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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
FILE NO. 333-
FILE NO. 811-7337
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
/ /
/ /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 12 /X/
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PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
PROTECTIVE LIFE INSURANCE COMPANY
(Name of Depositor)
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
COPY TO:
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NANCY KANE, ESQUIRE STEPHEN E. ROTH, ESQUIRE
2801 Highway 280 South Sutherland Asbill & Brennan LLP
Birmingham, Alabama 35223 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent Washington, D.C. 20004-2404
for Service of Process)
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
TITLE OF SECURITIES BEING REGISTERED:
Interests in a separate account issued through variable life insurance policies.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT
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OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE
AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), SHALL DETERMINE.
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PROSPECTUS
[LOGO]
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Issued by: PROTECTIVE LIFE INSURANCE COMPANY
2801 Highway 280 South
Birmingham, Alabama 35223
Telephone (800) 866-3555
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This prospectus describes the Premiere Survivor, a last survivor flexible
premium variable and fixed life insurance policy offered by Protective Life
Insurance Company ("Protective Life"). Please read it carefully before you
invest.
The policy is designed to provide insurance protection on the lives of two
individuals and to pay a death benefit after the death of the last surviving
Joint Insured.
You have the flexibility to vary the amount and timing of premium payments
as long as sufficient premiums are paid.
The value of the life insurance policy will fluctuate with the investment
performance of the investment options you select. A Fixed Account is also
available.
The prospectuses for the investment funds describe the investment
objective(s) and risks of investing in the Sub-Account corresponding to each.
You bear the entire investment risk for Policy Value allocated to a Sub-Account.
The Policy has no guaranteed minimum Surrender Value except for amounts
allocated to the Fixed Account.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy.
POLICIES (EXCEPT FOR POLICIES ISSUED IN CERTAIN STATES) INCLUDE AN
ARBITRATION PROVISION THAT MANDATES RESOLUTION OF ALL DISPUTES ARISING UNDER THE
POLICY THROUGH BINDING ARBITRATION. THIS PROVISION IS INTENDED TO RESTRICT AN
OWNER'S ABILITY TO LITIGATE SUCH DISPUTES. SEE "ARBITRATION".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This policy may not be available for sale in all states.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUMS PAID
(PRINCIPAL).
The date of this Prospectus is
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PROSPECTUS CONTENTS
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DEFINITIONS........................................................... 5
SUMMARY AND DIAGRAM OF THE POLICY..................................... 6
EXPENSE TABLES........................................................ 9
GENERAL INFORMATION ABOUT PROTECTIVE LIFE, THE VARIABLE ACCOUNT AND
THE FUNDS............................................................ 11
Protective Life Insurance Company................................... 11
Protective Variable Life Separate Account........................... 11
The Funds........................................................... 11
- The PIC Funds................................................... 12
- The Van Kampen Funds............................................ 12
- The MFS Funds................................................... 13
- The Oppenheimer Funds........................................... 13
- The Calvert Funds............................................... 14
- The Van Eck Funds............................................... 14
Other Information about the Funds................................... 14
Other Investors in the Funds........................................ 15
Addition, Deletion or Substitution of Investments................... 15
Voting Rights....................................................... 16
THE POLICY............................................................ 16
Parties to the Policy............................................... 16
- Owner........................................................... 16
- Joint Insureds.................................................. 16
- Beneficiary..................................................... 16
Purchasing a Policy................................................. 17
Cancellation Privilege.............................................. 17
Premiums............................................................ 18
- Minimum Initial Premium......................................... 18
- Planned Periodic Premiums....................................... 18
- Unscheduled Premiums............................................ 18
- Premium Limitations............................................. 18
- No-Lapse Guarantee.............................................. 18
- Premium Payments Upon Increase in Face Amount................... 19
Net Premium Allocations............................................. 19
Policy Lapse and Reinstatement...................................... 19
- Lapse........................................................... 19
- Reinstatement................................................... 20
CALCULATION OF POLICY VALUES.......................................... 20
Variable Account Value.............................................. 20
- Determination of Units.......................................... 20
- Determination of Unit Value..................................... 20
- Net Investment Factor........................................... 20
Fixed Account Value................................................. 20
POLICY BENEFITS....................................................... 21
Transfers of Policy Values.......................................... 21
- General......................................................... 21
- Telephone Transfers............................................. 21
- Reservation of Rights........................................... 21
- Dollar Cost Averaging........................................... 21
- Portfolio Rebalancing........................................... 22
Surrender Privilege................................................. 22
Withdrawal Privilege................................................ 22
Policy Loans........................................................ 23
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- General......................................................... 23
- Loan Collateral................................................. 23
- Loan Repayment.................................................. 23
- Interest........................................................ 24
- Non-Payment of Policy Loan...................................... 24
- Effect of a Policy Loan......................................... 24
Death Benefit Proceeds.............................................. 24
- Calculation of Death Benefit Proceeds........................... 25
- Death Benefit Options........................................... 25
- Changing the Death Benefit Option............................... 25
Face Amounts........................................................ 25
- Basic Face Amount............................................... 25
- Supplemental Face Amount........................................ 26
- Changing the Face Amount........................................ 26
- Increasing the Face Amount...................................... 26
- Decreasing the Face Amount...................................... 26
Special Endorsements................................................ 27
- Estate Protection Endorsement................................... 27
- Policy Split Option Endorsement................................. 27
Settlement Options.................................................. 28
- Minimum Amounts................................................. 28
- Death of Payee.................................................. 28
- Other Requirements.............................................. 28
THE FIXED ACCOUNT..................................................... 29
The Fixed Account................................................... 29
Interest Credited on Fixed Account Value............................ 29
Payments from the Fixed Account..................................... 29
CHARGES AND DEDUCTIONS................................................ 30
Premium Expense Charge.............................................. 30
Monthly Deduction................................................... 30
- Cost of Insurance Charge........................................ 30
- Cost of Insurance Rates......................................... 30
- Legal Considerations Relating to Sex -- Distinct Premium
Payments and Benefits............................................ 31
- Monthly Administration Fee...................................... 32
- Supplemental Rider Charges...................................... 32
- Mortality and Expense Risk Charge............................... 32
Transfer Fee........................................................ 32
Surrender Charge (Contingent Deferred Sales Charge)................. 32
Withdrawal Charge................................................... 33
Fund Expenses....................................................... 34
EXCHANGE PRIVILEGE.................................................... 34
Effect of the Exchange Offer........................................ 35
- Tax Matters..................................................... 36
- Sales Commissions............................................... 36
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES, DEATH BENEFITS AND
ACCUMULATED
PREMIUMS............................................................. 36
OTHER POLICY BENEFITS AND PROVISIONS.................................. 42
Limits on Rights to Contest the Policy.............................. 42
- Incontestability................................................ 42
- Suicide Exclusion............................................... 42
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3
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Changes in the Policy or Benefits................................... 42
- Misstatement of Age or Sex...................................... 42
- Other Changes................................................... 42
Suspension or Delay of Payments..................................... 42
Reports to Policy Owners............................................ 42
Assignment.......................................................... 43
Arbitration......................................................... 43
Supplemental Riders................................................. 43
Reinsurance......................................................... 43
USES OF THE POLICY.................................................... 43
TAX CONSIDERATIONS.................................................... 44
Introduction........................................................ 44
Tax Status of Protective Life....................................... 44
Taxation of Life Insurance Policies................................. 44
- Tax Status of the Policy........................................ 44
-- Diversification Requirements................................... 45
-- Ownership Treatment............................................ 45
- Tax Treatment of Life Insurance Death Benefit Proceeds.......... 45
- Tax Deferral During Accumulation Period......................... 45
Policies Not Owned by Individuals................................... 46
Policies Which Are Not MEC's........................................ 46
-- Tax Treatment of Withdrawals Generally......................... 46
-- Certain Distributions Required by the Tax Law in the First
15 Policy Years.................................................. 46
-- Tax Treatment of Loans......................................... 46
Policies Which Are MEC's............................................ 47
-- Characterization of a Policy as a MEC.......................... 47
-- Tax Treatment of Withdrawals, Loans, Assignments and Pledges
under MECs....................................................... 47
-- Penalty Tax.................................................... 47
-- Aggregation of Policies........................................ 47
- Actions to Ensure Compliance with the Tax Law................... 47
- Other Considerations............................................ 48
Federal Income Tax Withholding...................................... 48
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE.............. 48
Sale of the Policies................................................ 48
Corporate Purchasers................................................ 49
Protective Life Directors and Executive Officers.................... 49
State Regulation.................................................... 50
Additional Information.............................................. 51
Independent Accountants............................................. 51
Experts............................................................. 51
IMSA................................................................ 51
Legal Matters....................................................... 51
Financial Statements................................................ 51
INDEX TO FINANCIAL STATEMENTS......................................... F-1
APPENDICES
A-Examples of Death Benefit Options................................. A-1
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
4
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DEFINITIONS
"We", "us", "our", "Protective Life", and "Company" refer to Protective Life
Insurance Company. "You" and "your" refer to the Owner(s).
ATTAINED AGE -- A Joint Insured's age as shown in the Policy's specifications
page, plus the number of complete Policy Years since the Policy Effective Date.
BASIC FACE AMOUNT -- The dollar amount selected by the Owner and shown in the
Policy equal to the Face Amount less any Supplemental Face Amount.
CANCELLATION PERIOD -- Period shown in the Policy during which the Owner may
exercise the cancellation privilege and return the Policy for a refund.
CASH VALUE -- Policy Value minus any applicable Surrender Charge.
DEATH BENEFIT -- The amount of insurance provided under the Policy as determined
by the Death Benefit Option selected.
DEATH BENEFIT OPTION -- One of two options that an Owner may select for the
computation of Death Benefit Proceeds. Level (Option A), or Increasing
(Option B).
DEATH BENEFIT PROCEEDS -- The amount payable to the Beneficiary if both Joint
Insureds die while the Policy is in force. It is equal to the Death Benefit plus
any death benefit under any endorsement or rider to the Policy less any Policy
Debt and less unpaid monthly deductions if the Last Survivor of the Joint
Insureds dies during a grace period.
FACE AMOUNT -- The dollar amount selected by the Owner and shown in the Policy
used to compute the death benefit. It is the sum of the Basic Face Amount plus
any Supplemental Face Amount.
FIXED ACCOUNT -- Part of Protective Life's General Account to or from which
Policy Value may be transferred or into which Net Premiums allocated under a
Policy.
FIXED ACCOUNT VALUE -- The Policy Value in the Fixed Account.
FUND -- A separate investment portfolio of an open-end management investment
company or unit investment trust in which a Sub-Account invests.
HOME OFFICE -- 2801 Highway 280 South, Birmingham, Alabama 35223.
INITIAL FACE AMOUNT -- The Face Amount on the Policy Effective Date.
ISSUE DATE -- The date the Policy is issued.
JOINT INSUREDS -- The two persons whose lives are covered by the Policy.
LAPSE -- Termination of the Policy at the expiration of the grace period while
at least one of the Joint Insureds is still living.
LAST SURVIVOR OF THE JOINT INSUREDS -- The last living Joint Insured.
LOAN ACCOUNT -- An account within Protective Life's general account to which
Fixed Account Value and/or Variable Account Value is transferred as collateral
for Policy loans.
MONTHLY ANNIVERSARY DAY -- The same day in each month as the Policy Effective
Date.
MONTHLY DEDUCTION -- The fees and charges deducted monthly from the unloaned
Policy Value and/or Variable Account Value as described on the Policy
specifications pages.
NET AMOUNT AT RISK -- As of any Monthly Anniversary Day, the amount by which the
Death Benefit (discounted for the upcoming month) exceeds the Policy Value
(before the Monthly Deduction).
NET PREMIUM -- A premium payment minus the applicable premium expense charges.
OWNER -- The person or persons who own and are entitled to exercise all rights
provided under the Policy.
POLICY ANNIVERSARY -- The same day and month in each Policy Year as the Policy
Effective Date.
POLICY DEBT -- The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE -- The date shown in the Policy as of which coverage under
the Policy begins.
POLICY VALUE -- The sum of the Variable Account Value, the Fixed Account Value,
and the Loan Account Value.
POLICY YEAR -- Each period of twelve months commencing with the Policy Effective
Date and each Policy Anniversary thereafter.
SUB-ACCOUNT -- A separate division of the Variable Account established to invest
in a particular Fund.
SUB-ACCOUNT VALUE -- The Policy Value in a Sub-Account.
SUPPLEMENTAL FACE AMOUNT -- The dollar amount selected by the Owner and shown in
the Policy as Face Amount purchased in addition to the Basic Face Amount.
SURRENDER VALUE -- The Cash Value minus any outstanding Policy Debt.
VALUATION DAY -- Each day the New York Stock Exchange and the Home Office are
open for business except for a day that a Sub-Account's corresponding Fund does
not value its shares.
VALUATION PERIOD -- The period commencing with the close of regular trading on
the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT -- Protective Variable Life Separate Account.
VARIABLE ACCOUNT VALUE -- The sum of all Sub-Account Values.
5
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SUMMARY AND DIAGRAM OF THE POLICY
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION AND DIAGRAM OF THE POLICY
SHOULD BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE POLICY IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND THERE IS NO OUTSTANDING
POLICY DEBT.
PURPOSE OF THE POLICY. The Policy is designed to be a long-term investment
providing insurance benefits. A prospective Owner should consider the Policy in
conjunction with other insurance policies he or she may own, as well as their
need for insurance and the Policy's long-term investment potential. It may not
be advantageous to replace existing insurance coverage with the Policy. In
particular, replacement should be carefully considered if the decision to
replace existing coverage is based solely on a comparison of Policy
illustrations (see below).
COMPARISON WITH UNIVERSAL LIFE INSURANCE. The Policy is similar in many
ways to fixed-benefit life insurance. As with fixed-benefit life insurance: the
Owner of a Policy pays premiums for insurance coverage on the persons insured;
the Policy provides for accumulation of Net Premiums and a Surrender Value which
is payable if the Policy is surrendered during the lifetime of either of the
Joint Insureds; and the Surrender Value during the early Policy Years is likely
to be substantially lower than the aggregate premiums paid. However, the Policy
differs from fixed-benefit life insurance in several important respects. Unlike
fixed-benefit life insurance, the Death Benefit may and the Policy Value will
increase or decrease to reflect the investment performance of any Sub-Accounts
to which Policy Value is allocated. There is no guaranteed minimum Surrender
Value except with respect to Policy Value that is allocated to the Fixed
Account. If Policy Value is insufficient to pay charges due, then, after a grace
period, the Policy will lapse without value. See "Policy Lapse and
Reinstatement". However, Protective Life guarantees that the Policy will remain
in force during the first 5 Policy Years, as long as certain requirements
related to the Minimum Monthly Premium have been met. See "Premiums -- No-Lapse
Guarantee," and "Policy Loans". If a Policy lapses while loans are outstanding,
certain amounts may become subject to income tax and a 10% penalty tax. (See
"Tax Considerations".)
DEATH BENEFIT OPTIONS. Two Death Benefit options are available under the
Policy: a level death benefit ("Option A") and an increasing death benefit
("Option B"). Protective Life guarantees that the Death Benefit Proceeds will
never be less than the Face Amount of insurance (less any outstanding Policy
Debt and past due charges) as long as sufficient premiums are paid to keep the
Policy in force. The Policy provides for a Surrender Value that can be obtained
by surrendering the Policy. The Policy also permits loans and withdrawals,
within limits.
ILLUSTRATIONS. Illustrations in this prospectus or illustrations used in
connection with the purchase of a Policy are based on HYPOTHETICAL rates of
return. THESE RATES ARE NOT GUARANTEED. They are illustrative only and SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE PERFORMANCE. Actual rates
of return may be higher or lower than those reflected in Policy illustrations,
and therefore, actual Policy values will be different from those illustrated.
