
     Providentmutual Variable Life Separate Account, separate accounts under
     Pennsylvania law, and has registered them as unit investment trusts under
     the Investment Company Act of 1940 (the "1940 Act"). The Provident Mutual
     Variable Separate Account and Providentmutual Variable Life Separate
     Account (the "Variable Accounts") will serve as investment vehicles for the
     Contracts. The Contracts provide for the allocation of net amounts received
     by Insurance Company to separate series of the Variable Accounts for
     investment in the shares of specified investment companies selected among
     those companies available through the Variable Accounts to act as under-



<PAGE>   2


lying investment media. Selection of a particular investment company is made by
the Contract owner who may change such selection from time to time in accordance
with the terms of the applicable Contract.

2.   Insurance 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. Insurance Company further represents and warrants that it is an
     insurance company duly organized and in good standing under applicable law.

3.   The Trust represents and warrants that Portfolio 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 Commonwealth of
     Pennsylvania and all applicable federal and state securities laws including
     without limitation the Securities Act of 1933 (the "1933 Act"), and the
     1940 Act and that the Trust is and shall remaln registered under the 1940
     Act. The Trust 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 Trust shall register and
     qualify the shares for sale in accordance with the laws of the various
     states if and to the extent required by applicable law. Insurance Company
     will notify the Trust if its shares are required to be registered for sale
     in Pennsylvania.


                                      -2-
<PAGE>   3

4.   The Trust represents and warrants that it is lawfully organized and validly
     existing under the laws of the State of Massachusetts and that it does and
     will comply in all material respects with the 1940 Act.

5.   Underwriter represents and warrants that it is and shall remain duly
     registered under all applicable federal and state securities laws and that
     it shall perform its obligations for the Trust in compliance in all
     material respects with the laws of the State of Massachusetts and any
     applicable state and federal securities laws.

6.   The Trust and Underwriter represent and warrant that all of their
     directors, officers, employees, investment advisers, and other individuals
     or entities dealing with the money and/or securities of the Trust are and
     shall continue to be at all times covered by a blanket fidelity bond or
     similar coverage for the benefit of the Trust in an amount not less than
     the minimal coverage as required currently by Section 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.



7.   The Parties hereto acknowledge that the arrangement contemplated by this
     Agreement is not exclusive; The Trust and Underwriter agree that shares of
     the Trust will be sold only to insurance companies (and their separate
     accounts) which have entered into participation agreements with the Trust
     and the Underwriter. No shares of any Designated Portfolios will be sold to
     the general public. The Trust and the Underwriter

                                       -3-

<PAGE>   4

     agree not to sell Fund shares to any insurance company or separate account
     unless an agreement containing provisions substantially the same as
     Sections 10, 20, and 26 of this Agreement is in effect to govern such
     sales. The cash value of the Contracts may be invested in other investment
     companies.

8.   Insurance Company agrees to make every reasonable effort to market its
     Contracts. It will use its best efforts to give equal emphasis and
     promotion to shares of the Trust as is given to other underlying
     investments of the Variable Accounts. In marketing its Contracts, Insurance
     Company will comply with all applicable state or Federal laws.

9.   The Trust or Underwriter will provide closing net asset value, dividend and
     capital gain information at the close of trading each business day, and, in
     any event, by 6:30 p.m. Eastern Time, to Insurance Company. Insurance
     Company will use this data to calculate unit values, which will in turn be
     used to process that same business day's Variable Accounts unit value. The
     Variable Accounts processing will be done the same evening, and orders will
     be placed the morning of the following business day. Orders will be sent
     directly to the Trust or its specified agent, and payment for purchase will
     be wired to a custodial account designated by the Trust or Underwriter, so
     as to coincide with the order for Trust shares. The Trust agrees to sell to
     Insurance Company those shares of the Portfolios which the Variable
     Accounts order and agrees to make shares of the Portfolios available for
     purchase at the applicable net asset value pursuant to the rules of the
     Securities and Exchange Commission (the "SEC"). For the purpose of this
     section, Insurance Company shall be the designee of the Trust for receipt
     of such orders 

                                      -4-
<PAGE>   5
     and receipt by such designee shall constitute receipt by the Trust provided
     that the Trust receives notice of such orders by 10 a.m. and receipt by
     such designee shall constitute receipt by the Trust. In the event that the
     Fund is unable to meet the 6:30 p.m. time stated herein, it shall provide
     additional time for the Company to place orders for the purchase and
     redemption of shares of each Designated Portfolio for the Account. Such
     additional time shall be equal to the additional time which the Fund takes
     to make the net asset value available to the Company. If the Fund provides
     incorrect share net asset value information, the Company shall be entitled
     to an adjustment to the number of shares purchased or redeemed to reflect
     the correct net asset value per share. Any error in the calculation or
     reporting of net asset value per share, dividend or capital gains
     information greater than or equal to $.01 per share shall be reported
     immediately upon discovery to the Company. Any error of a lesser amount
     shall be corrected in the next Business Day's net asset value per share.
     "Business Day" shall mean any day on which the New York Stock Exchange is
     open for trading and on which the Trust calculates the net asset value
     pursuant to the rules of the SEC. The Trust will execute the orders at the
     net asset value as determined as of the close of trading on the prior day.
     Dividends and capital gains distributions shall be reinvested in additional
     shares at the ex-date net asset value.

10.  The Trust agrees to redeem for cash (subject to its rights under Rules
     18f-1 and 22c-1, provided that each Contract owner shall be considered a
     shareholder for purposes of Rule 18f-1), on Insurance Company's request,
     any full or fractional shares of the Portfolios, executing such requests on
     a daily basis at the net asset value next computed after receipt


                                      -5-

<PAGE>   6


     by the Trust or its designee of the request for redemption. For purposes of
     this section, Insurance Company shall be the designee of the Trust for
     receipt of requests for redemption and receipt by such designee shall
     constitute receipt by the Trust.

11.  Insurance Company shall pay for Portfolio shares by 11 a.m. Eastern time on
     the next Business Day after an order to purchase Trust shares is made in
     accordance with the provisions of Section 9 hereof. Payment shall be in
     federal funds transmitted by wire and/or by a credit for any shares
     redeemed the same day as the purchase.

12.  The Trust shall pay and transmit the proceeds of redemptions of Portfolio
     shares by 11 a.m. Eastern time on the next Business Day after a redemption
     order is received in accordance with Section 10 hereof. Payment shall be in
     federal funds transmitted by wire and/or a credit for any shares purchased
     the same day as the redemption.

13.  All expenses incident to the performance by the Trust under this Agreement
     shall be paid by the Trust. The Trust shall pay the cost of registration of
     Trust shares with the SEC. The Trust shall distribute, to the Variable
     Accounts, proxy material, periodic Trust reports to shareholders and other
     material the Trust may require to be sent to Contract owners. The Trust
     shall pay the cost of qualifying Trust shares in states where required. The
     Trust, at its or the Underwriter's expense, will provide Insurance Company
     with as many copies of the Trust's current prospectus as Insurance Company
     may reasonably request, and other material the Trust may require to be sent
     to Contract owners. The

                                      -6-

<PAGE>   7

     Trust will provide Insurance Company with a copy of the Statement of
     Additional Information suitable for duplication.

     Insurance Company shall bear the expenses of routine annual distribution of
     the Trust's prospectus to Contract owners and of distributing the Trust's
     proxy materials and reports to such Contract owners.

14.  Insurance Company and its agents shall make no representations concerning
     the Trust or Trust shares except those contained in the then-current
     registration statement, prospectus, or statements of additional information
     of the Trust, as such registration, statement, prospectus or statement of
     additional information may be amended or supplemented from time to time, or
     in current printed sales literature or promotional material approved by the
     Trust or its designee, except with the permission of the Trust.

15.  The Trust and Underwriter shall not give any information or make any
     representations on behalf of Insurance Company or concerning Insurance
     Company, the Variable Accounts, or the Contracts other than the information
     or representations contained in a registration statement or prospectus or
     statement of additional information for the Contracts, as such registration
     statement and prospectus and statement of additional information may be
     amended or supplemented from time to time, or in reports for the Variable
     Accounts, or in current printed sales literature or other promotional
     material approved by Insurance Company or its designee, except with the
     permission of Insurance Company.

                                       -7-


<PAGE>   8

16.  Administrative services to Contract owners shall be the responsibility of
     Insurance Company, and shall not be the responsibility of the Trust or
     Underwriter. The Trust and Underwriter recognize that Insurance Company
     will be sole shareholder of Trust shares issued pursuant to the Contracts.
     Such arrangement will result in multiple share orders.

17.  The Trust represents and warrants that the Trust shall comply at all times
     with Sections 817(h) and 851 of the Internal Revenue Code of 1986, as
     amended, if applicable, and the regulations thereunder, and the applicable
     provisions of the 1940 Act relating to the diversification requirements for
     variable annuity, endowment, and life insurance contracts. Upon request,
     the Trust shall provide Insurance Company with a letter from the
     appropriate Trust officer certifying the Trust's compliance with the
     diversification requirements and qualification as a regulated investment
     company.

18.  The Trust represents and warrants that the Trust and each Portfolio is
     currently qualified as a Regulated Investment Company under Subchapter M of
     the Code, and that it will maintain such qualification (under Subchapter M
     or any successor or similar provisions) as long as this Agreement is in
     effect.

19.  The Trust or Underwriter will notify Insurance Company promptly upon having
     a reasonable basis for believing that the Trust or any Portfolio has ceased
     to comply with the aforesaid Section 817(h) diversification or Subchapter M
     qualification requirements or might not so comply in the future.


                                       -8-
<PAGE>   9

20.  Insurance Company agrees to inform the Board of Trustees of the Trust of
     the existence of or any potential for, any material irreconcilable conflict
     of interest between the interests of the Contract owners of the Variable
     Accounts investing in the Trust and/or any other separate account of any
     other insurance company investing in the Trust.

     A material irreconcilable conflict may arise for a variety of reasons,
     including:

     (a)  an action by any state insurance or other 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;

     (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 Contract owners and
          variable annuity insurance contract owners or by variable annuity or
          life insurance contract owners of different life insurance companies
          utilizing the Trust; or

                                       -9-
<PAGE>   10

     (f)  a decision by Insurance Company to disregard the voting instructions
          of Contract owners.


Insurance Company will be responsible for assisting the Board of Trustees of the
Trust in carrying out its responsibilities by providing the Board with all
information which to Insurance Company's knowledge is reasonably necessary for
the Board to consider any issue raised, including information as to a decision
by Insurance Company to disregard voting instruction of Contract owners.

The Board of Trustees of the Trust will monitor the Trust for existence of any
material irreconcilable conflict between the interests of the Contract owners of
all separate accounts investing in the Trust.

It is agreed that if it is determined by a majority of the members of the Board
of Trustees of the Trust or a majority of its disinterested Trustees that a
material irreconcilable conflict exists affecting Insurance Company, Insurance
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 the 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


                                     - 10 -
<PAGE>   11

               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;
               or



          (b)  establishing a new registered management investment company or
               managed separate account.



For purposes hereof, a majority of the disinterested members of the Board of
Trustees of the Trust shall determine whether any proposed action adequately
remedies any material irreconcilable conflict. In no event will the Trust be
required to establish a new funding medium for any Contracts. Insurance Company
shall not be required by the terms hereof to establish a new funding medium for
any Contracts if an offer to do so has been declined by vote of a majority of
affected Contract owners. In the event that the Board determines that any
proposed action does not adequately remedy any irreconcilable material conflict,
then Insurance Company will withdraw the Variable Accounts' investment in the
Trust and terminate this Agreement within six (6) months, or such lesser period
of time as the SEC may require, after the Board informs Insurance 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.

                                      -11-
<PAGE>   12

The Trust will undertake to promptly make known to Insurance Company the Board
of Trustees' determination of the existence of a material irreconcilable
conflict and its implications.

If a material irreconcilable conflict arises because of Insurance Company's
decision to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurance
Company may be required, at the Trust's election, to withdraw the Variable
Accounts' investment in the Trust; provided, however, that such withdrawal 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 Trust gives written notice that this provision is being implemented, and
until the end of that six month period the Trust shall continue to accept and
implement orders by Insurance Company for the purchase (and redemption) of
shares of the Trust. If investment in all Portfolios is withdrawn, then this
Agreement will terminate. No charge or penalty will be imposed against the
Variable Accounts as a result of such withdrawal Insurance 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.

If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to Insurance Company conflicts with
the majority of other state regulators, then Insurance Company will withdraw the
Variable Accounts' investment in

                                      -12-

<PAGE>   13

the Trust and terminate this Agreement within six months after the Board informs
Insurance 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 Trust shall continue to accept and implement orders by Insurance
Company for the purchase (and redemption) of shares of the Trust.



21.     This Agreement shall terminate as to the sale and issuance of new
        Contracts: 

                (a)     at the option of Insurance Company, Underwriter or the
                        Trust upon six months' advance written notice to the
                        other parties;
                (b)     at the option of Insurance Company, if Trust shares are
                        not available for any reason to meet the requirements of
                        Contracts as determined by Insurance Company. Reasonable
                        advance notice of election to terminate shall be
                        furnished by Insurance Company;
                (c)     at the option of Insurance Company, Underwriter or the
                        Trust, upon institution of formal proceedings against
                        the Broker-Dealer or Broker-Dealers marketing the
                        Contracts, the Variable Accounts, Insurance Company or
                        the Trust by the National Association of Securities
                        Dealers ("NASD"), the SEC or any other regulatory body;

                                      -13-
<PAGE>   14

        (d)     upon a decision by Insurance Company, in accordance with
                regulations of the SEC, to substitute such Trust shares with the
                shares of another investment company for Contracts for which
                the Trust shares have been selected to serve as the underlying
                investment medium. Insurance Company will give 60 days' written
                notice to the Trust and Underwriter of any proposed vote to
                replace Trust shares;

        (e)     upon assignment of this Agreement unless made with the written
                consent of each other party;

        (f)     in the event Trust shares are not registered, issued or sold
                in conformance with Federal law or such law precludes the use of
                Trust shares as an underlying investment medium of Contracts
                issued or to be issued by Insurance Company. Prompt notice shall
                be given by either party to the other in the event the
                conditions of this provision occur.

        (g)     at the option of Insurance Company by written notice to the
                Trust and Underwriter with respect to any Portfolio in the event
                that such Portfolio fails to meet the Section 817(h)
                diversification requirements or Subchapter M qualifications
                specified in Article VI hereof or if Insurance Company
                reasonably believes that the Portfolio may fail to meet either
                of those requirements;



                                     - 14 -

<PAGE>   15

        (h)     at the option of Insurance Company by written notice to the
                Trust and Underwriter, if Insurance Company shall determine, in
                its sole judgment exercised in good faith, that the Trust or
                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

        (i)     at the option of the Trust or Underwriter by written notice to
                Insurance Company, if the Trust or Underwriter shall determine,
                in its sole judgment exercised in good faith, that the Trust or
                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.

22.     Termination as the result of any cause listed in the preceding paragraph
        shall not affect the Trust's obligation to furnish Trust shares for
        Contracts then in force for which the shares of the Trust serve or may
        serve as an underlying medium, unless such further sale of Trust shares
        is proscribed by law or the SEC or other regulatory body, or deemed by
        the Trust's Board of Trustees, acting in good faith, not to be in the
        best interests of the Trust or any Portfolio thereof, upon 90 days
        written notice to Insurance Company. Specifically, without limitation,
        the owners of Contracts then in force shall be permitted to reallocate
        investments in the Trust, redeem investments in the Trust and/or invest
        in the Trust upon the making of additional purchase payments under the
        Contracts then in


                                      -15-
<PAGE>   16

        force. In addition, with respect to the Contracts in force upon
        termination pursuant to the preceding paragraph, the provisions of
        Sections 9, 10, 11, 12, 13, 17, 18, and 19 shall survive and not be
        affected by termination of this Agreement. The parties agree that this
        section shall not apply to any terminations under Section 20 and the
        effect of such Section 20 terminations shall be governed by Section 20
        of this Agreement. Notwithstanding any termination of this Agreement,
        each party's obligation under Section 27 to indemnify other parties
        shall survive and not be affected by any termination of this Agreement.
        A successor by law of the parties of this Agreement shall be entitled to
        the benefits of the indemnification contained in Section 27.

23.     Each notice required by this Agreement shall be given by wire and
        confirmed in writing to:

               Provident Mutual Life Insurance Company
               1600 Market Street
               Philadelphia, Pennsylvania 19103
               Attn:   Chief Executive Officer

               Providentmutual Life and Annuity Company
               of America
               300 Continental Drive
               Newark, Delaware 19713
               Attn:   President

               Van Eck Investment Trust
               122 East 42nd Street
               New York, New York 10168
               Attn:   President
     
               Van Eck Associates Corporation
               122 East 42nd Street
               New York, New York 10168
               Attn:   President, with copy to General Counsel

                                      -16-
<PAGE>   17

24.     Advertising and sales literature with respect to the Trust prepared by
        Insurance Company or its agents for use in marketing its Contracts will
        be submitted to the Trust for review before such material is submitted
        to the SEC or NASD for review.