TAX CONSIDERATIONS. Protective Life intends for the Policy to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code of 1986, as amended. A Policy may be a "modified endowment
contract" under federal tax law depending upon the amount of premiums paid in
relation to the Death Benefit provided under the Policy. Protective Life will
monitor Policies and will attempt to notify you on a timely basis if your Policy
is in jeopardy of becoming a modified endowment contract. For further discussion
of the tax status of a Policy and the tax consequences of being treated as a
life insurance contract or a modified endowment contract, see "Tax
Considerations".
CANCELLATION PRIVILEGE. For a limited time after the Policy is issued, you
have the right to cancel your Policy and receive a refund. (See "Cancellation
Privilege"). In certain states, until the end of this "Cancellation Period,"
Protective Life reserves the right to allocate Net Premium to the Sub-Account
investing in the Oppenheimer Money Fund Sub-Account or to the Fixed Account.
(See "Net Premium Allocations").
6
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OWNER INQUIRIES. If you have any questions, you may write or call
Protective Life's Home Office at 2801 Highway 280 South, Birmingham, Alabama
35223, 1-800-265-1545.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
- You select a payment plan but are not required to pay premiums according to
the plan. You can vary the amount and frequency and can skip planned premium
payments. See "Premiums" pages 18 through 19 for rules and limits.
- The Policy's minimum initial premium and planned premium payments depend on
each Joint Insured's age, sex and underwriting class, Face Amount selected,
and any supplemental riders.
- Unscheduled premium payments may be made, within limits. See page 18.
- Under certain circumstances, extra premiums may be required to prevent
lapse. See "Policy Lapse and Reinstatement" pages 19 through 20.
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DEDUCTIONS FROM PREMIUM PAYMENTS
- - A premium expense charge will be deducted
from each premium before allocation
resulting in a "Net Premium". See
page 30.
POLICY YEAR CURRENT CHARGE MAXIMUM CHARGE
- ----------- -------------- --------------
1-5 10% 12.5%
6-10 5% 6%
11+ 2% 2.5%
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ALLOCATION OF NET PREMIUM
- You direct the allocation of Net Premium among 30 Sub-Accounts and the Fixed
Account. See page 19 for rules and limits on Net Premium allocations.
- The Sub-Accounts invest in corresponding Funds. See pages 11 through 14.
Funds available are the PIC Funds, the Van Kampen Funds, the Oppenheimer
Funds, the MFS Funds, the Calvert Funds and the Van Eck Funds.
- Interest is credited on amounts allocated to the Fixed Account at a rate
determined by Protective Life, but not less than an annual effective rate of
4%. See page 29 for rules and limits on Fixed Account allocations.
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DEDUCTIONS FROM POLICY VALUE
- Monthly Deduction includes charges for cost of insurance, administration
fees, mortality and expense risk charges and charges for any supplemental
rider. Monthly administration fees are currently $.06 per $1,000 of Basic
Face Amount (guaranteed not to exceed $0.075 per $1,000) during Policy Years
1 through 9. This charge is not assessed after the ninth Policy Year. In
addition, for the 12-month period following an increase in the Supplemental
Face Amount, there is a charge based on the increase. Monthly mortality and
expense risk charges are equal to .075% multiplied by the value of the
assets in the Variable Account (which is equivalent to an annual rate of
0.90% of such amount) during Policy Years 1 through 10. In Policy Years 11
and thereafter the monthly mortality and expense risk charge is currently
equal to .021% multiplied by the value of the assets in the Variable Account
(which is equivalent to an annual rate of 0.25% of such amount) and is
guaranteed not to exceed .075%. The mortality and expense risk charge is not
deducted from the Fixed Account. See "Monthly Deduction" pages 30 through
32.
DEDUCTIONS FROM ASSETS
- Investment advisory fees and Fund operating expenses are also deducted from
the assets of each Fund.
POLICY VALUE
- Is the amount in the Sub-Accounts and in the Fixed Account credited to your
Policy plus the value held in the general account to secure the Policy Debt.
- Varies from day to day to reflect Sub-Account investment experience,
interest credited on any Fixed Account allocations, charges deducted and any
other Policy transactions (such as Policy loans, transfers and withdrawals).
See "Calculation of Policy Value" pages 20 and 21. There is no minimum
guaranteed Policy Value except with respect to amounts allocated to the
Fixed Account. The Policy may lapse if the Policy Value is insufficient to
cover a Monthly Deduction due. See page 19.
- Can be transferred between and among the Sub-Accounts and the Fixed Account.
A transfer fee of $25 may apply if more than 12 transfers are made in a
Policy Year. See pages 21 and 22 for rules and limits. Policy loans reduce
the amount available for allocations and transfers.
- Is the starting point for calculating certain values under a Policy, such as
the Cash Value, Surrender Value, and the Death Benefit used to determine
Death Benefit Proceeds.
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CASH BENEFITS DEATH BENEFITS
- - After the first Policy Year loans may be - Available as lump sum or under a variety
taken for amounts up to 90% of Surrender of settlement options.
Value, at an effective annual interest - The minimum Face Amount is $250,000 (Basic
rate of 6.0% during the Policy Years 2 plus Supplemental) of which at least
through 10 and currently 4.00% thereafter $100,000 must be Basic. The minimum
(4.50% guaranteed). See "Policy Loans" Supplemental Face Amount, if any, is
pages 23 and 24 for rules and limits. $25,000.
- - After the first policy year withdrawals - Two Death Benefit Options are available:
generally can be made provided there is Option A, Level (which is equal to the
sufficient remaining Surrender Value. A Face Amount), and Option B, Increasing
withdrawal charge of the lesser of $25 or (which is equal to the Face Amount plus
2% of the withdrawal amount requested will Policy Value). See page 25.
apply to each withdrawal. See "Withdrawal - Flexibility to change the Death Benefit
Privilege" on pages 22 and 23 for rules Option and Face Amount. See pages 25 through
and limits. 27 for rules and limits.
- - The Policy may be surrendered in full at - The No-Lapse Guarantee keeps the Policy in
any time for its Surrender Value. A force for a 5-year period regardless of
declining deferred sales charge is the sufficiency of Policy Value so long as
assessed on surrenders during the first 12 for each month the cumulative premiums
Policy Years. See "Surrender Charge paid on the Policy, less any withdrawals
(Contingent Deferred Sales Charge)" and Policy Debt, are at least equal to the
page 32. cumulative Minimum Monthly Premium. See
- - A variety of settlement options are "No-Lapse Guarantee" page 18.
available. See page 28. - Supplemental riders may be available. See
page 43.
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EXPENSE TABLES (TO BE UPDATED WHEN 1999 INFORMATION IS AVAILABLE FROM FUND
MANAGERS)
The Sub-Accounts invest in corresponding Funds. (See "The Funds"
pages 10-14.) The current Funds available and the investment advisory fees and
other expenses are as follows:
ANNUAL FUND EXPENSES
(AFTER REIMBURSEMENT AND AS PERCENTAGE OF AVERAGE NET ASSETS)
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MANAGEMENT OTHER TOTAL ANNUAL
(ADVISORY) EXPENSES AFTER FUND EXPENSES
FEES REIMBURSEMENT (AFTER REIMBURSEMENTS)
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PROTECTIVE INVESTMENT COMPANY (PIC) (1)
International Equity Fund.....................
Small Cap Value Fund..........................
Capital Growth Fund...........................
CORE-SM- U.S. Equity Fund.....................
Growth & Income Fund..........................
Global Income Fund............................
VAN KAMPEN LIFE INVESTMENT TRUST
Emerging Growth Fund..........................
Enterprise Fund...............................
Comstock Fund.................................
Growth and Income Fund........................
Strategic Stock Fund..........................
Asset Allocation Fund.........................
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE
TRUST-SM- (2)(3)
New Discovery Series..........................
Emerging Growth Series........................
Research Series...............................
Growth Series.................................
Growth With Income Series.....................
Utilities Series..............................
Total Return Series...........................
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Aggressive Growth Fund/VA.....................
Global Securities Fund/VA.....................
Capital Appreciation Fund/VA..................
Main Street Growth & Income Fund/VA...........
High Income Fund/VA...........................
Strategic Bond Fund/VA........................
Money Fund/VA.................................
CALVERT VARIABLE SERIES, INC. (4)
Social Small Cap Growth Portfolio.............
Social Balanced Portfolio.....................
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Hard Assets Fund....................
Worldwide Real Estate Fund (5)................
</TABLE>
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(1) The annual expenses listed for all of the PIC Funds are net of certain
reimbursements by PIC's investment manager. (See "The Funds".) Absent the
reimbursements, total expenses for the period ended December 31, 1999 were:
CORE-SM- U.S. Equity Fund 0.85%, Small Cap Value Fund 0.89%, International
Equity Fund 1.39%, Growth and Income Fund 0.85%, Capital Growth Fund 0.86%,
and Global Income Fund 1.28%. PIC's investment manager has voluntarily
agreed to reimburse certain of
9
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each Fund's expenses in excess of its management fees. Although this
reimbursement may be ended on 120 days notice to PIC, the investment manager
has no present intention of doing so.
(2) MFS has agreed to bear expenses for these series, subject to reimbursement
by these series, such that each series' "Other Expenses" shall not exceed
0.25% of the average daily net assets of these series during the current
fiscal year. This waiver and reimbursement was in effect for the period
ending December 31, 1999. The payments made by MFS on behalf of each series
under this arrangement are subject to reimbursement by the series to MFS,
which will be accomplished by the payment of an expense reimbursement fee by
the series to MFS computed and paid monthly at a percentage of the series'
average daily net assets for its then current fiscal year, with a limitation
that immediately after such payment the series' "Other Expenses" will not
exceed the percentage set forth above for that series. The obligation of MFS
to bear a series "Other Expenses" pursuant to this arrangement, and the
series' obligation to pay the reimbursement fee to MFS, terminates on the
earlier of the date on which payments made by the series equal the prior
payment of such reimbursable expenses by MFS, or December 31, 2004 (May 1,
2001 in the case of the New Discovery Series). MFS may, in its discretion,
terminate this arrangement at an earlier date, provided that the arrangement
will continue for each series until at least May 1, 2000, unless terminated
with the consent of the board of trustees which oversees the series. Absent
the reimbursements, total expenses for the New Discovery Series for the
period ended December 31, 1999 were 5.22% reflecting "Other Expenses"
of %.
(3) Each Series has an expense offset arrangement which reduces the Series'
custodian based fee based on the amount of cash maintained by the Series
with its custodian and dividend disbursing agent. Each Series may enter into
other such arrangements and directed brokerage arrangements which would also
have the effect of reducing the Series' expenses. Expenses do not take into
account these expense reductions and are therefore higher than the actual
expenses of the Series. Had this offset been incorporated into the reported
expenses, the "Other Expenses" for the New Discovery Series would appear on
the Expenses table as % and in footnote (2) as %, and the "other
Expenses" for the Utilities Series would appear on the Expenses table as
0.23%.
(4) The figures have been restated to reflect an increase in transfer agency
expenses (the addition of 0.01%) for the Calvert Social Balanced Portfolio
expected to be incurred in 2000. "Other Expenses" reflect an indirect fee.
Net fund operating expenses after reductions for fees paid indirectly
(again, restated for the Calvert Social Balanced Portfolio) would be 0.86%
for Calvert Social Balanced and 1.12% for Calvert Social Small Cap Growth.
(5) Van Eck Associates Corporation (the "Adviser") earned fees for investment
management and advisory services. The fee is based on an annual rate of 1%
of the average daily net assets. The Adviser also agreed to assume expenses
exceeding 1% of average daily net assets except interest, taxes, brokerage
commissions and extraordinary expenses for 2000. Absent this reimbursement,
total expenses for the Van Eck Worldwide Real Estate Fund would have been
% reflecting "Management Fees" of % and "Other Expenses" of %.
Certain of the officers and trustees of the Trust are officers, directors or
stockholders of the Adviser and Van Eck Securities Corporation. As of
December 31, 1999, the Adviser owned 39% of the outstanding shares of
beneficial interest of the Fund.
The above tables are intended to assist the owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The tables reflect
the investment management fees and other expenses and total expenses for each
Fund for the year ended December 31, 1999. For a more complete description of
the various costs and expenses see "Charges and Deductions" and the prospectus
for each of the Funds, which accompany this prospectus.
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GENERAL INFORMATION ABOUT PROTECTIVE LIFE,
THE VARIABLE ACCOUNT AND THE FUNDS
PROTECTIVE LIFE INSURANCE COMPANY
Protective Life is a Tennessee stock life insurance company. Founded in
1907, Protective Life offers individual life and health insurance, annuities,
group life and health insurance, and guaranteed investment contracts. Protective
Life is currently licensed to transact life insurance business in 49 states and
the District of Columbia. As of December 31, 1999, Protective Life had total
assets of approximately $ - billion. Protective Life is the principal
operating subsidiary of Protective Life Corporation ("PLC"), an insurance
holding company whose stock is traded on the New York Stock Exchange. PLC, a
Delaware corporation, had consolidated assets of approximately $13 billion at
December 31, 1999.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Protective Variable Life Separate Account is a separate investment account
of Protective Life established under Tennessee law by the board of directors of
Protective Life on February 22, 1995. The Variable Account is registered with
the Securities and Exchange Commission ("SEC") as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") and is a "separate account"
within the meaning of the federal securities laws. This registration does not
involve supervision by the SEC of the management or investment policies of
practices or the Variable Account.
Protective Life owns the assets of the Variable Account. These assets are
held separate from other assets and are not part of Protective Life's General
Account. 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 that Protective Life conducts. Protective Life may
transfer to its General Account any assets of the Variable Account which exceed
the reserves and other contract liabilities of the Variable Account (which
always are at least equal to the aggregate Surrender Values under the Policies).
Protective Life may accumulate in the Variable Account the charge for mortality
and expense risks and investment results applicable to those assets that are in
excess of the reserves and other contract liabilities related to the Policies.
Protective Life is obligated to pay all benefits provided under the Policies.
The Variable Account is divided into Sub-Accounts. The income, gains or
losses, whether or not realized, from the assets of each Sub-Account are
credited to or charged against that Sub-Account without regard to any other
income, gains or losses of Protective Life. Each Sub-Account invests exclusively
in shares of a corresponding Fund. Therefore, the investment experience of your
Policy depends on the experience of the Sub-Accounts you select. In the future,
the Variable Account may include other Sub-Accounts that are not available under
the Policies and are not otherwise discussed in this Prospectus.
Currently, thirty Sub-Accounts of the Variable Account are available under
the Policies: PIC International Equity; PIC Small Cap Value; PIC Capital Growth;
PIC CORE-SM- U.S. Equity; PIC Growth and Income; PIC Global Income; Van Kampen
Emerging Growth; Van Kampen Enterprise; Van Kampen Comstock; Van Kampen Growth
and Income; Van Kampen Strategic Stock; Van Kampen Asset Allocation; MFS New
Discovery; MFS Emerging Growth; MFS Research; MFS Growth; MFS Growth With
Income; MFS Utilities; MFS Total Return; Oppenheimer Aggressive Growth;
Oppenheimer Global Securities: Oppenheimer Capital Appreciation; Oppenheimer
Main Street Growth & Income; Oppenheimer High Income; Oppenheimer Strategic
Bond; Oppenheimer Money Fund; Calvert Social Small Cap Growth; Calvert Social
Balanced; Van Eck Worldwide Hard Assets; and Van Eck Worldwide Real Estate.