25.     The Trust or Underwriter shall furnish, or shall cause to be furnished,
        to Insurance Company, each piece of advertising and sales literature in
        which Insurance Company and/or its separate account(s) is named, for
        review before such material is submitted to the SEC or NASD for review.

26.     Insurance Company (a) will distribute all proxy material furnished by
        the Trust, (b) will solicit voting instructions from Contract owners,
        and (c) will vote Trust shares in accordance with instructions received
        from the Contract owners of such Trust shares, and (d) will vote the
        Trust shares for which no instructions have been received in the same
        proportion as Trust shares for which said instruction have been received
        from Contract owners, so long as and to the extent that the SEC
        continues to interpret the 1940 Act to require pass-through voting
        privileges for variable contract owners. Insurance Company reserves the
        right to vote Trust shares held in any segregated asset account in its
        own right, to the extent permitted by law. Insurance Company and its
        agents will in no way recommend action in connection with or oppose or
        interfere with the solicitation of proxies for the Trust shares held for
        such Contract owners.

27. (a) Insurance Company agrees to indemnify and hold harmless the Trust,
        Underwriter, and each of their trustees, directors, officers, employees,
        agents and

                                     - 17 -

<PAGE>   18

        each person, if any, who controls the Trust within the meaning of the
        1933 Act (the Trust and such persons collectively, "Trust Indemnified
        Person") against any losses, claims, damages or liabilities to which a
        Trust Indemnified Person 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 any untrue
        statement or alleged untrue statement of any material fact contained in
        the registration statement or prospectus or statement of additional
        information for the Variable Accounts or in information furnished in
        writing by Insurance Company for use in the registration statement or
        prospectus or statement of additional information of the Trust 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, or arise out of or as a
        result of conduct, statements or representations (other than statements
        or representations contained in the prospectus, statement of additional
        information, and Trust-prepared sales literature of the Trust) of
        Insurance Company or its agents with respect to the sale and
        distribution of Contracts for which Trust shares are an underlying
        investment or arise out of a breach of this Agreement; and Insurance
        Company will reimburse any legal or other expenses reasonably incurred
        by a Trust Indemnified Person in connection with investigating or
        defending any such loss, claim, damage, liability or action. This
        indemnity agreement will be in addition to any liability which Insurance
        Company may otherwise have.

                                      -18-
<PAGE>   19

(b)     The Trust agrees to indemnify and hold harmless Insurance Company and
        each of its directors, officers, employees, agents and each person, if
        any, who controls Insurance Company within the meaning of the 1933 Act
        (Insurance Company and such persons collectively, "Insurance Company
        Indemnified Person") against any losses, claims, damages or liabilities
        to which an Insurance Company Indemnified Person may become subject,
        under the 1933 Act or otherwise, insofar as such losses, claims, damages
        or liabilities to which an Insurance Company Indemnified Person 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 any untrue statement or alleged untrue statement of
        any material fact contained in the registration statement or prospectus
        or statement of additional information or Trust-prepared sales
        literature of the Trust, or in information furnished in writing by the
        Trust for use in the registration statement or prospectus or statement
        of additional information of the Variable Accounts, 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, or arise out of or are based upon the
        Trust's failure to keep each of the Trust options fully diversified and
        qualified as a regulated investment company as required by the
        applicable provisions of the Internal Revenue Code, the 1940 Act, and
        any other law or regulation, or arise out of a breach of this Agreement
        and the Trust will reimburse any legal or other expenses reasonably
        incurred by an Insurance Company Indemnified Person in connection with
        investigating or defending any such loss, claim, damage, liability


                                     - 19 -


<PAGE>   20

        or action; provided, however, that the Trust will not be liable in any
        such case to the extent that any such loss, claim, damage or liability
        arises out of or is based upon an untrue statement or omission or
        alleged omission made in such registration statement or prospectus or
        statement of additional information in conformity with written
        information furnished to the Trust by Insurance Company specifically for
        use therein or in Insurance Company-prepared sales literature. This
        indemnity agreement will be in addition to any liability which the Trust
        may otherwise have.

(c)     Underwriter agrees to indemnify and hold harmless each Insurance Company
        Indemnified Person against any losses, claims, damages or liabilities to
        which an Insurance Company Indemnified Person 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 any untrue statement or alleged untrue statement of any material
        fact contained in the registration statement or prospectus or statement
        of additional information or Underwriter-prepared sales literature of
        the Trust, 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, or arise out
        of or are based upon Underwriter's failure to keep each of the Trust and
        its Portfolios fully diversified and qualified as a regulated investment
        company as required by the applicable provisions of the Internal Revenue
        Code, the 1940 Act, and any other law or regulation, or arise out of a
        breach of this Agreement and Underwriter

                                      -20-
<PAGE>   21


        will reimburse any legal or other expenses reasonably incurred by each
        Insurance Company Indemnified Person in connection with investigating or
        defending any such loss, claim, damage, liability or action; provided,
        however, that Underwriter will not be liable in any such case to the
        extent that any such loss, claim, damage or liability arises out of or
        is based upon an untrue statement or omission or alleged omission made
        in such registration statement or prospectus or statement of additional
        information in conformity with written information furnished to
        Underwriter by Insurance Company specifically for use therein or
        Insurance Company-prepared sales literature. This indemnity agreement
        will be in addition to any liability which Underwriter may otherwise
        have.

(d)     The Trust and Underwriter shall indemnify and hold Insurance Company
        harmless against any and all liability, loss, damages, costs or expenses
        which Insurance Company may incur, suffer or be required to pay directly
        due to the Trust's or Underwriter's (or their designated agent's) (1)
        incorrect calculation of the daily net asset value, dividend rate or
        capital gain distribution rate; (2) incorrect reporting of the daily net
        asset value, dividend rate or capital gain distribution rate; or (3)
        untimely reporting of the net asset value, dividend rate or capital gain
        distribution rate. Any gain to Insurance Company attributable to the
        Trust's, or Underwriter's (or their designated agent's) incorrect
        calculation or reporting of the daily net asset value shall be
        immediately returned to the Trust.


                                      -21-
<PAGE>   22

(e)     Promptly after receipt by an indemnified party under this paragraph of
        notice of the commencement of action, such indemnified party will, if a
        claim in respect thereof is to be made against the indemnifying party
        under this paragraph, notify the indemnifying party of the commencement
        thereof, but the omission so to notify the indemnifying party will not
        relieve it from any liability which it may have to any indemnified party
        otherwise than under this paragraph. In case any such action is brought
        against any indemnified party, and it notified the indemnifying party of
        the commencement thereof, the indemnifying party, at its expense, will
        be entitled to participate therein and, to the extent that it may wish,
        assume the defense thereof, with counsel satisfactory to such
        indemnified party. After notice from the indemnifying party to such
        indemnified party of 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 paragraph for any legal or other
        expenses subsequently incurred by such indemnified party in connection
        with the defense thereof other than reasonable costs of investigation.

(f)     The indemnifying party 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
        negligence in the performance of such indemnified party's duties or by
        reason of such indemnified party's reckless


                                      -22-
<PAGE>   23

        disregard of obligations or duties under this Agreement or to the
        indemnifying party, whichever is applicable.

(g)     Each indemnified party will promptly notify the indemnifying party of
        the commencement of any litigation or proceedings against it in
        connection with the issuance or sale of the Trust shares or the
        Contracts or the operation or existence of the Trust or the Variable
        Accounts.

(h)     Nothing herein shall entitle an indemnified party to special,
        consequential or exemplary damages or damages of like kind or nature,
        and with respect to Section 27(d) hereof, all liability, loss and
        damages shall be limited to the amount required to correct the value of
        the account as if there had been no incorrect calculation or reporting
        or untimely reporting of net asset value, dividend rate or capital gain
        distribution rate.


        (i) The term "Trust" means the Master Trust Agreement of the Trust
(organized as a Massachusetts business trust), as the same may from time to
time, be amended. It is expressly agreed that the obligations of the Trust or a
Portfolio hereunder shall not be binding on any trustees, shareholders,
nominees, officers, agents or employees of the Trust or a Portfolio personally,
but bind only the assets and property of the Trust or Portfolio. The execution
and delivery of this Agreement by the officers of the Trust has been authorized
by the trustees of the Trust, acting as such, and neither such authorization by
the trustees or execution and delivery



                                     - 23 -

<PAGE>   24

by any such officer shall be deemed to have been made by any of them personally,
but shall bind only the assets and property of a Portfolio, as provided in the
Master Trust Agreement.

28.     If, in the course of future marketing of the Contracts, Insurance
        Company or its agents shall request the continued assistance of the
        Trust's sales personnel, compensation (which will be negotiated by the
        Trust and Insurance Company) shall be paid by Insurance Company to the
        Trust.