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each Fund is an investment
portfolio of one of the following investment companies: Protective Investment
Company (the "PIC Funds") managed by Protective Investment Advisors, Inc. and
subadvised by Goldman Sachs Asset Management or Goldman Sachs Asset Management
International; Van Kampen Life Investment Trust managed by Van Kampen
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Asset Management, Inc. (the "Van Kampen Funds"); Oppenheimer Variable Account
Funds (the "Oppenheimer Funds") managed by OppenheimerFunds, Inc.;
MFS-Registered Trademark- Variable Insurance Trust-SM- (the "MFS Funds") managed
by MFS Investment Management; Calvert Variable Series, Inc. (the "Calvert
Funds") managed by Calvert Asset Management Company, Inc.; or Van Eck Worldwide
Insurance Trust (the "Van Eck Funds") managed by Van Eck Associates Corporation.
Shares of these Funds are offered only to: (1) the Variable Account, (2) other
separate accounts of Protective Life supporting variable annuity contracts or
variable life insurance policies, (3) separate accounts of other life insurance
companies supporting variable annuity contracts or variable life insurance
policies, and (4) certain qualified retirement plans. Such shares are not
offered directly to investors but are available only through the purchase of
such contracts or policies or through such plans. See the prospectus for each
Fund for details about that Fund.
There is no guarantee that any Fund will meet its investment objectives.
Please refer to the prospectus for each of the Funds you are considering for
more information.
PROTECTIVE INVESTMENT COMPANY (PIC)
INTERNATIONAL EQUITY FUND. This Fund seeks long-term capital appreciation.
This Fund will pursue its objectives by investing substantially all, and at
least 65% of total assets in equity and equity-related securities of companies
that are organized outside the United States or whose securities are primarily
traded outside the United States.
SMALL CAP VALUE FUND. This Fund seeks long-term capital growth. This Fund
will pursue its objectives by investing, under normal circumstances, at least
65% of its total assets in equity securities of companies with public stock
market capitalizations of $1 billion or less at the time of investment.
CAPITAL GROWTH FUND. This Fund seeks long-term capital growth. The Fund
will pursue its objective by investing, under normal circumstances, at least 90%
of its total assets in a diversified portfolio of equity securities having
long-term capital appreciation potential.
CORE-SM- U.S. EQUITY FUND. This Fund seeks a total return consisting of
capital appreciation plus dividend income. This Fund will pursue its objective
by investing, under normal circumstances, at least 90% of its total assets in
equity securities selected using both fundamental research and a variety of
quantitative techniques in seeking to maximize the Fund's expected return, while
maintaining risk, style, capitalization and industry characteristics similar to
the S&P 500 Index.
GROWTH AND INCOME FUND. This Fund seeks long-term growth of capital and
growth of income. This Fund will pursue its objectives by investing, under
normal circumstances, at least 65% of its total assets in equity securities
having favorable prospects of capital appreciation and/or dividend paying
ability.
GLOBAL INCOME FUND. This Fund seeks high total return, emphasizing current
income and, to a lesser extent, providing opportunities for capital
appreciation. This Fund will pursue its objectives by investing primarily in
high quality fixed-income securities of U.S. and foreign issuers and through
foreign currency transactions.
VAN KAMPEN LIFE INVESTMENT TRUST
EMERGING GROWTH PORTFOLIO This Fund seeks capital appreciation through
investment in common stocks of small and medium sized emerging growth companies.
ENTERPRISE PORTFOLIO This Fund seeks capital appreciation through
investment in securities believed by the Fund's investment adviser to have above
average potential for capital appreciation.
COMSTOCK PORTFOLIO This Fund seeks capital growth and income through
investments in equity securities, including common stocks, preferred stocks and
securities convertible into common and preferred stocks.
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GROWTH AND INCOME This Fund seeks income and long-term growth of capital
through investments in income-producing equity securities.
STRATEGIC STOCK PORTFOLIO This Fund seeks above average total return
through a combination of potential capital appreciation and dividend income
consistent with the preservation of investment capital.
ASSET ALLOCATION PORTFOLIO This Fund seeks high total investment return
consistent with prudent investment risk through a fully managed investment
policy utilizing equity securities as well as investment grade intermediate and
long-term debt securities and money market securities. Total investment return
consists of current income (including dividends, interest and discount accruals)
and capital appreciation or depreciation.
MFS-REGISTERED TRADEMARK- VARIABLE INSURANCE TRUST-SM-
NEW DISCOVERY SERIES. This Fund seeks to provide capital appreciation.
EMERGING GROWTH SERIES. This Fund seeks to provide long-term growth of
capital.
RESEARCH SERIES. This Fund seeks to provide long-term growth of capital and
future income.
GROWTH SERIES. This Fund seeks long-term growth of capital and future
income rather than current income by investing primarily in common stocks and
related securities, such as preferred stocks, convertible securities and
depositary receipts for those securities of companies the Fund's investment
advisor believes offer better than average prospects for long-term growth.
GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income.
UTILITIES SERIES. This Fund seeks to provide capital growth and current
income above that available from a portfolio invested entirely in equity
securities.
TOTAL RETURN SERIES. This Fund seeks primarily to provide above-average
income (compared to a portfolio invested entirely in equity securities)
consistent with the prudent employment of capital and secondarily to provide a
reasonable opportunity for growth of capital and income.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
AGGRESSIVE GROWTH FUND/VA. This Fund seeks to achieve long-term capital
appreciation by investing in "growth-type" companies.
GLOBAL SECURITIES FUND/VA. This Fund seeks long-term capital appreciation
by investing in securities of foreign issuers, "growth-type" companies and
cyclical industries.
CAPITAL APPRECIATION FUND/VA. This Fund seeks to achieve long-term capital
appreciation by investing in securities of well-known established companies.
MAIN STREET GROWTH & INCOME FUND/VA. This Fund seeks a high total return
(which includes growth in the value of its shares as well as current income)
from equity and debt securities. From time to time this Fund may focus on small
to medium capitalization common stocks, bonds and convertible securities.
HIGH INCOME FUND/VA. This Fund seeks a high level of current income from
investment in high yield fixed-income securities.
STRATEGIC BOND FUND/VA. This Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance such
income by writing covered call options on debt securities.
MONEY FUND/VA. This Fund seeks maximum current income from investments in
"money market" securities consistent with low capital risk and the maintenance
of liquidity. AN INVESTMENT IN THE MONEY
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FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
CALVERT VARIABLE SERIES, INC.
SOCIAL SMALL CAP GROWTH PORTFOLIO. This Fund seeks to provide long-term
capital appreciation by investing in the equity securities of companies that
have small market capitalization.
SOCIAL BALANCED PORTFOLIO. This Fund seeks to achieve a total return above
the rate of inflation through an actively managed, non-diversified portfolio of
common and preferred stocks, bonds, and money market instruments that offer
income and capital growth opportunity and that satisfy the social criteria
established for the Fund.
VAN ECK WORLDWIDE INSURANCE TRUST
WORLDWIDE HARD ASSETS FUND. This Fund seeks long-term capital appreciation
by investing primarily in "Hard Asset Securities". Hard Asset Securities are the
stocks, bonds and other securities of companies that derive at least 50% of
gross revenue or profit from the exploration, development, production or
distribution of (together "Hard Assets"):
- precious metals,
- natural resources,
- real estate; and
- commodities.
WORLDWIDE REAL ESTATE FUND. This Fund seeks a high return by investing in
equity securities of companies that own real estate or that principally do
business in real estate.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
Certain Funds may have investment objectives and policies similar to other
mutual funds (sometimes having similar names) that are managed by the same
investment adviser or manager. The investment results of the Funds, however, may
be more or less favorable than the results of such other mutual funds.
Protective Life does not guarantee or make any representation that the
investment results of any Fund is, or will be, comparable to any other mutual
fund, even one with the same investment adviser or manager.
MORE DETAILED INFORMATION CONCERNING THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS OF THE FUNDS, THE EXPENSES OF THE FUNDS, THE RISKS OF INVESTING IN
THE FUNDS AND OTHER ASPECTS OF THEIR OPERATIONS CAN BE FOUND IN THE CURRENT
PROSPECTUSES FOR THE FUNDS, WHICH ACCOMPANY THIS PROSPECTUS, AND THE CURRENT
STATEMENT OF ADDITIONAL INFORMATION FOR EACH OF THE FUNDS. THE FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF NET PREMIUMS OR TRANSFERS AMONG THE SUB-ACCOUNTS.
OTHER INFORMATION ABOUT THE FUNDS
Each Fund sells its shares to the Variable Account under a participation
agreement between the appropriate investment company and Protective Life. The
termination provisions of these agreements vary. The Variable Account would not
be able to purchase additional shares of a Fund if the participation agreement
relating to the Fund terminates. Owners would not be able to allocate assets in
the Variable Account or premiums to Sub-Accounts investing in that Fund. In
certain circumstances, it is also possible that a Fund may refuse to sell its
shares to the Variable Account despite the fact that the participation agreement
relating to that Fund has not been terminated. Should a Fund decide to
discontinue selling its shares to the Variable Account, Protective Life would
not be able to honor requests from Owners to allocate premiums or transfer
Account Value to the Sub-Account investing in shares of that Fund.
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Protective Life has entered into agreements with the investment managers or
advisers of several of the Funds under which the investment manager or adviser
pays Protective Life a servicing fee based upon an annual percentage of the
average daily net assets invested by the Variable Account (and other separate
accounts of Protective Life) in the Funds managed by that manager or adviser.
These amounts are intended to compensate us for the administrative and other
services we provide to the Funds. Managers or advisers paying fees under these
agreements do not increase the fees or expenses the Funds or their shareholders
pay.
OTHER INVESTORS IN THE FUNDS
PIC currently sells shares of its Funds only to Protective Life as the
underlying investment for the Variable Account as well as for variable annuity
contracts issued through Protective Life and its subsidiary Protective Life and
Annuity Insurance Company. PIC may in the future sell shares of its Funds to
other separate accounts of Protective Life or its life insurance company
affiliates supporting other variable annuity contracts or variable life
insurance policies. In addition, upon obtaining regulatory approval, PIC may
sell shares to certain retirement plans qualifying under Section 401 of the
Code. Protective Life currently does not forsee any disadvantages to Owners that
would arise from the possible sale of shares to support its variable annuity
contracts or those of its affiliates or from the possible sale of shares to such
retirement plans. However, the board of directors of PIC will monitor events in
order to identify any material irreconcilable conflicts that might possibly
arise if such shares were also offered to support variable life insurance
policies other than the Policies or variable annuity contracts or to retirement
plans. In event of such a conflict, the board of directors would determine what
action, if any, should be taken in response to the conflict. In addition, if
Protective Life believes that PIC's response to any such conflicts does not
provide enough protection for Owners, it will take appropriate action on its
own, including withdrawing the Variable Account's investment in the Fund. (See
the PIC prospectus for more detail.)
Shares of the Van Kampen Funds, Oppenheimer Funds, MFS Funds, Calvert Funds
and Van Eck Funds are sold to separate accounts of insurance companies, which
may or may not be affiliated with Protective Life or each other, a practice
known as "shared funding." They may also be sold to separate accounts to serve
as the underlying investment for both variable annuity contracts and variable
life insurance policies, a practice known as "mixed funding." Shares of some of
these Funds may also be sold to certain qualified pension and retirement plans.
As a result, there is a possibility that a material conflict may arise among and
between the interests of Policy Owners and other of the Fund's various
investors. In the event of any such material conflicts, Protective Life will
consider what action may be appropriate, including removing the Fund from the
Variable Account or replacing the Fund with another fund. As is the case with
PIC, the board of directors (or trustees) of each of the Van Kampen Funds,
Oppenheimer Funds, MFS Funds, Calvert Funds and Van Eck Funds monitors events
related to their Funds to identify possible material irreconcilable conflicts
among and between the interests of the Fund's various investors. There are
certain risks associated with mixed and shared funding and with the sale of
shares to qualified pension and retirement plans, as disclosed in each Fund's
prospectus.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Protective Life may make additions to, deletions from, or substitutions for
the shares that are held in or purchased by the Variable Account. If the shares
of a Fund are no longer available for investment or further investment in any
Fund should become inappropriate in view of the purposes of the Variable
Account, Protective Life may redeem the shares of that Fund and substitute
shares of another Fund. Protective Life will not substitute any shares without
notice and any necessary approval of the SEC and state insurance authorities.
Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Account, which would each invest in shares corresponding to a
new Fund. Subject to applicable law and any required SEC approval, Protective
Life may establish new Sub-Accounts or eliminate one or more Sub-Accounts if
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marketing needs, tax considerations or investment conditions warrant. Any new
Sub-Accounts may be made available to existing Owner(s).
If any of these substitutions or changes are made, Protective Life may by
appropriate endorsement change the Policy to reflect the substitution or other
change. If Protective Life deems it to be in the best interest of Owner(s), the
Variable Account may be operated as a management investment 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 Protective Life separate accounts.
Protective Life may make any changes to the Variable Account required by the
1940 Act or other applicable law or regulation.
VOTING RIGHTS
Protective Life is the legal owner of Fund shares held by the Sub-Accounts
and has the right to vote on all matters submitted to shareholders of the Funds.
However, in accordance with applicable law, Protective Life will vote shares
held in the Sub-Accounts at meetings of shareholders of the Funds in accordance
with instructions received from Owners with Policy Value in the Sub-Accounts.
Should Protective Life determine that it is permitted to vote such shares in its
own right, it may elect to do so.
Protective Life will send Owners voting instruction forms and other voting
materials (such as Fund proxy statements, reports and other proxy materials)
prior to shareholders meetings. The number of votes as to which an Owner may
give instructions is calculated separately for each Sub-Account and may include
fractional votes.
An Owner holds a voting interest in each Sub-Account to which Variable
Policy Value is allocated under his or her Policy. Owners only have voting
interests while a Joint Insured is alive. The number of votes for which an Owner
may give instructions is based on the Owner's percentage interest of a Sub-
Account determined as of the date established by the Fund for determining
shareholders eligible to vote at the relevant meeting of that Fund.
Shares as to which no timely instructions are received and shares held
directly by Protective Life are voted by Protective Life in proportion to the
voting instructions that are received with respect to all Policies participating
in a Sub-Account. Voting instructions to abstain on any item are applied to
reduce the votes eligible to be cast on that item.
Protective Life may, if required by state insurance officials, disregard
Owner voting instructions if such instructions would require shares to be voted
so as to cause a change in sub-classification or investment objectives of one or
more of the Funds, or to approve or disapprove the investment management
agreement or an investment advisory agreement. In addition, Protective Life may
under certain circumstances disregard voting instructions that would require
changes in the investment management agreement, investment manager, an
investment advisory agreement or an investment adviser of one or more of the
Funds, provided that Protective Life reasonably disapproves of such changes in
accordance with applicable regulations under the 1940 Act. If Protective Life
ever disregards voting instructions, Owners will be advised of that action and
of the reasons for such action in the next semiannual report.
THE POLICY
PARTIES TO THE POLICY
OWNER The Owner is the person or persons who own the Policy and are
entitled to exercise all rights provided under the Policy. Joint Insureds are
the Owners unless a different person or persons are named as Owner in the
application. All Owners must authorize the exercise of any right under the
Policy. A change in the Owner(s) may have adverse tax consequences. (See "Tax
Considerations.")
JOINT INSUREDS The Joint Insureds are the two persons whose lives are
covered by the Policy.
BENEFICIARY The Beneficiary is the person or persons who may receive the
benefits of this Policy upon the death of the Last Survivor of the Joint
Insureds.
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If no Beneficiary designation is in effect or if no Beneficiary is living at
the time of the Last Survivor of the Joint Insureds' death, the Owner will be
the Beneficiary or, if the Owner is no longer living, the estate of the Owner
will be the Beneficiary.