                                   PROVIDENT MUTUAL LIFE INSURANCE COMPANY

May 1, 1995                        By
- -------------------------------      -----------------------------------------
Date


                                   PROVIDENTMUTUAL LIFE AND ANNUITY
                                   COMPANY OF AMERICA


May 1, 1995                        By
- -------------------------------      -----------------------------------------
Date


                                   VAN ECK INVESTMENT TRUST


May 1, 1995                        By
- -------------------------------      -----------------------------------------
Date


                                   VAN ECK SECURITIES CORPORATION


May 1, 1995                        By
- -------------------------------      -----------------------------------------
Date


                                     - 24 -


<PAGE>   1
                                                                    Exhibit 8(g)


                               SERVICE AGREEMENT
                               -----------------



This agreement is entered into, effective January 1, 1992, by and between
Provident Mutual Life Insurance Company of Philadelphia (PMLIC), a Pennsylvania
corporation, and Providentmutual Life and Annuity Company of America (PLACA), a
Pennsylvania corporation. Upon execution, this agreement shall supersede and
replace any and all prior service agreement(s) between PMLIC and PLACA.

WHEREAS PLACA desires to have PMLIC perform certain services in regard to the
operation of a life insurance company; and

WHEREAS PMLIC is desirous of performing such services;

NOW, THEREFORE, PMLIC and PLACA agree as follows;

PMLIC shall perform all services necessary to administer the business operations
of PLACA (including, but not limited to, the specific services enumerated in
this Agreement) at such intervals and in such a manner as reasonably required by
PLACA, using forms and procedures and in accordance with any and all applicable
rules and regulations of regulatory authorities.

                                     PART I

                            ADMINISTRATIVE SERVICES

PMLIC shall perform the following services:

1.1     POLICY ADMINISTRATION

        (a)     Process all requests for changes to the policy: address change;
                beneficiary change; etc.
        (b)     Provide mail and telephone policyowner service.
        (c)     Issue policy anniversary statements.
        (d)     Bill and collect premiums due.
        (e)     Process policy loans and loan repayments.
        (f)     Calculate and apply policyholder dividends.
        (g)     Process transfers between accounts.
        (h)     Process supplementary contracts and periodic payments.

1.2     AGENT ADMINISTRATION

        (a)     Contract and license agents.
        (b)     Calculate and pay commissions.
        (c)     Recapture agents' balances.
        (d)     Calculate production data.






<PAGE>   2

1.3        COMPANY ADMINISTRATION

          (a)     Process general journal vouchers and prepare trial balances.
          (b)     Process accounts payable transactions.
          (c)     Process and pay state and local taxes.
          (d)     Prepare required regulatory filings,
          (e)     Prepare required information filings (1099's, 5498's, etc.)
          (f)     Calculate and process reinsurance transactions.
          (g)     Initiate and control separate account buy/sell transactions.
          (h)     Perform actuarial and related services.
          (i)     Perform investment services as more specifically described
                  in Schedule A.
          (j)     Perform product development services.
          (k)     Perform legal services.


                                    PART II

                                 CLAIM SERVICES

PMLIC shall perform the claim services listed below on behalf of PLACA in strict
compliance with the policies, with PLACA's claim practices and procedures, and
with any and all applicable rules and regulations of regulatory authorities,
using PLACA approved forms. PMLIC shall strictly comply with the claims payment
standards set forth in written guidelines to be provided to PMLIC by PLACA.

        (a)     Handle all claims for withdrawals, surrenders, and payments upon
                death.

        (b)     Forwarding of annuitizations to PLACA.


                                    PART III

                               MARKETING SERVICES

PMLIC shall perform the following services:

        (a)     Prepare advertising and marketing material. 

        (b)     Prepare illustrations.


                                    PART IV

                             UNDERWRITING SERVICES

PMLIC shall perform the following services:

        (a)     Underwrite review of life policies.

        (b)     Process MIB information. 

        (c)     Perform policy issue functions.

                                       2
<PAGE>   3

                                     PART V

                                DRAFT AUTHORITY

        5.1     PMLIC shall pay claims by checks drawn on a bank account
                established for that purpose under written procedures and
                controls established by PLACA.

        5.2     PMLIC agrees to maintain and preserve full and complete records
                necessary for the processing of claims and claim payments in a
                manner satisfactory to PLACA, and all such records shall be and
                remain the property of PLACA. PMLIC shall make these records
                available to PLACA during normal business hours for review,
                inspection and examination, and shall promptly deliver all
                records or any requested part of them to PLACA at its Home
                Office whenever requested by it.

        5.3     PMLIC's check authority shall terminate immediately upon notice
                from PLACA. Upon termination, PMLIC shall immediately return all
                unused checks, all claim records, and all pending files to PLACA
                and shall cooperate in accomplishing a speedy and orderly
                transition. At all times, the claim records held by PMLIC are
                the property of PLACA.


                                    PART VI

                                    RECORDS

PMLIC shall maintain at its principal administrative office books and records of
all transactions between PMLIC, PLACA and all insured persons for the duration
of this Agreement and six years thereafter. These records shall be maintained in
accordance with prudent standards of insurance recordkeeping and in accordance
with any and all applicable rules and regulations of regulatory authorities.
PLACA retains the right to continuing access to the books and records of PMLIC
needed by PLACA to fulfill all of its obligations under the Policies to insured
persons. All such records shall be made available to PLACA during normal
business hours for review, inspection, examination, and at PLACA's expense,
reproduction. All such records shall be the property of PLACA, and PLACA may
demand the delivery of such records upon termination of their Agreement.


                                    PART VII

                                     AUDIT

PLACA shall be entitled to make audits of the books and accounts of PMLIC
relative to transactions subject to this Agreement. Such audits shall be
scheduled at reasonable times and PMLIC shall cooperate to the fullest extent
possible in accommodating all such audits.



                                        3
<PAGE>   4

                                   PART VIII

                           COMPLAINTS AND LITIGATION

        8.1     PMLIC will promptly notify PLACA of any complaint to or from any
                state insurance department of which PMLIC becomes aware in
                connection with any transaction covered by this Agreement. Any
                complaint letter from any state insurance department received by
                PMLIC together with its file and a detailed report on the matter
                shall be forwarded immediately to the Legal Officer of PLACA.

        8.2     PMLIC will promptly notify the Legal Officer of PLACA of any
                litigation of which PMLIC becomes aware in connection with any
                transaction covered by this Agreement. Each party hereto shall
                be responsible at its own expense (such expense to be subject to
                the provisions of Sections 11.1 and 11.2 hereof) for defending
                itself in any litigation brought against it, whether or not the
                other party hereto is also a defendant, arising out of any
                aspect of activities engaged in connection with the Policies.


                                    PART IX

                                  COMPENSATION

        9.1     As full and complete compensation to PMLIC for all services
                rendered by it to PLACA under this Agreement, PLACA agrees to
                pay PMLIC during the term of this Agreement a service fee in
                accordance with Schedule B.

        9.2     In the event that it is determined that Pennsylvania sales or
                use tax is applicable to any of the services rendered under this
                Agreement, PLACA agrees to pay PMLIC the amount of such tax.
                PMLIC shall be responsible for paying such tax to the
                appropriate taxing authority.


                                     PART X

                            RELATIONSHIP OF PARTIES

        10.1    The relationship between PMLIC and PLACA is the contractual
                relationship established by this Agreement. Nothing in this
                Agreement shall be construed to create the relationship of
                employer and employee, or the relationship of principal and
                agent, between PLACA and PMLIC. PMLIC's authority shall be
                limited to that which is expressly stated in this Agreement.
                PLACA shall exercise no control over the hours, office location,
                rentals, or employees of PMLIC

        10.2    This Agreement may not be assigned in whole or part by PMLIC,
                except to an affiliate of PMLIC, without prior written approval
                of PLACA. Any assignee shall be bound by the terms of this
                Agreement.

                                        4
<PAGE>   5

        10.3    PMLIC may subcontract for the performance of services which
                PMLIC is to provide hereunder; provided, however, that PMLIC
                will remain legally responsible for the proper performance of
                such services and will not, without PLACA's prior written
                consent, subcontract, except to an affiliate of PMLIC, for the
                performance of any services hereunder requiring contact with
                annuitants, insureds or claimants.


                                    PART XI

                         INDEMNIFICATION AND INSURANCE

        11.1    PMLIC agrees to indemnify and hold PLACA harmless from any and
                all losses, costs, claims, demands, damages, and attorneys' fees
                arising out of or caused by the alleged negligence or misconduct
                of its officers, agents or employees in processing,
                investigating, and/or paying claims, and/or alleged fraudulent
                conduct or embezzlement or any other alleged negligence
                attributable to PMLIC, its officers, agents, or employees with
                regard to services provided pursuant to this Agreement.