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed
application and at least the minimum initial premium payment through a licensed
representative of Protective Life who is also a registered representative of a
broker-dealer having a distribution agreement with Investment
Distributors, Inc. ("IDI"). See "Premiums," below. Protective Life requires
satisfactory evidence of the insurability, which may include a medical
examination of the Joint Insureds. Generally, Protective Life will issue a
Policy covering Insureds up to age 85 if evidence of insurability satisfies
Protective Life's underwriting rules. Acceptance of an application depends on
Protective Life's underwriting rules, and Protective Life may reject an
application for any reason. With the consent of the Owner, a Policy may be
issued on a basis other than that applied for (I.E., on a higher premium class
basis due to increased risk factors). A POLICY IS ISSUED AFTER PROTECTIVE LIFE
APPROVES THE APPLICATION. PREMIUM IS NOT A REQUIREMENT TO ISSUE A POLICY.
PREMIUM MAY BE COLLECTED AT THE TIME OF POLICY DELIVERY.
Insurance coverage under a Policy begins on the Policy Effective Date.
Temporary life insurance coverage also may be provided under the terms of a
temporary insurance agreement. Under such agreements, the total amount of
insurance which may become effective prior to delivery of the Policy may not
exceed $500,000 (including the amount of any life insurance and accidental death
benefits then in force or applied for with the Company) and may not be in effect
for more than 90 days.
In order to obtain a more favorable Issue Age, Protective Life may permit
the Owner to "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. Charges for the Monthly
Deduction for the backdated period are deducted as of the Policy Effective Date
and the calculation of the No-Lapse Guarantee will include the Minimum Monthly
Premium for the backdated period.
CANCELLATION PRIVILEGE
You may cancel your Policy for a refund during the Cancellation Period by
returning it to Protective Life's Home Office or to the sales representative who
sold it along with a written cancellation request. The Cancellation Period is
determined by the law of the state in which the application is signed and is
shown in your Policy. In most states it expires at the latest of
(1) ten days after you receive your Policy,
(2) 45 days after you sign your application, or
(3) ten days after Protective Life mails or delivers a Notice of Right of
Withdrawal.
Return of the Policy by mail is effective upon receipt by Protective Life.
We will treat the Policy as if it had never been issued. Within seven calendar
days after receiving the returned Policy, Protective Life will refund the sum of
(1) the difference between premiums paid and amounts allocated to the Fixed
Account or the Variable Account,
(2) Fixed Account Value determined as of the date the returned Policy is
received, and
(3) Variable Account Value determined as of the date the returned Policy is
received.
This amount may be more or less than the aggregate premiums paid. In states
where required, Protective Life will refund premiums paid.
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PREMIUMS
MINIMUM INITIAL PREMIUM. The minimum initial premium required depends on a
number of factors, including the age, sex and rate class of each proposed Joint
Insured, the Initial Face Amount requested by the applicant, any supplemental
riders requested by the applicant and the planned periodic premiums that the
applicant selects. See "Planned Periodic Premiums," below. Consult your sales
representative for information about the initial premium required for the
coverage you desire.
PLANNED PERIODIC PREMIUMS. In the application the Owner selects a plan for
paying level premiums at specified intervals (e.g., quarterly, semi-annually or
annually). At the Owner's election, we will also arrange for payment of planned
periodic premiums on a monthly basis (on any day except the 29th, 30th, or 31st
of a month) under a pre-authorized payment arrangement. You are not required to
pay premiums in accordance with these plans. You can pay more or less than
planned or skip a planned periodic premium entirely. (See, however, "Policy
Lapse and Reinstatement"). Subject to the limits described below, you can change
the amount and frequency of planned periodic premiums whenever you want by
written notice to Protective Life at the Home Office.
Unless you have arranged to pay planned periodic premiums by pre-authorized
payment arrangement or have otherwise requested, you will be sent reminder
notices for planned periodic premiums.
UNSCHEDULED PREMIUMS. Subject to the limitations described below,
additional unscheduled premiums may be paid in any amount and at any time. By
written notice to Protective Life at the Home Office, the Owner may specify that
all unscheduled premiums are to be applied as repayments of Policy Debt, if any.
PREMIUM LIMITATIONS. Premiums may be paid by any method acceptable to
Protective Life. If by check, the check must be from an Owner (or the Owner's
designee other than a sales representative), payable to Protective Life
Insurance Company, and be dated prior to its receipt at the Home Office.
Additional limitations apply to premiums. Premium payments must be at least
$150 ($50 if paid monthly by a pre-authorized payment arrangement) and must be
remitted to the Home Office. (See "Net Premium Allocations.") Protective Life
also reserves the right to limit the amount of any premium payment. In addition,
at any point in time aggregate premiums paid under a Policy may not exceed
guideline premium payment limitations for life insurance policies set forth in
the Internal Revenue Code. Protective Life will immediately refund any portion
of any premium payment that is determined to be in excess of the limits
established by law to qualify a Policy as a contract for life insurance.
Protective Life will monitor Policies and will attempt to notify the Owner on a
timely basis if his or her Policy is in jeopardy of becoming a modified
endowment contract under the Internal Revenue Code. (See "Tax Considerations".)
NO-LAPSE GUARANTEE. In return for paying the Minimum Monthly Premium
specified in the Policy or an amount equivalent thereto by the Monthly
Anniversary Day, Protective Life guarantees that a Policy and its associated
riders and endorsements will remain in force during the first 5 Policy Years
regardless of the Policy Value, if, for each month that the Policy has been in
force since the Policy Effective Date, the total premiums paid less any
withdrawals and Policy Debt is greater than or equal to the Minimum Monthly
Premium (shown in the Policy) multiplied by the number of complete policy months
since the Policy Effective Date, including the current policy month. The Minimum
Monthly Premium is calculated for each Policy based on the age, sex and rate
class of each Joint Insured, the requested Face Amount and any supplemental
riders. We will NOT notify you in the event the No-Lapse Guarantee is no longer
in effect.
If you increase your Policy's Face Amount or change benefits while the
No-Lapse Guarantee is in effect, Protective Life will NOT EXTEND the period of
this guarantee. The guarantee period is based on the Policy Effective Date.
However, upon an increase in Face Amount, Protective Life will recalculate the
Minimum Monthly Premium, which will generally also increase. Any other change in
the benefits provided under this Policy or its riders which is made after the
Policy Effective Date and during the period of the No-Lapse Guarantee also may
result in a change to the Minimum Monthly Premium. Protective Life will notify
you of any change in the Minimum Monthly Premium and will amend your Policy to
reflect the change.
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PREMIUM PAYMENTS UPON INCREASE IN FACE AMOUNT. Depending on the Policy
Value at the time of an increase in the Face Amount and the amount of the
increase requested, an additional premium payment may be necessary or a change
in the amount of planned periodic premiums may be advisable. (See "Death Benefit
Proceeds".) You will be notified if a premium payment is necessary or a change
appropriate.
NET PREMIUM ALLOCATIONS
Owners must indicate in the application how Net Premiums are to be allocated
to the Sub-Accounts and/or to the Fixed Account. These allocation instructions
apply to both initial and subsequent Net Premiums. Owners may change the
allocation instructions in effect at any time by written notice to Protective
Life at the Home Office. Whole percentages must be used. The sum of allocations
to the Sub-Accounts and the Fixed Account must be equal to 100% of any Net
Premiums. Protective Life reserves the right to establish (i) a limitation on
the number of Sub-Accounts to which Net Premiums may be allocated and/or (ii) a
minimum allocation requirement for the Sub-Accounts and the Fixed Account.
For Policies issued in states where, upon cancellation during the
Cancellation Period, Protective Life returns at least your premiums, Protective
Life reserves the right to allocate your initial Net Premium (and any subsequent
Net Premiums paid during the Cancellation Period) to the Oppenheimer Money Fund
Sub-Account or the Fixed Account until the expiration of the number of days in
the Cancellation Period plus 6 days starting from the date that the Policy is
mailed from the Home Office. Thereafter, the Policy Value in the Oppenheimer
Money Fund Sub-Account or the Fixed Account and all Net Premiums will be
allocated according to your allocation instructions then in effect.
Planned periodic premiums and unscheduled premiums not requiring additional
underwriting will be credited to the Policy and the Net Premiums will be
invested as requested on the Valuation Date they are received by the Home
Office. However, any premium paid in connection with an increase in Face Amount
will be allocated to the Fixed Account until underwriting has been completed.
When approved, the Policy Value in the Fixed Account attributable to the
resulting Net Premium will be reallocated in accordance to your allocation
instructions then in effect. If an additional premium payment is rejected,
Protective Life will return the premium immediately, without any adjustment for
investment experience.
Unless designated by the Owner as a loan repayment, premiums received from
Owners (other than planned periodic premiums) are treated as unscheduled
premiums.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, failure to pay planned
periodic premiums will not necessarily cause a Policy to lapse. Conversely,
paying all planned periodic premiums will not necessarily prevent a Policy from
lapsing. Except when the No-Lapse Guarantee is in effect, a Policy will lapse if
its Surrender Value is insufficient to cover the Monthly Deduction (See "Monthly
Deduction") on the Monthly Anniversary Day.
If the Surrender Value on a Monthly Anniversary Day is less than the amount
of the Monthly Deduction due on that date and the No-Lapse Guarantee is not in
effect, the Policy will be in default and a grace period will begin. This could
happen if investment experience has been sufficiently unfavorable that it has
resulted in a decrease in Policy Value or the Policy Value has decreased because
you have not paid sufficient Net Premiums to offset prior Monthly Deductions.
In the event of a Policy default, the Owner has a 61-day grace period to
make a payment of Net Premium at least sufficient to cover the current and
past-due Monthly Deductions. Protective Life will send to the Owner, at the last
known address and the last known address of any assignee of record, notice of
the premium required to prevent lapse. The grace period will begin when the
notice is sent. A Policy will remain in effect during the grace period. If the
Last Survivor of the Joint Insureds should die during the grace period, the
Death Benefit Proceeds payable to the Beneficiary will reflect a reduction for
the Monthly Deductions due on or before the date of the Last Survivor of the
Joint Insureds' death as well as any unpaid Policy Debt. See "Death Benefit
Proceeds". Unless the premium stated in the notice is paid before the grace
period ends, the Policy will lapse.
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REINSTATEMENT. An Owner may reinstate a Policy within 5 years of its lapse
provided that: (1) a request for reinstatement is made by written notice
received by Protective Life at the Home Office, (2) one of the Joint Insureds is
still living, (3) the Owner pays Net Premiums equal to (a) all Monthly
Deductions that were due but unpaid during the grace period, and (b) which are
at least sufficient to keep the reinstated Policy in force for three months,
(4) Protective Life is provided with satisfactory evidence of insurability,
(5) the Owner repays or reinstates any Policy Debt which existed at the end of
the grace period and (6) the Policy has not been surrendered. The "Approval
Date" of a reinstated Policy is the date that Protective Life approves the
Owner's request for reinstatement and requirements 1-6 above have been met.
CALCULATION OF POLICY VALUES
VARIABLE ACCOUNT VALUE
THE VARIABLE ACCOUNT VALUE REFLECTS THE INVESTMENT EXPERIENCE OF THE
SUB-ACCOUNTS TO WHICH IT IS ALLOCATED, ANY PREMIUMS ALLOCATED TO THE
SUB-ACCOUNTS, TRANSFERS IN OR OUT OF THE SUB-ACCOUNTS, OR ANY WITHDRAWALS OF
VARIABLE ACCOUNT VALUE. THERE IS NO GUARANTEED MINIMUM VARIABLE ACCOUNT VALUE. A
POLICY'S VARIABLE ACCOUNT VALUE THEREFORE DEPENDS UPON A NUMBER OF FACTORS. THE
VARIABLE ACCOUNT VALUE FOR A POLICY AT ANY TIME IS THE SUM OF THE SUB-ACCOUNT
VALUES FOR THE POLICY ON THE VALUATION DAY MOST RECENTLY COMPLETED.
DETERMINATION OF UNITS. For each Sub-Account, the Net Premium(s) or Policy
Value transferred are converted into units. The number of units credited is
determined by dividing the dollar amount directed to each Sub-Account by the
value of the unit for that Sub-Account for the Valuation Day on which the Net
Premium(s) or transferred amount is invested in the Sub-Account. Therefore, Net
Premiums allocated to or amounts transferred to a Sub-Account under a Policy
increase the number of units of that Sub-Account credited to the Policy.
DETERMINATION OF UNIT VALUE. The unit value at the end of every Valuation
Day is the unit value at the end of the previous Valuation Day times the net
investment factor, as described below. The Sub-Account Value for a Policy is
determined on any day by multiplying the number of units attributable to the
Policy in that Sub-Account by the unit value for that Sub-Account on that day.
NET INVESTMENT FACTOR. The net investment factor is an index applied to
measure the investment performance of a Sub-Account from one Valuation Period to
the next. Each Sub-Account has a net investment factor for each Valuation Period
which may be greater or less than one. Therefore, the value of a unit may
increase or decrease. The net investment factor for any Sub-Account for any
Valuation Period is determined by dividing (1) by (2), where:
(1) is the result of:
a. the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund to the Sub-Account, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Protective Life to have resulted from the operations of the
Sub-Account.
(2) is the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
FIXED ACCOUNT VALUE
The Fixed Account Value under a Policy at any time is equal to: (1) the Net
Premium(s) allocated to the Fixed Account, plus (2) amounts transferred to the
Fixed Account, plus (3) interest credited to the Fixed Account, less
(4) transfers from the Fixed Account (including any transfer fees deducted),
less
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(5) withdrawals from the Fixed Account (including any withdrawal charges
deducted), less (6) surrender charges deducted in the event of a decrease in
Face Amount, less (7) Monthly Deductions. See "The Fixed Account," for a
discussion of how interest is credited to the Fixed Account.
POLICY BENEFITS
TRANSFERS OF POLICY VALUES
GENERAL. Upon receipt of written notice to Protective Life at the Home
Office at any time on or after the later of the following: (1) thirty days after
the Policy Effective Date, or (2) six days after the expiration of the
Cancellation Period, you may transfer the Fixed Account Value or any Policy
Value in a Sub-Account to other Sub-Accounts or the Fixed Account, subject to
certain restrictions. Transfers (including telephone transfers -- described
below) are processed as of the date a request is received at the Home Office.
Protective Life may, however defer transfers under the same conditions that
payment of Death Benefit Proceeds, withdrawals and surrenders may be delayed.
See "Suspension or Delay of Payments". The minimum amount that may be
transferred is the lesser of $100 or the entire Policy Value in any Sub-Account
or the Fixed Account from which the transfer is made. If, after the transfer,
the Policy Value remaining in a Sub-Account(s) or the Fixed Account would be
less than $100, Protective Life reserves the right to transfer the entire amount
instead of the requested amount. Protective Life reserves the right to limit the
maximum amount which may be transferred from the Fixed Account in any Policy
Year. This maximum is currently the greater of $2,500 or 25% of the Fixed
Account Value.
Protective Life reserves the right to limit transfers to 12 per Policy Year.
For each additional transfer over 12 in any Policy Year, Protective Life
reserves the right to charge a transfer fee. The transfer fee, if any, is
deducted from the amount being transferred. (See "Transfer Fee".)
TELEPHONE TRANSFERS. Transfers may be made upon instructions given by
telephone, provided the appropriate election has been made on the application or
written authorization is provided.
Protective Life will confirm all transfer instructions communicated by
telephone. For telephone transfers we require a form of personal identification
prior to acting on instructions received by telephone. We also make a
tape-recording of the instructions given by telephone. If we follow these
procedures we are not liable for any losses due to unauthorized or fraudulent
instructions. Protective Life reserves the right to suspend telephone transfer
privileges at any time for any class of Policies.