        11.2    PLACA agrees to indemnify and hold PMLIC harmless from any and
                all losses, costs, claims, demands, damages, and attorneys' fees
                arising out of or caused by:

                (a)     any act or omission of PMLIC required to be taken or not
                        taken by the terms of this Agreement or at the direction
                        or request of PLACA provided, however, that such losses,
                        costs, claims, demands, damages or fees neither arose
                        out of nor were caused by PMLIC's negligence or
                        misconduct in carrying out any such requirements,
                        direction or request, or

                (b)     the alleged negligence or misconduct in processing,
                        investigating, and/or paying claims, and/or alleged
                        fraudulent conduct or embezzlement or any other alleged
                        negligence attributable to PLACA, its officers, agents,
                        or employees.

        11.3    PMLIC shall maintain insurance in effect that provides
                protection to PLACA to cover loss by reason of acts of fraud or
                dishonesty. Such insurance shall be in an amount of no less than
                $1,000,000. PMLIC shall cause the issuer of said insurance
                policy to deliver to PLACA evidence of the existence of such
                policy and shall cause the insurer to give PLACA thirty (30)
                days written notice prior to cancellation of, or any material
                change in, the policy. 

                                       5
<PAGE>   6

        11.4    In the event of a change in control of PLACA, PMLIC shall
                maintain in effect a general liability policy in the amount of
                no less than $1,000,000 per occurrence, providing for indemni-
                fication of PLACA to cover any loss arising as a result of any
                real or alleged negligence on the part of PMLIC's employees in
                any aspect of the performance of PMLIC's services under this
                Agreement. PMLIC shall cause the insurer to give PLACA thirty
                (30) days written notice prior to the cancellation of, or any
                material change in, the policy.

        11.5    Evidences and notices as provided for in Section 11.3 and 11.4
                shall be addressed to PLACA to the attention of the Legal
                Officer.


                                    PART XII

                             REGULATORY AUTHORITIES

In the conduct of its business and in the performance of its obligations under
this Agreement, PMLIC shall comply with all applicable statutes, ordinances,
rules, and regulations of any and all federal, state, and municipal regulatory
authorities. Where required by state law, PMLIC shall hold a certificate of
registration as a Third Party Administrator issued by the Department of
Insurance or other regulatory body, Also, PLACA and PMLIC will enter into a
separate agreement with respect to each state that has enacted an administrators
statute requiring written agreements between third party administrators and
insurers, and where any term of such a separate agreement conflicts with any
term of this Agreement, the former shall prevail, but only with respect to the
specific term involved and the statute to which it applies.


                                   PART XIII

                                CONFIDENTIALITY

All claims, records and other material pertaining to PLACA products that is not
meant for public dissemination shall be held by PMLIC in strict confidence.
Except as explicitly provided under any Policy, or as required by law, PMLIC
shall not supply information on any claim to third parties, but shall refer all
such requests to PLACA.


                                    PART XIV

                                  TERMINATION

        14.1    This Agreement shall terminate at the option of PLACA on the
                occurrence of any of the following events:

                (a)     Cessation of PMLIC's administration business;

                                        6


<PAGE>   7

                (b)     Bankruptcy, receivership, or dissolution of PMLIC;

                (c)     Upon 6 months written notice of termination by PLACA to
                        PMLIC. The notice shall be delivered personally or
                        mailed, by certified mail, to PMLIC;

                (d)     Gross negligence, fraud or embezzlement on the part of
                        PMLIC;

                (e)     Failure by PMLIC to comply with applicable state
                        licensing requirements that is not remedied within 90
                        days after receipt of written notice thereof;

                (f)     Failure by PMLIC to comply with any provision of this
                        Agreement, if such failure is not remedied within 90
                        days after receipt of written notice thereof;

                (g)     In the event of the sale of a controlling interest in
                        any party with whom PMLIC has subcontracted as permitted
                        under section 10.3, PMLIC shall cause notice of such
                        sale to be given in writing to PLACA no less than 30
                        days prior to the closing date of such sale, unless such
                        disclosure is precluded by applicable law.

        14.2    This Agreement shall terminate at the option of PMLIC on the
                occurrence of any of the following events:

                (a)     Cessation of PLACA's business;

                (b)     Bankruptcy, receivership, or dissolution of PLACA;

                (c)     Upon 6 months written notice of termination by PMLIC to
                        PLACA. The notice shall be delivered personally or
                        mailed, by certified mail, to PLACA;

                (d)     Gross negligence, fraud or embezzlement on the part of
                        PLACA;

                (e)     Failure by PLACA to comply with applicable state
                        licensing requirements that is not remedied within 90
                        days of receipt of written notice thereof;

                (f)     Failure by PLACA to comply with any provision of this
                        Agreement, if such failure is not remedied within 90
                        days after receipt of written notice thereof.

        14.3    Upon termination of this Agreement,

                (a)     PMLIC shall promptly deliver to PLACA or its designee
                        all claim records, pending files and pertinent
                        administrative records;

                                        7
<PAGE>   8

                (b)     PLACA shall promptly pay all outstanding amounts under
                        the Agreement;

                (c)     PMLIC and PLACA will cooperate with each other in
                        accomplishing a speedy and orderly transition period.


                                    PART XV

                              SIGNATORY AUTHORITY

Each party hereto represents and warrants that each of the respective officers
executing this Agreement on its behalf is duly authorized by its Board of
Directors and is acting within the scope of his authority to bind said party
under this Agreement.

Signed and sealed as of the effective date shown hereinabove.

                                        PROVIDENT MUTUAL LIFE INSURANCE
                                        COMPANY OF PHILADELPHIA

Witness                                 By
       -------------------------------    -------------------------------------



                                       PROVIDENTMUTUAL LIFE AND
                                       ANNUITY COMPANY OF AMERICA


Witness                                 By
       -------------------------------    -------------------------------------





                                       8
<PAGE>   9

                                   SCHEDULE A


PMLIC will manage the investments of PLACA on the following basis:

1.      PMLIC will review new investments for PLACA and, on a continuing basis,
        monitor the existing portfolio and recommend to PLACA changes and
        additions deemed appropriate. After approval by PLACA, PMLIC will convey
        the appropriate instructions to brokers, agents or other intermediaries
        necessary for execution of the recommendations approved. PMLIC will also
        provide the following investment services for PLACA: investment
        accounting, legal review, securities safekeeping, cash management and
        collection functions.

2.      The assets to be managed by PMLIC on behalf of PLACA are as follows:

        - Securities: bonds, private placements, preferred stock, common stock
          and short-term investments

        - Mortgage Loans and Real Estate: mortgage loans, investment real
          estate and real estate joint ventures

        - Other investments as agreed upon by the parties.

3.      The charges for the investment services provided are as follows:

        (a)     For Securities Management:

                PMLIC will charge PLACA an annual investment management fee 
                based on the statutory value of the PLACA assets managed by 
                PMLIC as follows:

                     .15% of the first $100,000,000 of such assets calculated 
                     and paid monthly, plus

                     .10% of such assets in excess of $100,000,000 calculated 
                     and paid monthly.

                The asset value will be determined for each month as the 
                average of the asset values at the beginning and end of the 
                month.

        (b)     For Mortgage Loans and Real Estate Management:

                PMLIC will charge PLACA an annual investment management fee 
                calculated as follows based on the asset values as defined 
                below of the PLACA assets managed by PMLIC:





                                       9

<PAGE>   10




                  .20% of the first $100,000,000 of assets calculated and paid 
                  monthly, plus

                  .15% of such assets in excess of $100,000,000 calculated and 
                  paid monthly.

             The asset values on which such fee is based are the values at each
             month end of the outstanding mortgage loan balances, investment 
             real estate and joint venture book values.

4.      In addition to the charges contained in Section 3, PMLIC will charge
        PLACA for any bank fees, custody fees or mortgage service fees arising
        from transactions performed by PMLIC on behalf of PLACA pursuant to this
        Agreement.

















                                       10

<PAGE>   11

                                   SCHEDULE B


Effective the 1st day of January, 1992, PMLIC will charge PLACA for services
according to the following rates.

ISSUE COSTS

        PMLIC will charge PLACA $210 per policy issued.

INFORCE/MAINTENANCE COSTS

        PMLIC will charge PLACA a monthly fee equal to .0108% of average monthly
account value for the SPDA, SPWL and Variable Annuity blocks of business.

        PMLIC will charge PLACA $1 per check issued for SPIA and Supplementary
Contracts.