RESERVATION OF RIGHTS. Protective Life reserves the right without prior
notice to modify, restrict, suspend or eliminate the transfer privileges
(including telephone transfers) at any time, for any class of Policies, for any
reason. In particular, we reserve the right not to honor transfer requests by a
third party holding a power of attorney from an Owner where that third party
requests simultaneous transfers on behalf of the Owners of two or more Policies.
DOLLAR-COST AVERAGING. If you elect at the time of application or at any
time thereafter by written notice to the Home Office, you may systematically and
automatically transfer, on a monthly or quarterly basis, specified dollar
amounts from or to the Fixed Account or any of the Sub-Account(s). This is known
as the dollar-cost averaging method of investment. By transferring on a
regularly scheduled basis as opposed to allocating the total amount at one
particular time, an Owner may be less susceptible to the impact of market
fluctuations in Sub-Account unit values. Protective Life, however, makes no
guarantee that the dollar-cost averaging method will result in a profit or
protect against loss.
To elect dollar-cost averaging, Policy Value in the source Sub-Account or
the Fixed Account Value must be at least $5,000 at the time of election.
Automatic transfers for dollar-cost averaging are subject to all transfer
restrictions other than the maximum transfer amount from the Fixed Account
restriction. You may elect dollar cost averaging for periods of at least 12
months but no longer than 48 months. At least $100 must be transferred each
month or $300 each quarter. Dollar-cost averaging transfers may commence
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on any day of the month that you request following six days after the end of the
Cancellation Period, except the 29th, 30th, or 31st. If no day is selected,
transfers will occur on the Monthly Anniversary Day.
Once elected, Protective Life will continue to process dollar-cost averaging
transfers until the earlier of the following: (1) the number of designated
transfers has been completed, or (2) the Policy Value in the source Sub-Account
or the Fixed Account is depleted, (3) the Owner, by written notice received by
Protective Life at the Home Office, instructs Protective Life to cease the
automatic transfers, (4) a grace period begins under the Policy, or (5) the
maximum amount of Policy Value has been transferred under a dollar-cost
averaging election.
Automatic transfers made to facilitate dollar-cost averaging will not count
toward the 12 transfers permitted each Policy Year if Protective Life elects to
limit the number of transfers or impose the transfer fee. Protective Life
reserves the right to discontinue offering automatic dollar-cost averaging
transfers upon 30 days' written notice to the Owner.
PORTFOLIO REBALANCING. At the time of application or at any time thereafter
by written notice to Protective Life, you may instruct Protective Life to
automatically transfer, on a quarterly, semi-annual or annual basis, your
Variable Account Value among specified Sub-Accounts to achieve a particular
percentage allocation of Variable Account Value among such Sub-Accounts
("Portfolio Rebalancing"). Such percentage allocations must be in whole numbers
and must allocate amounts only among the Sub-Accounts. No amounts will be
transferred to the Fixed Account as part of Portfolio Rebalancing. A minimum
Variable Account Value of $100 is required for Portfolio Rebalancing. Unless you
instruct otherwise when electing rebalancing, the percentage allocation of your
Variable Account Value for Portfolio 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 premium
allocation instructions will be deemed to be a request to change your premium
allocation. Portfolio Rebalancing may commence on any day of the month that you
request following six days after the end of the Cancellation Period except the
29th, 30th or 31st. If no day is selected, rebalancing will occur on each
applicable Monthly Anniversary Day.
Once elected, Portfolio Rebalancing begins on the first quarterly,
semi-annual or annual anniversary following election. You may change or
terminate Portfolio Rebalancing by written instruction received by Protective
Life at the Home Office, or by telephone if you have previously authorized us to
take telephone instructions. Portfolio Rebalancing transfers do not count as one
of the 12 free transfers available during any Policy Year if Protective Life
elects to limit the number of transfers or impose the transfer fee. Protective
Life reserves the right to assess a processing fee for this service or to
discontinue Portfolio Rebalancing upon 30 days written notice to the Owner.
SURRENDER PRIVILEGE
At any time while the Policy is still in force and while either of the Joint
Insureds is still living, you may surrender your Policy for its Surrender Value.
Surrender Value is determined as of the end of the Valuation Period during which
the written notice requesting the surrender, the Policy and any other required
documents are received by Protective Life at the Home Office. A Surrender Charge
may apply. (See "Surrender Charges".) The Surrender Value is paid in a lump sum
unless the Owner requests payment under a settlement option. (See "Settlement
Options".) Payment is generally made within seven calendar days. (See
"Suspension or Delay of Payments", and "Payments from the Fixed Account".) A
Policy which terminates upon surrender cannot later be reinstated.
WITHDRAWAL PRIVILEGE
At any time after the first Policy Year, an Owner, by written notice
received at the Home Office, may make a withdrawal of Surrender Value of not
less than $500. Protective Life will withdraw the amount
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requested, plus a withdrawal charge, from Sub-Account Value(s) and Fixed Account
Value as of the end of the Valuation Period during which the written request is
received. (See "Withdrawal Charge".)
The Owner may specify the amount of the withdrawal to be made from any
Sub-Account or the Fixed Account. If the Owner does not so specify, or if the
Sub-Account Value or Fixed Account Value is insufficient to carry out the
request, the withdrawal from each Sub-Account and the Fixed Account is based on
the proportion that such Sub-Account Value(s) and Fixed Account Value bears to
the total unloaned Policy Value on the Valuation Day immediately prior to the
Withdrawal. Payment is generally made within seven calendar days. (See
"Suspension or Delay of Payments", and "Payments from the Fixed Account".)
If Death Benefit Option A is in effect, Protective Life reserves the right
to reduce the Face Amount by the withdrawn amount. Protective Life may reject a
withdrawal request if the withdrawal would reduce the Face Amount below the
minimum amount for which the Policy would be issued under Protective Life's
then-current rules, or if the withdrawal would cause the Policy to fail to
qualify as a life insurance contract under applicable tax laws, as interpreted
by Protective Life. If the Face Amount at the time of the withdrawal includes
increases from the Initial Face Amount and the withdrawal requires a decrease of
Face Amount, the reduction is made first from the most recent increase, then
from prior increases, if any, in reverse order of their being made and finally
from the Initial Face Amount.
POLICY LOANS
GENERAL. After the first Policy Anniversary and while either of the Joint
Insureds is still living, an Owner may borrow from Protective Life using the
Policy as the security for the loan. Policy loans must be requested by written
notice received at the Home Office. The minimum amount of any loan is $500. The
maximum amount that an Owner may borrow is an amount equal to 90% of the
Policy's Cash Value minus any Policy Debt on the date that the loan request is
received. Outstanding Policy loans therefore reduce the amount available for new
Policy loans. Loan proceeds generally are mailed within seven calendar days of
the loan being approved. See "Suspension or Delay of Payments", and "Payments
from the Fixed Account".
LOAN COLLATERAL. When a Policy loan is made, an amount equal to the loan is
transferred out of the Sub-Accounts and the Fixed Account and into a Loan
Account established for the Policy. Like the Fixed Account, a Policy's Loan
Account is part of Protective Life's General Account and amounts therein earn
interest as credited by Protective Life from time to time. Because Loan Account
values are part of Policy Value, a loan will have no immediate effect on the
Policy Value. In contrast, Surrender Value (including, as applicable, Variable
Account Value and Fixed Account Value) under a Policy is reduced immediately by
the amount transferred to the Loan Account. The Owner can specify the
Sub-Accounts and the Fixed Account from which collateral is transferred to the
Loan Account. If no allocation is specified, collateral is transferred from each
Sub-Account and from the Fixed Account in the same proportion that the value in
each Sub-Account and the Fixed Account bears to the total unloaned Policy Value
on the date that the loan is made.
On each Policy Anniversary, an amount of Policy Value equal to any due and
unpaid loan interest (explained below), is also transferred to the Loan Account.
Such interest is transferred from each Sub-Account and the Fixed Account in the
same proportion that each Sub-Account Value and the Fixed Account Value bears to
the total unloaned Policy Value.
LOAN REPAYMENT. You may repay all or part of your Policy Debt (the amount
borrowed plus unpaid interest) at any time while either of the Joint Insureds is
living and the Policy is in force. Loan repayments must be sent to the Home
Office and are credited as of the date received. The Owner may specify in
writing that any unscheduled premiums paid while a loan is outstanding be
applied as loan repayments. (Loan repayments, unlike unscheduled premium
payments, are not subject to the premium expense charge.) When a loan repayment
is made, Policy Value in the Loan Account in an amount equal to the
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repayment is transferred from the Loan Account to the Sub-Accounts and the Fixed
Account. Thus, a loan repayment will have no immediate effect on the Policy
Value, but the Surrender Value (including, as applicable, Variable Account Value
and Fixed Account Value) under a Policy is increased immediately by the amount
transferred from the Loan Account. Unless specified otherwise by the Owner(s),
amounts are transferred to the Sub-Accounts and the Fixed Account in the same
proportion that Net Premiums are allocated.
INTEREST. During Policy Years 2 through 10, Protective Life will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and thereafter, Protective Life currently charges
interest daily on any outstanding loan at an effective annual rate of 4.0% (with
a maximum guaranteed rate of 4.50%). Interest is due and payable at the end of
each Policy Year while a loan is outstanding. We will notify you of the amount
due. If interest is not paid when due, the amount of the interest is added to
the loan and becomes part of the Policy Debt.
The Loan Account is credited with interest at an effective annual rate of
not less than 4%. Thus, the net cost of a loan is 2.0% per year during Policy
Years 2 through 10, and currently 0.00% thereafter (the difference between the
rate of interest charged on Policy loans and the amount credited on the
equivalent amount held in the Loan Account). Protective Life determines the rate
of interest to be credited to the Loan Account in advance of each calendar year.
The rate, once determined, is applied to the calendar year which follows the
date of determination. On each Policy Anniversary, the interest earned on the
Loan Account since the previous Policy Anniversary is transferred to the
Sub-Accounts and to the Fixed Account. The interest is transferred and allocated
to the Sub-Accounts and the Fixed Account in the same proportion that Net
Premiums are allocated.
NON-PAYMENT OF POLICY LOAN. If the Last Survivor of the Joint Insureds dies
while a loan is outstanding, the Policy Debt is deducted from the Death Benefit
in calculating the Death Benefit Proceeds.
If the Loan Account Value exceeds the Cash Value (I.E., the Surrender Value
becomes zero) on any Valuation Date, the Policy may be in default. If this
occurs, you, and any assignee of record, will be sent notice of the default. You
will have a 31-day grace period to submit a sufficient payment to avoid a lapse
(I.E., termination) of the Policy. The notice will specify the amount that must
be repaid to prevent lapse.
EFFECT OF A POLICY LOAN. A loan, whether or not repaid, has a permanent
effect on the Death Benefit and Policy values because the investment results of
the Sub-Accounts and current interest rates credited on Fixed Account Value do
not apply to Policy Value in the Loan Account. The larger the loan and longer
the loan is outstanding, the greater will be the effect of Policy Value held as
collateral in the Loan Account. (See "No Lapse Guarantee".) Depending on the
investment results of the Sub-Accounts or credited interest rates for the Fixed
Account while the loan is outstanding, the effect could be favorable or
unfavorable. Policy loans also may increase the potential for Lapse if
investment results of the Sub-Accounts to which Surrender Value is allocated is
unfavorable. If a Policy lapses with loans outstanding, certain amounts may be
subject to income tax. In addition, if your Policy is a "modified endowment
contract," loans may be currently taxable and subject to a 10% penalty tax. See
"Tax Considerations," for a discussion of the tax treatment of Policy loans.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, Protective Life will pay the Death
Benefit Proceeds upon receipt at the Home Office of satisfactory proof of both
Joint Insureds' deaths. Protective Life may require return of the Policy. The
Death Benefit Proceeds are paid to the primary beneficiary or a contingent
beneficiary. The Owner may name one or more primary or contingent beneficiaries
and change such beneficiaries, as provided for in the Policy. If no beneficiary
survives the Joint Insureds, the Death Benefit Proceeds are paid to the Owner or
the Owner's estate. Death Benefit Proceeds are paid in a lump sum or under a
settlement option. (See "Settlement Options".)
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CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds are equal
to the Death Benefit under the Death Benefit Option selected calculated as of
the date of death of the Last Survivor of the Joint Insureds, plus any death
benefits under any supplemental riders or endorsements, minus any Policy Debt on
that date and, if the Last Survivor of the Joint Insureds died during a grace
period, minus any past due Monthly Deductions. Under certain circumstances, the
amount of the Death Benefit may be further adjusted. (See "Limits on Rights to
Contest the Policy" and "Misstatement of Age or Sex".)
If part or all of the Death Benefit is paid in one sum, Protective Life will
pay interest on this sum as required by applicable state law from the date of
receipt of due proof of the death of the Last Survivor of the Joint Insureds to
the date of payment.
DEATH BENEFIT OPTIONS. At the time of application, the Owner may choose one
of two Death Benefit Options for use in determining the Death Benefit. Under
Death Benefit Option A, the Death Benefit is the greater of: (1) the Face Amount
under the Policy on the date of death of the Last Survivor of the Joint
Insureds, or (2) a specified percentage of the Policy Value as of such date.
Under Death Benefit Option B, the Death Benefit is the greater of: (1) the Face
Amount under the Policy plus the Policy Value on the date of death of the Last
Survivor of the Joint Insureds, or (2) a specified percentage of the Policy
Value as of such date. The specified percentage varies with the Attained Age of
the younger Joint Insured on the Policy Anniversary on or prior to the date of
death. A table showing these percentages for Attained Ages 0 to 95 and examples
of Death Benefit calculations for both Death Benefit Options are found in
Appendix A.
Under Death Benefit Option A, the Death Benefit remains level at the Face
Amount unless the Policy Value multiplied by the specified percentage of Policy
Value exceeds that Face Amount, in which event the Death Benefit will vary as
the Policy Value varies. Owners who are satisfied with the amount of their
insurance coverage under the Policy and who prefer to have favorable investment
performance and additional premiums reflected in higher Policy Value, rather
than increased Death Benefits, generally should select Option A. Under Death
Benefit Option B, the Death Benefit always varies as the Policy Value varies
(although it is never less than the Face Amount). Owners who prefer to have
favorable investment performance and additional premiums reflected in increased
Death Benefits generally should select Option B.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, the Owner may change the Death Benefit option on your Policy
subject to the following rules. After any change, the Face Amount must be at
least equal to the minimum specified in the Policy. The effective date of the
change will be the Monthly Anniversary Day that coincides with or next follows
the day that Protective Life receives and accepts the request. Protective Life
may require satisfactory evidence of insurability. All changes must be approved
by Protective Life at the Home Office before they will be effective.
When a change from Option A to Option B is made during the lifetime of both
Joint Insureds, the Face Amount after the change is effected will be equal to
the Face Amount before the change less the Policy Value on the effective date of
the change. When a change from Option B to Option A is made, the Face Amount
after the change will be equal to the Face Amount before the change is effected
plus the Policy Value on the effective date of the change. The increase in the
Face Amount will be deemed an increase in the Supplemental Face Amount.
FACE AMOUNTS
BASIC FACE AMOUNT. All Policies must have a Basic Face Amount. The minimum
Basic Face Amount at all times under a Policy is $100,000. Basic Face Amount can
only be purchased as part of the Initial Face Amount and cannot be increased
thereafter. Purchasing coverage under the Policy in the form of Basic Face
Amount is generally more expensive during the first nine Policy Years than
purchasing it in the form of a Supplemental Face Amount because the monthly
administration fee is based on the amount of Basic Face Amount. Similarly,
purchasing coverage under a Policy in the form of Basic Face Amount can be
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more expensive than purchasing Supplemental Face Amount because surrender charge
is only assessed when Basic Face Amount is decreased, but not when Supplemental
Face Amount is decreased. Also, depending upon how much Policy Value is in a
Policy and whether current or guaranteed cost of insurance rates are being
applied, the cost of insurance associated with Basic Face Amount is usually
greater than that associated with an equal Supplemental Face Amount that is part
of the Initial Face Amount. (See "Cost of Insurance" and "Cost of Insurance
Rates.") Consistent with the foregoing, sales representatives are compensated
primarily on the amount of Basic Face Amount under a Policy.