        PMLIC will charge PLACA an annual fee of $55 for each InForce Premium
Paying Traditional Policy, and $20 for each InForce NonPremium
Paying Traditional Policy.

        PMLIC will charge PLACA an annual fee of $55 for each InForce
Policy sold through the PPGA sales force.

PROFESSIONAL SERVICES

        PMLIC will charge PLACA a monthly fee of $16,700 for Accounting, Legal
and Actuarial Services provided.

        PMLIC will charge PLACA Investment Expenses per Schedule A of this
Agreement.

        PMLIC will charge PLACA for Marketing Services a fee equal to 25 basis
points on gross new SPDA Premium, and 35 basis points on new Variable Annuity
Premium.

        PMLIC will charge PLACA for PPGA Marketing Services a fee of $100,000
per month plus 39 basis points on new PPGA Premium.

It is understood that the above charges will apply for twelve months. After that
time, PMLIC has the right to change the fees due under this Agreement upon 30
days prior written notice, but in no event will the charge increase by more than
10% in any twelve month period nor will it be changed more frequently than once
every twelve months.

In the event that PLACA wishes PMLIC to provide any services not provided for by
this Agreement, PMLIC will provide such services as it agrees to provide on a
time and expenses basis.

In addition to the charges described above, PLACA agrees in the event of the
sale by PMLIC of a controlling interest in PLACA to reimburse


                                       11

<PAGE>   12


PMLIC for any license, royalty fees or other fees or expenses paid to any
unrelated third party required for PMLIC to provide the services set forth in
this Agreement, which fees would otherwise not be payable if PMLIC was not
providing said services to PLACA.

                                       12

<PAGE>   1
                                                                     EXHIBIT 8.h

                                SUPPORT AGREEMENT




This Agreement dated December 31, 1997 by and between Provident Mutual Life
Insurance Company ("PMLIC") and Providentmutual Life and Annuity Company of
America ("PLACA") ("Agreement") provides for the ongoing support of PLACA by
PMLIC in accordance with the following terms:

1. That certain Support Agreement dated April 5, 1993 by and between PMLIC and
PLACA is hereby terminated as of the date hereof.

2. PLACA currently is, and for the term of this Agreement will remain, a
subsidiary of PMLIC.

3. PMLIC agrees to ensure that PLACA's total adjusted capital will remain at the
level of 200% of the company action level for risk-based capital at the end of
each calendar quarter during the term of this Agreement. If PLACA's statutory
total adjusted capital falls below this level, PMLIC agrees to contribute to
PLACA an amount of capital sufficient to attain such level of total adjusted
capital.

4. PMLIC agrees to cause PLACA to maintain cash or cash equivalents from time to
time as may be necessary during the term of this Agreement in an amount
sufficient for the payment of benefits and other contractual claims pursuant to
policies and other contracts issued by PLACA.

5. This Agreement shall be binding on PMLIC, its successor or assigns.

6. This Agreement shall continue indefinitely, unless terminated subject to the
provisions of Paragraph 8, below.

7. It is agreed that the provisions of this Agreement shall inure to the benefit
of the policyholders of PLACA who shall have the right to enforce its terms
through a cause of action for damages or an action in equity.

8. This Agreement may be modified or terminated at any time. The termination
will not be effective unless and until PMLIC has given 60 days prior written
notice to PLACA of such termination. Prior to any material modification or
termination, a determination must be made that such modification or termination
will not have an adverse impact on the policyholders of PLACA. Such
determination shall be based on the ability of PLACA at the time of such
determination to maintain its own financial stability according to the standards
contained in this Agreement.
<PAGE>   2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.



                            PROVIDENT MUTUAL LIFE INSURANCE COMPANY



                        BY:
                           ----------------------------------------
                                     Robert William Kloss
                             President & Chief Executive Officer



                        BY:
                           -----------------------------------------
                                      Mary Lynn Finelli
                           Executive Vice President & Chief Financial Officer





                          PROVIDENTMUTUAL LIFE AND ANNUITY COMPANY OF AMERICA



                        BY:
                           -------------------------------------------
                                     Robert William Kloss
                                           President



                        BY:
                           -------------------------------------------
                                      Alan Furness Hinkle
                                   Vice President & Actuary





                                   DELAWARE INSURANCE DEPARTMENT



                        BY:
                           -------------------------------------------
                                          Steve White
                           Chief Examiner - Regulatory Insurance Services



<PAGE>   1
                                                                    EXHIBIT 9




                                                                April 30, 1998

Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713



                RE:  Providentmutual Life and Annuity Company of America
                     Providentmutual Variable Annuity Separate Account
                     (File No. 33-65195)


Gentlemen:

I hereby consent to the use of my name in the Prospectus under the heading
"Legal Matters" filed as part of the Post-Effective Amendment No. 5 to the
Registration Statement on Form N-4 (File No. 33-65512) for the Providentmutual
Variable Annuity Separate Account.

                                                Very truly yours,

                                                /s/ ADAM SCARAMELLA
                                                -------------------------------
                                                Adam Scaramella






<PAGE>   1

                                                                EXHIBIT 10.A

                          SUTHERLAND, ASBILL & BRENNAN
                    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]


Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713



         Re:  Providentmutual Life and Annuity Company of America
              Providentmutual Variable Annuity Separate Account
              (File No. 33-65512)

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 number 5
to the Form N-4 registration statement filed by Providentmutual Life and
Annuity Company of America and Providentmutual Variable Annuity Separate
Account for certain individual flexible premium deferred annuity contracts 
(File No. 33-65512). 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 10.B





                                                                April 30, 1998

Providentmutual Life and Annuity Company of America
300 Continental Drive
Newark, DE 19713


Gentlemen:

I hereby consent to the use of my name in the Prospectus under the heading
"Experts" filed as part of the Post-Effective Amendment No. 5 on Form N-4 (File
No. 33-65512) for the Providentmutual Variable Annuity Separate Account.




                                                Very truly yours,

                                                /s/ SCOTT V. CARNEY
                                                --------------------------
                                                Scott V. Carney, FSA, MAAA
                                                Vice President & Actuary




<PAGE>   1
                                                                  EXHIBIT 10.C



                       CONSENT OF INDEPENDENT ACCOUNTANTS


        We hereby consent to the inclusion, in this Post-Effective Amendment
No. 5 to the Registration Statement under the Securities Act of 1933, as
amended, filed on Form N-4 (File No. 33-65512) for the Providentmutual Variable
Annuity Separate Account, of the following reports:


        1.  Our report dated February 4, 1998 on our audits of the financial 
            statements of Providentmutual Life and Annuity Company of America 
            as of December 31, 1997 and 1996 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 Providentmutual Variable Annuity Separate Account
            (comprising thirty-three subaccounts) as of December 31, 1997, and
            the related statements of operations for the year then ended and
            the statements of changes in net accets for each of the two years
            in the period then ended.

  
        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 (13)

              Providentmutual Life and Annuity Company of America
                       Variable Annuity Separate Account

                            MONEY MARKET SUB-ACCOUNT

7-DAY CURRENT YIELD

  Current Yield =   (( NCS-ES)/UV /7) x 365

      where NCS =   the net change in the value of the Portfolio (exclusive of
                    realized gains or losses on the sale of securities and 
                    unrealized appreciation and depreciation) for the 7-day 
                    period attributable to a hypothetical account having a 
                    balance of 1 Sub-Account unit
 
             ES =   M&E + ADMIN

       where ES =   per unit expenses of the Sub-Account for the 7-day period

            M&E =   per unit Mortality & Expense Risk Charges deducted for the
                    7-day period 

          ADMIN =   per unit Administration Charges deducted for the 7-day
                    period
                =   (30 / AAV / 365 ) x AUV x 7

      where AAV =   Average Account Value of contracts on the last day of the
                    7-day period
                =   $10,000

            AUV =   the sum of the unit values on the first and last days of
                    the 7-day period divided by 2
                =   10.000 + 10.0059 2 = 10.0030

             UV =   the unit value on the first day of the 7-day period
                =   10.0000

DATE            NCS             M&E             ADMIN

Dec 31      .00117473       .00032920       .00008222
Dec 30      .00353355       .00098700       .00024665
Dec 29          -               -               -
Dec 28          -               -               -
Dec 27      .00117978       .00032893       .00008222
Dec 26      .00234930       .00065760       .00016443
Dec 25          -               -               -
            _________       _________       _________
            .00823736       .00230273       .00057552

   (((.00823736 - .00230273 - .00057552)/ 10.0000)) / 7 x 365 = 2.79% = 7-day
                      Current Yield at December 31, 1991.
<PAGE>   2
7-Day Effective Yield