SUPPLEMENTAL FACE AMOUNT. Although a Supplemental Face Amount is not
required under a Policy, if purchased, the minimum Supplemental Face Amount is
$25,000. No more than 90% of the Initial Face Amount may consist of Supplemental
Face Amount. Coverage in the form of Supplemental Face Amount may be purchased
as part of the Initial Face Amount or may be added or increased at a later time
if the Policy is in force.
CHANGING THE FACE AMOUNT. On or after the first Policy Anniversary, the
Owner may request a change in the Face Amount. The request must be received in
writing at the Home Office.
INCREASING THE FACE AMOUNT. The Basic Face Amount cannot be increased; the
Owner can only request an increase of the Face Amount by submitting an
application for an increase in the Supplemental Face Amount during the lifetime
of both of the Joint Insureds.
Any increase in the Face Amount must be at least $25,000 and Protective Life
reserves the right to require satisfactory evidence of insurability. In
addition, the attained age of the older Joint Insured must be less than the
current maximum issue age for the Policies, as determined by Protective Life
from time to time. A change in planned periodic premiums may be advisable. (See
"Premiums Upon Increase in Face Amount".) The increase in Face Amount (which
will be sent to You) will become effective as of the date shown on the
supplemental Policy Specifications Page and the Policy Value will be adjusted to
the extent necessary to reflect a monthly deduction as of the effective date
based on the increase in Face Amount. When the No-Lapse Guarantee is in effect,
the Policy's Minimum Monthly Premium amount would also generally be increased.
(See "No-Lapse Guarantee," and "Premiums Upon Increase in Face Amount".)
An increase in Face Amount may be cancelled by the Owner in accordance with
the Policy's cancellation privilege provisions, which also apply to increases in
Face Amount. In such case, the amount refunded will be calculated in accordance
with such provisions described above, except that if no additional premiums are
required in connection with the Face Amount increase, then the amount credited
back to Policy Value is limited to that portion of the first Monthly Deduction
following the increase that is attributable to cost of insurance charges for the
increase and the monthly administration fee for the increase. (See "Cancellation
Privilege".)
DECREASING THE FACE AMOUNT. If a decrease in the Face Amount would result
in total premiums paid exceeding the premium limitations prescribed under
current tax law to qualify your Policy as a life insurance contract, Protective
Life will immediately return to you the amount of such excess above the premium
limitations. Protective Life reserves the right to decline a requested decrease
in the Face Amount if compliance with the guideline premium limitations under
current tax law resulting from such a decrease would result in immediate
termination of the Policy, or if to effect the requested decrease, payments to
the Owner would have to be made from Policy Value for compliance with the
guideline premium limitations, and the amount of such payments would exceed the
Surrender Value under the Policy.
Any decrease in Face Amount will first be applied against any Supplementary
Face Amount, until the minimum Supplemental Face Amount (as specified in the
Policy specification pages) has been reached. If the Supplemental Face Amount of
the Policy has been increased prior to the requested decrease, then a decrease
will first be applied against any previous increases in Supplemental Face Amount
in the reverse order in which they occurred. Any remaining decrease in Face
Amount will be applied against the Basic Face Amount. The Basic Face Amount
however, may not be reduced below the minimum Basic Face Amount specifed in the
Policy. Protective Life reserves the right to prohibit any decrease in Face
Amount
26
<PAGE>
(i) for three Policy Years following an increase in Face Amount; and (ii) for
one Policy Year following the last decrease in Face Amount. A decrease in Face
Amount will become effective on the Monthly Anniversary Day that coincides with
or next follows receipt and acceptance of a request at the Home Office.
Decreasing the Face Amount of the Policy may have the effect of decreasing
monthly cost of insurance charges. Decreasing the Face Amount also may have
adverse tax consequences. (See "Tax Considerations".) In addition, if the Basic
Face Amount is decreased during the first 12 Policy Years, a Surrender Charge
will apply. (See "Surrender Charge").
SPECIAL ENDORSEMENTS
ESTATE PROTECTION ENDORSEMENT. During the first four Policy Years, the
estate protection endorsement provides additional coverage in the form of
non-participating, non-convertable, renewable term life insurance. Under this
endorsement an additional death benefit is payable if the death of the Last
Survivor of the Joint Insureds occurs prior to the termination of the
endorsement. This additional death benefit will be available if underwriting
requirements are met and the older of the Joint Insureds is under age 76. There
is no additional charge for this endorsement. If the Policy lapses, this
endorsement cannot be reinstated. This endorsement will terminate on the earlier
of (1) the fourth Policy Anniversary, (2) the date the Policy terminates or
(3) the date any option under the Policy Split Option Endorsement is exercised.
POLICY SPLIT OPTION ENDORSEMENT. Under this endorsement, the Owner(s) may
exchange the Policy for two individual permanent life insurance policies, one on
the life of each of the Joint Insureds by making a written request to the Home
Office within 90 days of one of the following events:
1. a court of competent jurisdiction issues a final divorce decree with
respect to the marriage of the Joint Insureds;
2. federal law with regard to estate taxes is changed so as to remove the
unlimited marital deduction or reduce by 50% or more, the estate taxes
payable on death; and
3. dissolution of a corporate or business partnership of which the Joint
Insureds are partners.
There is no charge for this endorsement. The two individual policies each
shall have a face amount equal to [at least] one-half of the Policy's Face
Amount, a Policy Value equal to one-half of the Policy's Policy Value, and a
policy debt equal to one-half of the Policy's Policy Debt. The individual
policies must have the same Beneficiaries as the Policy.
If the Policy is owned jointly by two Owners, both must agree to exercise
the endorsement and each will become the sole owner of his or her individual
policy. Protective Life requires satisfactory evidence of insurability as to
both Joint Insureds before issuing the individual policies. In the event that
one of the Insureds cannot provide satisfactory evidence of insurability, an
individual policy may be issued on the other Insured and one-half of the
Surrender Value of the Policy may be distributed to the Owner(s) in lieu of a
second individual policy. Similarly, if two joint Owners are the Insureds and
one of them does not agree to exercise the exchange provided by this
endorsement, then he or she may take one-half (or other appropriate portion
based on relative ownership) of the Surrender Value of the Policy in lieu of a
second individual policy. If the surrender charge on either individual policy is
less than that policy's pro-rata share of the surrender charge under the Policy,
then a charge may be assessed under the individual policy for the difference. If
the surrender charge under an individual policy is greater than that policy's
pro-rata share of the surrender charge under the Policy, no adjustment will be
made.
If the endorsement is exercised, the Policy will terminate and the
individual policies will become effective as of the Valuation Day following the
later of the date that: (1) a written request for the exchange is received at
the Home Office, or (2) Protective Life approves the request.
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<PAGE>
The endorsement terminates at the earliest of: (1) the date as of which the
Policy terminates due to the (a) exercise of the endorsement, (b) surrender of
the Policy or, (c) lapse of the Policy; (2) the date of death of a Joint
Insured; or (3) the date that the older Joint Insured reaches Attained Age 90.
The exercise of this endorsement may have significant federal or state tax
consequences. (See "Tax Considerations.")
SETTLEMENT OPTIONS
The Policy offers a variety of ways of receiving proceeds payable under the
Policy, such as on surrender or death, other than in a lump sum. These
alternative settlement options are summarized below. Any sales representative
authorized to sell this Policy can further explain these settlement options upon
request. All of these settlement options are forms of fixed-benefit annuities
(except Option 3) which do not vary with the investment performance of a
separate account. Under each settlement option (other than Option 3), no
surrender or withdrawal may be made once payments have begun.
The following settlement options may be elected.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period of up to 30 years. The amount of each payment depends on the
total amount applied, the period selected and the monthly payment rates
Protective Life is using when the first payment is due.
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named annuitant. Payments will
continue for the lifetime of the annuitant with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
OPTION 3 -- INTEREST INCOME. Protective Life will hold any amount applied
under this option. Interest on the unpaid balance will be paid each month at a
rate determined by Protective Life. This rate will not be less than the
equivalent of 3% per year.
OPTION 4 -- PAYMENTS FOR A FIXED AMOUNT. Equal monthly payments will be
made of an agreed fixed amount. The amount of each payment may not be less than
$10 for each $1,000 applied. Interest will be credited each month on the unpaid
balance and added to it. This interest will be at a rate set by us, but not less
than an effective rate of 3% per year. Payments continue until the amount
Protective Life holds runs out. The last payment will be for the balance only.
MINIMUM AMOUNTS. Protective Life reserves the right to pay the total amount
of the Policy in one lump sum, if less than $5,000. If monthly payments are less
than $50, payments may be made quarterly, semi-annually, or annually at
Protective Life's option.
DEATH OF PAYEE. If a payee dies while there are unpaid installments under
Option 1 or before the end of the guaranteed period under Option 2, Protective
Life will pay the commuted value of the remaining payments in a lump sum. The
commuted value of any balance held under Option 3 or Option 4 will be paid to
the payee's executors or administrators unless the written election of the
Option directed Protective Life differently. Any commuted value will be
calculated using 3% interest per year.
OTHER REQUIREMENTS. Settlement options must be elected by written notice
received by Protective Life at the Home Office. The Owner may elect settlement
options during the lifetime of either of the Joint Insureds; beneficiaries may
elect settlement options thereafter if Death Benefit Proceeds are payable in a
lump sum. The effective date of an option applied to Death Benefit Proceeds is
the date the due proof of the death of each of the Joint Insureds is received at
the Home Office. The effective date of an option applied to Surrender Value is
the effective date of the surrender.
If Protective Life has available, at the time a settlement option is
elected, options or rates on a more favorable basis than those guaranteed, the
higher benefits will apply.
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<PAGE>
THE FIXED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS AND, AS A RESULT, THE STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN
THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT. THE DISCLOSURE REGARDING THE
FIXED ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
THE FIXED ACCOUNT
The Fixed Account consists of assets owned by Protective Life with respect
to the Policies, other than those in the Variable Account. It is part of
Protective Life's general account assets. Protective Life's general account
assets are used to support its insurance and annuity obligations other than
those funded by separate accounts, and are subject to the claims of Protective
Life's general creditors. Subject to applicable law, Protective Life has sole
discretion over the investment of the assets of the Fixed Account. The Loan
Account is part of the Fixed Account. Guarantees of Net Premiums allocated to
the Fixed Account, and interest credited thereto, are backed by Protective Life.
The Fixed Account Value is calculated daily. (See "Fixed Account Value".)
INTEREST CREDITED ON FIXED ACCOUNT VALUE
Protective Life guarantees that the interest credited during the first
Policy Year to the initial Net Premiums allocated to the Fixed Account will not
be less than the initial annual effective interest rate shown in the Policy. The
interest rate credited to subsequent Net Premiums allocated to or amounts
transferred to the Fixed Account will be the annual effective interest rate in
effect on the date that the Net Premium(s) is received by Protective Life or the
date that the transfer is made. The interest rate is guaranteed to apply to such
amounts for a twelve month period which begins on the date that the Net
Premium(s) is allocated or the date that the transfer is made.
After an interest rate guarantee expires as to a Net Premium or amount
transferred, (I.E., 12 months after the Net Premium or transfer is placed in the
Fixed Account) Protective Life will credit interest on the Fixed Account Value
attributable to such Net Premium or transferred amount at the current interest
rate in effect. New current interest rates are effective for such Fixed Account
Value for 12 months from the time that they are first applied. Protective Life,
in its sole discretion, may declare a new current interest rate from time to
time. The initial annual effective interest rate and the current interest rates
that Protective Life will credit are annual effective interest rates of not less
than 4.00%. For purposes of crediting interest, amounts deducted, transferred or
withdrawn from the Fixed Account are accounted for on a "first-in-first-out"
(FIFO) basis.
PAYMENTS FROM THE FIXED ACCOUNT
Payments from the Fixed Account for a withdrawal, surrender or loan request
may be deferred for up to six months from the date Protective Life receives the
written request. If a payment from the Fixed Account is deferred for 30 days or
more, it will bear interest at a rate of 4% per year (or an alternative rate if
required by applicable state insurance law), compounded annually while payment
is deferred.
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<PAGE>
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGE
The premium expense charge compensates Protective Life for certain sales and
tax expenses associated with the Policies and the Variable Account. The premium
expense charge is equal to a percentage of each premium as set out in the
following table.
<TABLE>
<CAPTION>
POLICY YEAR CURRENT CHARGE MAXIMUM CHARGE
- ----------- -------------- --------------
<S> <C> <C>
1-5 10% 12.5%
6-10 5% 6%
11+ 2% 2.5%
</TABLE>
MONTHLY DEDUCTION
On the Policy Effective Date, Protective Life will deduct the first Monthly
Deduction from the Policy Value. Subsequent Monthly Deductions will be made on
each Monthly Anniversary Day thereafter. The Monthly Deduction consists of
(1) cost of insurance charges ("cost of insurance charge"), (2) administration
charges (the "monthly administration fee"), (3) mortality and expense risk
charge (the "mortality and expense risk charge") and (4) any charges for
supplemental riders ("supplemental rider charges"), as described below. Except
for the mortality and expense risk charge, the Monthly Deduction is deducted
from the Sub-Accounts and the Fixed Account pro-rata on the basis of the
relative Policy Value. The mortality and expense risk charge will reduce only
the Sub-Account Values.
COST OF INSURANCE CHARGE. This monthly charge compensates Protective Life
for the expense of assuming the risk of the Death Benefit. This charge can vary
among Policies, and from one Monthly Anniversary Day to the next within the same
Policy, depending on differences in the cost of insurance rates, and the Net
Amount at Risk associated with the Basic Face Amount and, if applicable
Supplemental Face Amount. The monthly cost of insurance charge is equal to the
sum of the cost of insurance charges for the Basic Face Amount and each
increment of Supplemental Face Amount, which are calculated separately based on
the net amount at risk under each coverage.
The cost of insurance charge for each increment of Face Amount is computed
at the beginning of each Policy month by subtracting 2 from 1 and multiplying
the result by 3, where:
1. is the Death Benefit attributable to that increment on the first day of
the Policy month divided by 1 plus the monthly equivalent of 4.0%;
2. is the Policy Value attributable to that increment before the Monthly
Deduction (and, when Death Benefit B is in effect, divided by 1 plus the
monthly equivalent of 4.9%); and
3. is the cost of insurance rate for that increment as described below.
For the purpose of computing the Net Amount at Risk (the result of
subtracting 2 from 1) for an Increment of Face Amount, Policy Value is first
apportioned to the Basic Face Amount and then apportioned to any Supplemental
Face Amount that is part of the Initial Face. If Policy Value exceeds the
Initial Face Amount, it is apportioned to each increase in Supplemental Face
Amount in the order that such Supplemental Face Amount was added to the Policy.
COST OF INSURANCE RATES. The monthly cost of insurance rates for the Basic
Face Amount and, if applicable, the cost of insurance rates for a Supplemental
Face Amount can vary from one month to another. The rates are a function of each
Joint Insured's age at nearest birthday, sex and rate class, type of Face Amount
(Basic or Supplemental), and the number of years that a Policy has been in force
since the Policy Effective Date or the effective date of a Face Amount increase.
In general, current cost of insurance rates are greater for the Basic Face
Amount than for Supplemental Face Amount purchased at the same
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<PAGE>
time, whereas guaranteed rates for the Basic Face Amount are the same as for
Supplemental Face Amount purchased at the same time.