          ES = ES as calculated for the Current Yield

          UV = UV as calculated for the Current Yield

                            365/7
      ((.00535911/10.0000) + 1        -1

     = 2.83% = 7-Day Effective Yield at December 31, 1991

Growth, Bond, Managed, Aggressive Growth and International Sub-Accounts

30-Day Yield

                                   6
                  NI - ES
      Yield = 2  --------- + 1       - 1
                   U x UV

   where NI = Net income of the Portfolio for the 30-day period attributable
              to the Sub-Account's units

          ES = M&E + ADMIN

    where ES = Expenses of the Sub-Account for the 30-day period

         M&E = Mortality & Expense Risk charges deducted from the Sub-Account
               for the 30-day period

       ADMIN = Administration charges deducted from the Sub-Account for the
               30-day period
             = (30 / AAV / 365) x (U x AUV) x 30

   where AAV = Average Accumulated Value of contracts on the last day of the
               30-day period
             = $10,000

           U = the average number of units outstanding, which equals the number
               of units on the first day of the 30-day period plus the number
               of units on the last day of the 30-day period, the sum of which
               is divided by 2

         AUV = the sum of the unit values on the first and last days of the
               30-day period divided by 2

          UV = the unit value at the close (highest) of the last day in the
               30-day period


                                      -2-
<PAGE>   3
<TABLE>
<CAPTION>
Yields for the 30-day period ended December 31, 1991 
- ----------------------------------------------------

                     NI          ES          U          UV     Yield
                     --          --          -          --     -----
<S>              <C>         <C>         <C>         <C>       <C>
Growth           67,935.30   68,357.32   2,035,000   26.2149   -0.01%
Bond             14,035.84    5,600.26     225,000   19.2330    2.35%
Managed          34,570.74   16,031.86     875,000   14.2727    1.79%
Aggressive        3,435.66    3,118.54     140,000   17.3625    0.16%
  Growth   
International     1,006.66    6,387.75     505,000    9.7711   -1.31%
</TABLE>

<TABLE>
<CAPTION>
Total Return
- ------------
<S>               <C>
Total Return =    ((ERV/P - 1)

   where ERV =     the value, at the end of the applicable period, of a 
                   hypothetical $1,000 investment made at the beginning of the 
                   applicable period. It is assumed that all dividends and
                   capital gains distributions are reinvested

          P =      a hypothetical initial investment of $1,000

        ERV =      (1,000 x ((EUV - BUV) / BUV)) + 1,000 - ADMIN
                   - (SC X 1000)

  where EUV =      Unit value at the end of the period

        BUV =      Unit value at the beginning of the period

         SC =      Surrender charge = 6% (1 year); 1% (5 year)

      ADMIN =      Administration Charges attributable to the hypothetical
                   account for the period
            =      (30 / AAV / 365) x No. of days in the period x (1,000 +
                   ($1,000 x ((EUV - BUV) / BUV) / 2))

  where AAV =      Average Accumulated Value of contracts on the last day of
                   the period
            =      $10,000
</TABLE>

<TABLE>
<CAPTION>
Average Annual Total Return
- ---------------------------
<S>                <C>

                           1/n
Total Return =     ((ERV/P)   -1)

   where ERV =     the value, at the end of the applicable period, of a 
                   hypothetical $1,000 investment made at the beginning of the
                   applicable period. It is assumed that all dividends and
                   capital gains distributions are reinvested

           P =     a hypothetical initial investment of $1,000
</TABLE>

                                      -3-
<PAGE>   4
        n = number of years (Int'l = days/365)

      ERV = (1,000 x ((EUV - BUV) / BUV)) + 1,000 - ADMIN
            - (SC x 1,000)

where EUV = Unit value at the end of the period

      BUV = Unit value at the beginning to the period

       SC = Surrender charge = 6% - 1 year; 1% - 5 year

    ADMIN = Administration Charges attributable to the hypothetical
            account for the period
          = (30 / AAV / 365) x No. of days in the period x
            ($1,000 + ($1,000 x ((EUV - BUV) / BUV) /2))

where AAV = Average Accumulated Value of contracts on last day of the
            period
          = $10,000














                                      -4-
<PAGE>   5
GROWTH SUB-ACCOUNT

1 Year (1/1/91 to 12/31/91)
- ---------------------------

ADMIN =      365 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    26.2149 - 22.3898 ) / 22.3898 / 2))
      = ( 0.003) x (    1,085.42 )
      =    3.26

ERV   =   1,000 + ( 1,000 x ((    26.2149 - 22.3898 ) / 22.3898
           3.26 - (.06 x 1,000)
      = 1107.58

Total Return =      (   1,107.58 / 1,000) - 1
             =   10.76%

Average Annual Total Return =        10.76%

5 Year (1/1/87 to 12/31/91)
- ---------------------------

ADMIN =     1825 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    26.2149 - 14.5785 ) / 14.5785 / 2))
      = ( 0.015) x (    1,399.09 )
      =   20.99

ERV   =   1,000 + ( 1,000 x ((    26.2149 - 14.5785 ) / 14.5785
        - 20.99 - (.01 x 1,000)
      =  1767.2

Total Return =      (   1,767.20 / 1,000) - 1
             =   76.72%

Average Annual Total Return =        12.06%

Since Inception (2/24/84 to 12/31/91)
- -------------------------------------

ADMIN =     2867 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    26.2149 - 10.0000 ) / 10.0000 / 2))
      = (0.02356 ) x (    1,810.75 )
      =   42.67

ERV   =   1,000 + ( 1,000 x ((    26.2149 - 10.0000 ) / 10.0000
        - 42.67 - (0 x 1,000)
      =  2578.82

Total Return =      (   2,578.82 / 1,000) - 1
             =  157.88%

Average Annual Total Return =        12.82%




                                      -5-
<PAGE>   6
MONEY MARKET SUB-ACCOUNT


1 Year (1/1/91 to 12/31/91)
- ---------------------------

ADMIN =      365 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    15.9477 - 15.2698 ) / 15.2698 / 2))
      = ( 0.003) x (    1,022.20 )
      =    3.07

ERV   =   1,000 + ( 1,000 x ((    15.9477 - 15.2698 ) / 15.2698
        -  3.07 - (.06 x 1,000)
      =  981.32

Total Return =      (     981.32 / 1,000) - 1
             =   -1.87 %

Average Annual Total Return =        -1.87%


5 Year (1/1/87 to 12/31/91)
- ---------------------------

ADMIN =     1825 x (30/10,000/365)
        x (1.000 + ( 1,000 x ((    15.9477 - 11.9506 ) / 11.9506 / 2))
      = ( 0.015) x (    1,167.23 )
      =   17.51

ERV   =   1,000 + ( 1,000 x ((    15.9477 - 11.9506 ) / 11.9506
        - 17.51 - (.01 x 1,000)
      =  1306.96

Total Return =      (   1,306.96 / 1,000) - 1
             =   30.70 %

Average Annual Total Return =         5.50%

Since Inception (2/24/84 to 12/31/91)
- -------------------------------------

ADMIN =     2867 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    15.9477 - 10.0000 ) / 10.0000 / 2))
      = (0.02356) x (    1,297.39 )
      =    30.57

ERV   =   1,000 + ( 1,000 x ((    15.9477 - 10.0000 ) / 10.0000
         - 30.57 - (0 x 1,000)
      =  1564.2

Total Return =      (   1,564.20 / 1,000) - 1
             =   56.42 %

Average Annual Total Return =         5.86%



                                      -6-
<PAGE>   7
BOND SUB-ACCOUNT

1 Year (1/1/91 to 12/31/91)
- ---------------------------

ADMIN =        365 x (30/10,000/365)
          x (1,000 + (1,000 x ((   19.2330 - 17.0844 ) / 17.0844 / 2))
        = (  0.003 ) x (   1,062.88 )
        =     3.19

ERV     =    1,000 + (1,000 x ((   19.2330 - 17.0844 ) / 17.0844
          -   3.19 - (.06 x 1,000)
        = 1,062.57

Total Return =   ( 1,062.57 / 1,000) - 1
             =  6.26%

Average Annual Total Return =     6.26%


5 Year (1/1/87 to 12/31/91)
- ---------------------------

ADMIN =       1825 x (30/10,000/365)
        x   (1,000 + ( 1,000 x (( 19.2330 - 14.8780 ) / 14.8780 / 2))
        =  ( 0.015 ) x (   1,146.36 )
        =     17.2

ERV     =    1,000 + ( 1,000 x ((   19.2330 - 14.8780 ) / 14.8780
        -     17.2 - (.01 x 1,000)
        =    1265.51