Protective Life currently places each Joint Insured in the following rate
classes, based on underwriting: Preferred Nonsmoker (ages 20-75), Nonsmoker
(ages 20-85), Tobacco (ages 20-85), and Smoker (ages 20-85) and substandard rate
classes which involve a higher mortality risk than the Nonsmoker or Smoker,
Tobacco classes. The guaranteed rates for standard classes are based on the 1980
Commissioner's Standard Ordinary Mortality Tables, Male and Female, Smoker or
Nonsmoker Mortality Rates ("1980 CSO Table"). The guaranteed rates for
substandard classes are based on multiples of or additions to the 1980 CSO
Tables.
Protective Life's current cost of insurance rates may be less than the
guaranteed rates that are set forth in the Policy. Current cost of insurance
rates will be determined based on Protective Life's expectations as to future
mortality, investment earnings, expenses, taxes, and persistency experience.
Cost of insurance rates (whether guaranteed or current) for Joint Insureds
in a nonsmoker standard class are generally lower than guaranteed rates for
Joint Insureds of the same age and sex in a smoker standard class. Cost of
insurance rates (whether guaranteed or current) for Joint Insureds in a
nonsmoker or smoker standard class are generally lower than guaranteed rates for
Joint Insureds of the same age and sex and smoking status in a substandard
class.
Any change in monthly cost of insurance rates will be on a uniform basis for
Joint Insured's of the same class (with respect to age, sex, rate class, and
policy year), but the cost of insurance rates for a Policy will never be greater
than the limit set forth in the Policy.
Protective Life will also determine a separate cost of insurance rate for
each increment of Face Amount above the Initial Face Amount based on the Policy
duration and the Issue Age, sex and rate class of each Joint Insured at the time
of the request for an increase. The following rules will apply for purposes of
determining the rates.
Protective Life places each Joint Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to both the Basic and Supplemental portions of the
Initial Face Amount. When an increase in Face Amount is requested, Protective
Life conducts underwriting before approving the increase (except as noted below)
to determine whether a different rate class will apply to the increase. If the
rate class for the increase has lower cost of insurance rates than the original
rate class (or the rate class of a previous increase), the rate class for the
increase also will be applied to the Initial Face Amount and any previous
increases in Face Amount beginning as of the effective date of the increase. If
the rate class for the increase has a higher cost of insurance rate than the
original rate class (or the rate class of a previous increase), the rate class
for the increase will apply only to the increase in Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of an exercise of any available guaranteed
option to increase the Face Amount without underwriting.
LEGAL CONSIDERATIONS RELATING TO SEX -- DISTINCT PREMIUM PAYMENTS AND
BENEFITS. Mortality tables for the Policies generally distinguish between males
and females. Thus, premiums and benefits under Policies covering males and
females of the same age will generally differ.
Protective Life does, however, also offer Policies based on unisex mortality
tables if required by state law. Employers and employee organizations
considering purchase of a Policy should consult with their legal advisors to
determine whether purchase of a Policy based on sex-distinct actuarial tables is
consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Upon request, Protective Life may offer Policies with unisex mortality
tables to such prospective purchasers.
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<PAGE>
MONTHLY ADMINISTRATION FEE. This charge compensates Protective Life for
administration expenses associated with the Policies and the Variable Account.
These expenses relate to premium billing and collection, recordkeeping,
processing death benefit claims, Policy loans, Policy changes, financial
reporting and overhead costs, processing applications and establishing Policy
records. The monthly administration fee is currently equal to $.06 per $1,000 of
Basic Face Amount in Policy Years 1 through 9 (guaranteed not to exceed $.075
per $1,000). This fee is no longer assessed after the ninth Policy Year.
For 12 months following every increase in the Supplemental Face Amount, a
monthly administration fee will be assessed. This fee will be equal to the
lesser of (1) $23.50 plus $0.06 per thousand of increase in the Supplemental
Face Amount or (2) $250.
SUPPLEMENTAL RIDER CHARGES. Protective Life deducts a monthly charge for
any riders as part of the Monthly Deduction. See "Supplemental Riders".
MORTALITY AND EXPENSE RISK CHARGE. This charge compensates Protective Life
for the mortality risk it assumes which is that the cost of insurance charges
are insufficient to meet actual claims. The expense risk Protective Life assumes
is that expenses incurred in issuing and administering the Policies and the
Variable Account will exceed the amounts realized from the administrative
charges assessed against the Policies.
Protective Life deducts a monthly charge from assets in the Sub-Accounts
attributable to the Policies. This charge does not apply to Fixed Account assets
attributable to the Policies. The monthly mortality and expense risk charge to
be deducted is currently equal to .075% multiplied by the Variable Account
Value, which is equivalent to an annual rate of 0.90% of such amount, in Policy
Years 1 through 10 and .021% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .25% of such amount, in Policy Year 11 and
thereafter. Protective Life guarantees the maximum monthly mortality and expense
risk charge for any Policy Year will not exceed .075% multiplied by the Variable
Account Value.
TRANSFER FEE
Protective Life reserves the right to impose a $25 transfer fee on any
transfer of Policy Value between or among the Sub-Accounts or the Fixed Account
in excess of the 12 free transfers permitted each Policy Year. If the fee is
imposed, it will be deducted from the amount requested to be transferred. If an
amount is being transferred from more than one Sub-Account or the Fixed Account,
the transfer fee will be deducted proportionately from the amount being
transferred from each. This fee, if imposed, will reimburse Protective Life for
administrative expenses incurred in effecting transfers.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
A surrender charge, which is a contingent deferred sales charge, will be
deducted from the Policy Value if, during the first twelve Policy Years:
(1) the Policy is surrendered; (2) the Policy lapses at the end of a grace
period; or (3) the Basic Face Amount is reduced. There will be no surrender
charge for a requested decrease in the Supplemental Face Amount or a reduction
in the Basic Face Amount resulting from a Death Benefit Option change or from a
withdrawal. The surrender charge will be deducted before any Surrender Value is
paid.
The surrender charge varies depending on a number of factors including Basic
and Supplemental Face Amounts, Issue Ages, sex and rate classification of the
Joint Insureds and is set forth in your Policy. The surrender charge decreases
over the twelve-year period.
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<PAGE>
Assuming a Policy with an initial Basic Face Amount of $1,000,000 and no
Supplemental Face Amount, the range of surrender charges for the expected
representative issue ages for this product are:
1. Joint Insureds: 1 Age 55 Male Non-smoker
2 Age 55 Female Non-smoker
<TABLE>
<CAPTION>
SURRENDER SURRENDER
YEAR CHARGE YEAR CHARGE
- ---- --------- -------- ---------
<S> <C> <C> <C>
1 8,075.99 7 5,191.71
2 8,075.99 8 4,614.85
3 7,499.13 9 4,038.00
4 6,922.28 10 3,461.14
5 6,345.42 11 2,884.28
6 5,768.57 12 2,307.43
</TABLE>
2. Joint Insureds: 1 Age 70 Male Smoker
2 Age 70 Female Smoker
<TABLE>
<CAPTION>
SURRENDER SURRENDER
YEAR CHARGE YEAR CHARGE
- ---- --------- -------- ---------
<S> <C> <C> <C>
1 21,874.85 7 14,062.40
2 21,874.85 8 12,499.91
3 20,312.36 9 10,937.42
4 18,749.87 10 9,374.93
5 17,187.38 11 7,812.45
6 15,624.89 12 6,249.96
</TABLE>
Individualized illustrations of the type described on pages 38 and 41 herein
will be provided to each prospective Owner based on the Face Amounts, Death
Benefit option, and anticipated pattern and amount of premium payments suggested
by the Owner. Such illustrations will be accompanied by a sample schedule of the
actual surrender charges for Policy being illustrated.
There are no surrender charges assessed after the 12th Policy Year.
In the event of a decrease in the Basic Face Amount, a pro rata surrender
charge will be imposed equal to the portion of the total surrender charge that
corresponds to the percentage by which the Basic Face Amount is reduced. This
surrender charge will be allocated to each Sub-Account and to the Fixed Account
based on the proportion of Policy Value in each Sub-Account and in the Fixed
Account. A surrender charge imposed in connection with a reduction in the Basic
Face Amount reduces the remaining surrender charge that may be imposed in
connection with a surrender of the Policy.
The purpose of the surrender charge is to reimburse Protective Life for some
of the expenses incurred in the distribution of the Policies. Protective Life
also deducts a premium expense charge for this purpose from each premium paid.
See "Premium Expense Charge".
Protective Life reserves the right to charge less than the Maximum Surrender
Charge.
WITHDRAWAL CHARGE
Protective Life will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This charge will be
deducted pro rata from the Fixed and Variable Account Values. See "Withdrawal
Privilege" for rules for allocating the deduction.
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<PAGE>
FUND EXPENSES
The value of the net assets of each Sub-Account reflects the investment
advisory fees and other expenses incurred by the corresponding Fund in which the
Sub-Account invests. See the prospectus for each of the Funds.
EXCHANGE PRIVILEGE
The Company is offering, where allowed by law, to owners of certain existing
fixed life policies (the "Existing Life Policy" and/or "Existing Life Policies")
issued by it the opportunity to exchange such a life policy for this Policy. The
Company reserves the right to modify, amend, terminate or suspend the Exchange
Privilege at any time or from time to time. Owners of Existing Life Policies
may, exchange their Existing Life Policies for this Policy. Owners of Existing
Life Policies may also make a partial or full surrender from their Existing Life
Policies and use the proceeds to purchase this Policy. All charges and
deductions described in this prospectus are equally applicable to Policies
purchased in an exchange. All charges and deductions may not be assessed under
an Existing Life Policy in connection with an exchange, surrender, or partial
surrender of an Existing Life Policy.
The Policy differs from the Existing Life Policies in many significant
respects. Most importantly, the Policy Value under this Policy may consist,
entirely or in part, of Variable Account Value which fluctuates in response to
the net investment return of the Variable Account. In contrast, the policy
values under the Existing Life Policies always reflect interest credited by
Protective Life. While a minimum rate of interest (typically 4 or 4 1/2 percent)
is guaranteed, Protective Life in the past has credited interest at higher
rates. Accordingly, policy values under the Existing Life Policies reflect
changing current interest rates and do not vary with the investment performance
of a Variable Account.
Other significant differences between the Policy and the Existing Life
Policies include: (1) additional charges applicable under the Policy not found
in the Existing Life Policies; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state laws and regulations
applicable to each of the types of policies.
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<PAGE>
A table which generally summarizes the different charges under the
respective policies is as follows. For more complete details owners of Existing
Life Policies should refer to their policy forms for a complete description.
<TABLE>
EXISTING LIFE POLICY POLICY
<S> <C> <C>
Sales Charges/Premium Ranges from 0% to 12% of premium Percentage of each premium
Expense Charge payments in all policy years. payment as follows:
The premium expense charge can 12.5% in Policy Years 1-5
vary by age. 6% in Policy Years 6-10
2.5% in Policy Years 11+
Administrative Fees Ranges from $4 to $5 monthly. A maximum monthly charge equal
to .075% per $1,000 of the
Basic Face Amount in Policy
Years 1 through 9. Additional
charge for the first 12 months
after an increase in the
Supplemental Face Amount based
on the amount of increase.
Mortality and Expense None A maximum monthly charge equal
Charges to .075% multiplied by the
Variable Account Value, which
is equivalent to annual rate of
.90% of such amount.
Withdrawal Charges $25 The lesser of $25 or 2% of the
withdrawal amount requested.
Monthly Deductions A monthly deduction consisting A monthly deduction consisting
of: (1) cost of insurance of: (1) cost of insurance
charges (2) administrative fees charges (2) administrative fees
(see above) (3) any charges for (see above) (3) monthly
supplemental riders. (Applies mortality and expense charges
to Existing Life Policies which (see above) and (4) any
are universal life plans) charges for supplemental
riders.
Surrender Charges Surrender charges vary by policy A declining deferred sales
type and are incurred during a charge based on Basic Face
surrender charge period which Amount only and assessed during
ranges from 0 years up to the first 12 Policy Years.
19 years.
Guaranteed Interest Rate Ranges from 4% to 5%. Only Fixed Account : 4%.
</TABLE>
EFFECT OF THE EXCHANGE OFFER
1. This Policy will be issued to Existing Life Policy Owners. Evidence of
insurability may be required.
2. If an Existing Life Policy owner is within current issue age limits, the
Owner may carry over existing riders if available with the Policy. Evidence of
insurability may be required. An increase or addition of riders or any type of a
rate reduction request will require full evidence of insurability.
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<PAGE>
3. The Contestable and Suicide provisions in the Policy will begin again as
of the effective date of the exchange, if evidence of insurability is required.
If evidence of insurability is not required on the exchange, the Contestable and
Suicide provisions will not begin again.
TAX MATTERS. Owners of Existing Life Policies should carefully consider
whether it will be advantageous to replace an Existing Life Policy with a
Policy. IT MAY NOT BE ADVANTAGEOUS TO EXCHANGE AN EXISTING LIFE POLICY FOR A
POLICY (OR TO SURRENDER IN FULL OR IN PART AN EXISTING LIFE POLICY AND USE THE
SURRENDER OR PARTIAL SURRENDER PROCEEDS TO PURCHASE A POLICY.)
The Company believes that an exchange of an Existing Life Policy for a
Policy generally should be treated as a nontaxable exchange within the meaning
of Section 1035 of the Internal Revenue Code if the Existing Life Policy covered
the same Joint Insureds. The Internal Revenue Service has taken the position
that Section 1035 will not apply if an Existing Life Policy covering only one
insured is exchanged for another life insurance contract covering more than one
insured. A Policy purchased in exchange will generally be treated as a newly
issued contract as of the effective date of the Policy. This could have various
tax consequences. (See "Tax Considerations".)
IF YOU SURRENDER YOUR EXISTING LIFE POLICY IN WHOLE OR IN PART AND AFTER
RECEIPT OF THE PROCEEDS YOU USE THE SURRENDER PROCEEDS OR PARTIAL SURRENDER
PROCEEDS TO PURCHASE A POLICY IT WILL BE TREATED AS A TAXABLE EVENT. THE
SURRENDER PROCEEDS WILL GENERALLY BE INCLUDIBLE IN INCOME.
Owners of Existing Life Policies should consult their tax advisers before
exchanging an Existing Life Policy for this Policy, or before surrendering in
whole or in part their Existing Life Policy and using the proceeds to purchase
this Policy.
SALES COMMISSIONS. Sales representatives offering the Policies to Existing
Life Policies Owners will receive a sales commission. In most cases, this sales
commission will be somewhat less than that paid in connection with sales of the
Policies to other purchasers. A standard sales commission will be paid. (See
"Sale of Policies".)
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how
certain values under a Policy change with investment performance over an
extended period of time. The tables illustrate how Policy Values, Surrender
Values and Death Benefits under a Policy covering Joint Insureds of the given
ages on the Issue Date, would vary over time if planned premium payments were
paid annually and the return on the assets in each of the Funds were an assumed
uniform gross annual rate of 0%, 6% and 12%. The values would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The tables also show planned periodic
premiums accumulated at 5% interest compounded annually. THE HYPOTHETICAL
INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. Actual rates of
return for a particular Policy may be more or less than the hypothetical
investment rates of return and will depend on a number of factors including the
investment allocations made by an Owner and prevailing rates. These
illustrations assume that Net Premiums are allocated equally among the
Sub-Accounts available under the Policy, and that no amounts are allocated to
the Fixed Account.
The illustrations reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross after tax return of the
selected Funds. The tables assume an average annual expense ratio of - % of
the average daily net assets of the Funds available under the Policies. This
average annual expense ratio is based on the expense ratios of each of the Funds
for the last fiscal year, adjusted, as appropriate, for any material changes in
expenses effective for the current fiscal year of a Fund. For information on
Fund expenses, see the prospectus for each of the Funds accompanying this
prospectus.