Total Return =     (   1,265.51 / 1,000) - 1
             =   26.55%

Average Annual Total Return =       4.82%


Since Inception (2/24/84 to 12/31/91)
- ------------------------------------

ADMIN =       2867.x (30/10,000/365)
        x   (1,000 + ( 1,000 x (( 19.2330 - 10.0000 ) / 10.0000 / 2))
        =  ( 0.02356 ) x (   1,146.65 )
        =    34.44

ERV     =    1,000 + ( 1,000 x ((   19.2330 - 10.0000 ) / 10.0000
        -    34.44 - (0 x 1,000)
        =    1888.86

Total Return =     (   1,888.86 / 1,000) - 1
             =   68.89%

Average Annual Total Return =       8.43%



                                      -7-
<PAGE>   8
MANAGED SUB-ACCOUNT

1 Year (1/1/91 to 12/31/91)
- ---------------------------

ADMIN =      365 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    14.2727 - 11.9886 ) / 11.9886 / 2))
      = (  0.003 ) x (    1,095.26 )
      =     3.29

ERV   =    1,000 + ( 1,000 x ((    14.2727 - 11.9886 ) / 11.9886
        -   3.29 - (.06 x 1,000)
      =  1127.23

Total Return =       (    1,127.23 / 1,000) - 1
             =     12.72%

Average Annual Total Return =        12.72%

5 Year (1/1/87 to 12/31/91)
- ----------------------------

ADMIN =     1825 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    14.2727 - 11.0949 ) / 11.0949 / 2))
      = (  0.015 ) x (    1,143.21 )
      =    17.15

ERV   =    1,000 + ( 1,000 x ((    14.2727 - 11.0949 ) / 11.0949
        -  17.15 - (.01 x 1,000)
      =  1259.27

Total Return =       (    1,259.27 / 1,000) - 1
             =     25.93%

Average Annual Total Return =        4.72%

Since Inception (12/12/85 to 12/31/91)
- --------------------------------------

ADMIN =     2210 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    14.2727 - 10.0000 ) / 10.0000 / 2))
      = (0.01816 ) x (    1,213.64 )
      =    22.05

ERV   =    1,000 + ( 1,000 x ((    14.2727 - 10.0000 ) / 10.0000
        -  22.05 - (0 x 1,000)
      =  1405.22

Total Return =       (    1,405.22 / 1,000) - 1
             =     40.52%

Average Annual Total Return =        5.78%


                                      -8-

<PAGE>   9
AGGRESSIVE GROWTH SUB-ACCOUNT

1 Year (1/1/91 to 12/31/91)

ADMIN =      365 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    17.3625 - 11.2405 ) / 11.2405 / 2))
      = (  0.003 ) x (    1,272.32 )
      =     3.82

ERV   =    1,000 + ( 1,000 x ((    17.3625 - 11.2405 ) / 11.2405
        -   3.82 - (.06 x 1,000)
      =  1480.82

Total Return =      (    1,480.82 / 1,000) - 1
             =   48.08 %

Average Annual Total Return =       48.08%

Since Inception (5/1/89 to 12/31/91)

ADMIN =       974 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((    17.3625 - 10.0000 ) / 10.0000 / 2))
      = (0.00800 ) x (    1,368.13 )
      =    10.95

ERV   =    1,000 + ( 1,000 x ((    17.3625 - 10.0000 ) / 10.0000
        -  10.95 - (.04 x 1,000)
      =  1685.3

Total Return =      (    1,685.30 / 1,000) - 1
             =   68.53 %

Average Annual Total Return =       21.60%


INTERNATIONAL SUB-ACCOUNT

Since Inception (11/7/91 to 12/31/91)

ADMIN =       54 x (30/10,000/365)
        x (1,000 + ( 1,000 x ((     9.7711 - 10.0000 ) / 10.0000 / 2))
      = (0.00044 ) x (      988.56 )
      =     0.44

ERV   =    1,000 + ( 1,000 x ((     9.7711 - 10.0000 ) / 10.0000
        -   0.44 - (.06 x 1,000)
      =   916.87

Total Return =      (      916.67 / 1,000) - 1
             =   -8.33 %

Average Annual Total Return =       -44.46%


                                      -9-

<PAGE>   1
                                                                      EXHIBIT 14

                                POWER OF ATTORNEY


Know all men by these presents:


That I, J. Kevin McCarthy a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, M. DIANE KOKEN 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either M. DIANE KOKEN and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of April, 1997.


                                                  /s/J. KEVIN McCARTHY
                                                  ______________________________
                                                  J. Kevin McCarthy


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 24th day of April, 1997, before me personally appeared J. Kevin McCarthy
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.

                                                  /s/JENNIFER J. AVILES
My commission expires:                            ______________________________
                                                  Notary Public
         NOTARIAL SEAL
 JENNIFER J. AVILES, Notary Public
City of Philadelphia, Phila. County
My Commission Expires July 24, 2000
<PAGE>   2
                                POWER OF ATTORNEY


Know all men by these presents:


That I, Mary Lynn Finelli a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, M. DIANE KOKEN 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either M. DIANE KOKEN and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of April, 1997.


                                                   /s/MARY LYNN FINELLI
                                                   _____________________________
                                                   Mary Lynn Finelli


Commonwealth of PENNSYLVANIA
                              :ss
County of CHESTER

On this 24th day of April, 1997, before me personally appeared Mary Lynn Finelli
to me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and she duly acknowledged to me that he
executed the same.

                                                   /s/JENNIFER J. AVILES
My commission expires:                             _____________________________
                                                   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, Alan F. Hinkle a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, M. DIANE KOKEN 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either M. DIANE KOKEN and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of April, 1997.



                                                   /s/ ALAN F. HINKLE
                                                   _____________________________
                                                   Alan F. Hinkle


Commonwealth of PENNSYLVANIA
                              :ss
County of CHESTER

On this 24th day of April, 1997, before me personally appeared Alan F. Hinkle 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.

                                                   /s/JENNIFER J. AVILES
My commission expires:                             _____________________________
                                                   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, Joan C. Turnbull a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, M. DIANE KOKEN 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either M. DIANE KOKEN and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of April, 1997.



                                                   /s/JOAN C. TURNBULL
                                                   _____________________________
                                                   Joan C. Turnbull


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 24th day of April, 1997, before me personally appeared Joan C. Turnbull
to me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and she 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, Robert W. Kloss a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, M. DIANE KOKEN 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either M. DIANE KOKEN and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of April, 1997.


                                                   /s/ROBERT W. KLOSS
                                                   _____________________________
                                                   Robert W. Kloss


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 24th day of April, 1997, before me personally appeared Robert W. Kloss
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, James Potter a member of the Board of Directors of PROVIDENTMUTUAL LIFE
& ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my true
and lawful attorney in fact, WILLIAM P. LOESCHE, for me and in my name, place
and stead to sign the following registration statements and any and all
amendments thereto on behalf of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as WILLIAM P. LOESCHE shall be an employee of
PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of April, 1998.


                                                   _____________________________
                                                   James Potter


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 23rd day of April, 1998, before me personally appeared James Potter 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>   7
                                POWER OF ATTORNEY


Know all men by these presents:


That I, Sarah C. Lange a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, JAMES POTTER 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either JAMES POTTER and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of April, 1998.



                                                   _____________________________
                                                   Sarah C. Lange


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 23rd day of April, 1998, before me personally appeared Sarah C. Lange to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and she duly acknowledged to me that he
executed the same.


My commission expires:                             _____________________________
                                                   Notary Public
<PAGE>   8
                                POWER OF ATTORNEY


Know all men by these presents:


That I, James D. Kestner a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, JAMES POTTER 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either JAMES POTTER and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of April, 1998.



                                                   _____________________________
                                                   James D. Kestner


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 23rd day of April, 1998, before me personally appeared James D. Kestner
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>   9
                                POWER OF ATTORNEY


Know all men by these presents:


That I, Linda Springer a member of the Board of Directors of PROVIDENTMUTUAL
LIFE & ANNUITY COMPANY OF AMERICA do hereby make constitute and appoint as my
true and lawful attorneys in fact, JAMES POTTER 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA 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 PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF
AMERICA and for so long as either JAMES POTTER and/or WILLIAM P. LOESCHE shall
be employees of PROVIDENTMUTUAL LIFE & ANNUITY COMPANY OF AMERICA.

IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of April, 1998.



                                                   _____________________________
                                                   Linda Springer


Commonwealth of PENNSYLVANIA
                             :ss
County of CHESTER

On this 23rd day of April, 1998, before me personally appeared Linda Springer to
me known and known to me to be the person mentioned and described in and who
executed the foregoing instrument and she duly acknowledged to me that he
executed the same.


My commission expires:                             _____________________________
                                                   Notary Public




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