36
<PAGE>
In addition, the illustrations reflect the monthly charge to the Variable
Account for assuming mortality and expense risks, which is equal to .075%
multiplied by the Variable Account Value, which is equivalent to a effective
annual charge of 0.90% of such amount. After deduction of Fund expenses, the
mortality and expense risk charge, the premium expense charge, and the monthly
administration fee the illustrated gross annual investment rates of return of
0%, 6% and 12% would correspond to approximate net annual rates for Policy Years
1-5 of - %, - % and - %, respectively, for Policy Years 5-10 of - %,
- % and - %, respectively and for Policy Years 11 and thereafter - %,
- % and - %, respectively.
The illustrations also reflect the deduction of the monthly cost of
insurance charge for the hypothetical Joint Insureds. The surrender charge is
reflected in the column "Surrender Value". Protective Life's current cost of
insurance charges, and the guaranteed maximum cost of insurance charges that
Protective Life has the contractual right to charge, are reflected in separate
illustrations on each of the following pages. All the illustrations reflect the
fact that no charges for federal or state income taxes are currently made
against the Variable Account and assume no Policy Debt or charges for
supplemental riders.
The illustrations are based on Protective Life's sex distinct rates for
nonsmokers. Upon request, Owner(s) will be furnished with a comparable
illustration based upon the proposed Joint Insured's individual circumstances.
Such illustrations may assume different hypothetical rates of return in addition
to those illustrated in the following tables.
37
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$ - ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION A
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -----------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- --------- ----------- ---------
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable premium expense charge, current cost of
insurance rates, a monthly administration fee of $.06 per $1,000 of Basic
Face Amount per month in Policy Years 1 through 9, and a monthly mortality
and expense risk charge equal to 0.075% multiplied by the Variable Account
Value, (which is equivalent to an annual rate of 0.90% of such amount)
during Policy Years 1 through 10 and 0.021% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.25% of such
amount) during Policy Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
38
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$ - ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION A
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -----------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- --------- ----------- ---------
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable premium expense charge, guaranteed cost
of insurance rates, a monthly administration fee of $.075 per $1,000 of
Basic Face Amount per month in Policy Years 1 through 9, and a monthly
mortality and expense risk charge equal to 0.075% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.90% of such
amount) during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
39
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$ - ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION B
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -------------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- ---------- ----------- ----------
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable premium expense charge, current cost of
insurance rates, a monthly administration fee of $.06 per $1,000 of Basic
Face Amount per month in Policy Years 1 through 9, and a monthly mortality
and expense risk charge equal to 0.075% multiplied by the Variable Account
Value, (which is equivalent to an annual rate of 0.90% of such amount)
during Policy Years 1 through 10 and 0.021% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.25% of such
amount) during Policy Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
INSURED 1: MALE ISSUE AGE 55; NON-SMOKER
INSURED 2: FEMALE ISSUE AGE 55; NON-SMOKER
$ - ANNUAL PLANNED PREMIUM
$1,000,000 BASIC FACE AMOUNT
DEATH BENEFIT OPTION B
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --------------------- -------------- -------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
<CAPTION>
12% HYPOTHETICAL
GROSS INVESTMENT RETURNS
END OF -----------------------------------
POLICY POLICY SURRENDER DEATH
YEAR VALUE VALUE BENEFIT
- --------------------- --------- ----------- ---------
<S> <C> <C> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
The illustration above is based on the following assumptions:
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable premium expense charge, guaranteed cost
of insurance rates, a monthly administration fee of $.075 per $1,000 of
Basic Face Amount per month in Policy Years 1 through 9, and a monthly
mortality and expense risk charge equal to 0.075% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.90% of such
amount) during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of the
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
41
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
LIMITS ON RIGHTS TO CONTEST THE POLICY
INCONTESTABILITY. Unless fraud is involved, Protective Life will not
contest the Policy, or any supplemental rider, after the Policy or rider has
been in force during the Joint Insureds' lifetime for two years from the Policy
Effective Date or the effective date of the rider. Protective Life will not
contest an increase in the Face Amount with respect to statements made in the
evidence of insurability for that increase after the increase has been in force
during the life of the Joint Insureds for two years after the effective date of
the increase.
SUICIDE EXCLUSION. If either of the Joint Insureds commits suicide, while
sane or insane, within two years from the Policy Effective Date and while the
Policy is in force, Protective Life's total liability will be limited to the
premium payments made before death, less any Policy Debt and any withdrawals and
the Policy will be terminated as of the date of such suicide. If either of the
Joint Insureds commits suicide while sane or insane within two years from the
effective date of any increase in Face Amount, Protective Life's total liability
with respect to the increase will be limited to the sum of the monthly cost of
insurance charges made for that increase.
CHANGES IN THE POLICY OR BENEFITS
MISSTATEMENT OF AGE OR SEX. If the age or sex of either Joint Insured has
been misstated in the application for the Policy, increases in Supplemental Face
Amount or in any application for supplemental riders, the Death Benefit under
the Policy or such supplemental riders is the amount which would have been
provided by the most recent cost of insurance charge, and the cost of such
supplemental riders, at the correct age and sex.
OTHER CHANGES. At any time Protective Life may make such changes in the
Policy as are necessary to assure compliance with any applicable laws,
regulations or rulings issued by a government agency. This includes, but is not
limited to, changes necessary to comply at all times with the definition of life
insurance prescribed by the Internal Revenue Code. Any such changes will apply
uniformly to all affected Policies and Owners will receive notification of such
changes.
SUSPENSION OR DELAY IN PAYMENTS
Protective Life will ordinarily pay any Death Benefit proceeds, Policy
loans, withdrawals, or surrenders within seven calendar days after receipt at
the Home Office of all the documents required for such a payment. Other than the
Death Benefit, which is determined as of the date of death, the amount will be
determined as of the date of receipt of all required documents. However,
Protective Life may delay making a payment or processing a transfer request if
(1) the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading on the Exchange is restricted by the SEC, or the SEC declares
that an emergency exists as a result of which the disposal or valuation of
Variable Account assets is not reasonably practicable; or (2) the SEC by order
permits postponement of payment to protect Owners. (See also "Payments from the
Fixed Account".)
When applied to distributions from the Fixed Account, Protective Life may
defer payment of Death Benefit proceeds for up to two months and defer payment
of withdrawals, surrenders and policy loans (unless the loan is for the payment
of a premium to Protective Life) for up to six months after we receive your
written request. If Protective Life delays payment on a surrender, you will be
paid interest at the rate state law sets (if any) beginning at the time of the
surrender request.
REPORTS TO POLICY OWNERS
Each year you will be sent a report at your last known address showing, as
of the end of the current report period: the Death Benefit; Policy Value; Fixed
Account Value; Variable Account Value; Loan Account Value; Sub-Account Values;
premiums paid since the last report; withdrawals since the last report;
42
<PAGE>
any Policy loans and accrued interest; Surrender Value; current Net Premium
allocations; charges deducted since the last report; and any other information
required by law. You will also be sent an annual and a semi-annual report for
each Fund underlying a Sub-Account to which you have allocated Policy Value,
including a list of the securities held in each Fund, as required by the 1940
Act. In addition, when you pay premiums or request any other financial
transaction under your Policy you will receive a written confirmation of these
transactions.
ASSIGNMENT
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon Protective Life, it must be in writing and filed
at the Home Office. Once Protective Life has received a signed copy of the
assignment, the Owner's rights and the interest of any beneficiary (or any other
person) will be subject to the assignment. Protective Life assumes no
responsibility for the validity or sufficiency of any assignment. An assignment
is subject to any Policy Debt. An assignment may result in certain amounts being
subject to income tax and a 10% penalty tax. (See "Tax Considerations".)
ARBITRATION
The Policy provides that any controversy, dispute or claim by any Owner(s),
Joint Insureds, or beneficiary (a "claimant") arising out of insurance provided
under the Policy will be submitted to binding arbitration pursuant to the
Federal Arbitration Act. Arbitration will be binding upon any claimant as well
as Protective Life and may not be set aside in later litigation except upon the
limited circumstances set forth in the Federal Arbitration Act. Arbitration
expenses will be borne by the losing party or in such proportion as the
arbitrator(s) shall decide. Consult the Policy for additional information. This
provision does not apply to Policies issued in certain states. The application
for the Policy will indicate whether your Policy will be subject to an
arbitration provision.
SUPPLEMENTAL RIDERS
Supplemental riders may be available in connection with your Policy. Monthly
charges for any such riders will be deducted from your Policy Value as part of
the Monthly Deduction. (See "Monthly Deduction".) Any available supplemental
riders will provide fixed benefits that do not vary with the investment
experience of the Variable Account.
REINSURANCE
The Company may reinsure a portion of the risks assumed under the Policies.
USES OF THE POLICY
Life insurance, including variable life insurance, can be used to provide
for many individual and business needs, in addition to providing a death
benefit. Possible applications of a variable life insurance policy, such as this
Policy include: (1) serving as vehicle for accumulating funds for a college
education, (2) estate planning, (3) serving as an investment vehicle on various
types of deferred compensation arrangements, (4) buy-sell arrangements,
(5) split dollar arrangements, and (6) a supplement to other retirement plans.
As with any investment, using this Policy under these or other applications
entails certain risks. For example, if investment performance of Sub-Accounts to
which Policy Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate Cash Value or
Surrender Value sufficient to adequately fund the application for which the
Policy was purchased. Similarly, certain transactions under a Policy entail
risks in connection with the application for which the Policy is purchased.
Withdrawals, policy loans and interest paid on policy loans may significantly
affect current and future Policy Value, Cash Value, Surrender Value or Death
Benefit Proceeds. If, for example, a policy loan is taken but not repaid prior
to the death of the Last Survivor of the Joint Insureds, the Policy
43
<PAGE>
Debt is subtracted from the Death Benefit in computing the Death Benefit
Proceeds to be paid to a beneficiary.
Prior to utilizing this Policy for the above applications you should
consider whether the anticipated duration of the Policy is appropriate for the
application for which you intend to purchase it.
In addition, you need to consider the tax implications of using the Policy
with these applications. (The tax implications of using this Policy with these
applications can be complex and generally are not addressed in the discussion of
"Tax Considerations" below.) Loans and withdrawals will affect the Policy Value
and Death Benefit. There may be penalties and taxes if the policy is
surrendered, lapses, matures or if a withdrawal is made. BECAUSE OF THESE RISKS,
YOU NEED TO CAREFULLY CONSIDER HOW YOU USE THIS POLICY. THIS POLICY MAY NOT BE
SUITABLE FOR ALL PERSONS, UNDER ANY OF THESE APPLICATIONS.
TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Policy
is not exhaustive, does not purport to cover all situations, and is not intended
as tax advice. The federal income tax treatment of the Policy is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with the purchase of the Policy. In addition, PROTECTIVE LIFE MAKES NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF
ANY TRANSACTION INVOLVING A POLICY.
TAX STATUS OF PROTECTIVE LIFE
Protective Life is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of Protective Life, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing federal income tax
laws, Protective Life is not taxed on investment income and realized capital
gains of the Variable Account, although Protective Life's federal taxes are
increased in respect of the Policies because of the federal tax law's treatment
of deferred acquisition costs. Currently, a charge for federal income taxes is
not deducted from the Sub-Accounts or the Policy's Cash Value. However,
Protective Life does deduct a premium expense charge from each premium payment
in all Policy Years in part to compensate it for the federal tax treatment of
deferred acquisition costs. Protective Life reserves the right in the future to
make a charge against the Variable Account or the Cash Values of a Policy for
any federal, state, or local income taxes that it incurs and determines to be
properly attributable to the Variable Account or the Policy. Protective Life
will promptly notify the Owner of any such charge.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. Section 7702 of the Code establishes a statutory
definition of life insurance for federal tax purposes. Protective Life believes
that the Policy will meet the current statutory definition of life insurance,
which places limitations on the amount of premiums that may be paid and the
Policy Values that can accumulate relative to the Death Benefit. As a result,
the Death Benefit payable under the Policy will generally be excludable from the
Beneficiary's gross income, and interest and other income credited under the
Policy will not be taxable unless certain withdrawals are made (or are deemed to
be made) from the Policy prior to the Insured's death, as discussed below. This
tax treatment will only apply, however, if (1) the investments of the Variable
Account are "adequately diversified" in accordance with Treasury
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Department regulations, and (2) Protective Life, rather than the Owner, is
considered the owner of the assets of the Variable Account for federal income
tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department
regulations prescribe the manner in which the investments of a segregated
asset account, such as the Variable Account, are to be "adequately
diversified". If the Variable Account fails to comply with these
diversification standards, the Policy will not be treated as a life
insurance contract for federal income tax purposes and the Owner would
generally be taxable currently on the income on the contract (as defined in
the tax law). Protective Life expects that the Variable Account, through the
Funds, will comply with the diversification requirements prescribed by the
Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for federal income tax
purposes, of the assets of a segregated asset account, such as the Variable
Account, used to support their contracts. In those circumstances, income and
gains from the segregated asset account would be includible in the contract
owners' gross income. The Internal Revenue Service (the "IRS") has stated in
published rulings that a variable contract owner will be considered the
owner of the assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, 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 than the insurance
company, to be treated as the owner of the assets in the account". This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts [of a segregated asset account]
without being treated as owners of the underlying assets". As of the date of
this prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a
segregated asset account. For example, the Owner of this Policy has the
choice of more investment options to which to allocate Premium Payments and
Variable Account Values, and may be able to transfer among investment
options more frequently, than in such rulings. These differences could
result in the Policy Owner being treated as the owner of a portion of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, Protective Life does not
know what standards will be set forth in the regulations or rulings which
the Treasury Department has stated it expects to issue. Protective Life
therefore reserves the right to modify the Policy as necessary to attempt to
prevent Owners from being considered the owners of the assets of the
Variable Account. However, there is no assurance that such efforts would be
successful.
The remainder of this discussion assumes that the Policy will be treated as
a life insurance contract for federal tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
amount of the Death Benefit Proceeds payable from a Policy by reason of the
death of the Insured is excludable from gross income under Section 101 of the
Code. Certain transfers of the Policy for valuable consideration, however, may
result in a portion of the Death Benefit Proceeds being taxable.
If the Death Benefit Proceeds are not received in a lump sum and are,
instead, applied under either Settlement Options 1, 2, or 4, generally payments
will be prorated between amounts attributable to the Death Benefit which will be
excludable from the beneficiary's income and amounts attributable to interest
(accruing after the Insured's death) which will be includible in the
beneficiary's income. If the Death Benefit Proceeds are applied under Option 3
(Interest Income), the interest payments will be includible in the beneficiary's
income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Policy Value is
generally not taxable to the Owner unless amounts are
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received (or are deemed to be received) from the Policy prior to the Insured's
death. If there is a surrender of the Policy, an amount equal to the excess of
the Cash Value over the "investment in the contract" will be includible in the
Owner's income. The "investment in the contract" generally is the aggregate
premiums paid less the aggregate amount received under the Policy previously to
the extent such amounts received were excludable from gross income. Whether
withdrawals (or other amounts deemed to be distributed) from the Policy
constitute income to the Owner depends, in part, upon whether the Policy is
considered a "modified endowment contract" ("MEC") for federal income tax
purposes.
POLICIES NOT OWNED BY INDIVIDUALS. In the case of Policies issued to a
nonnatural taxpayer such as a corporation, or held for the benefit of such an
entity, a portion of the taxpayer's otherwise deductible interest expenses may
not be deductible as a result of ownership of a Policy even if no loans are
taken under the Policy. An exception to the latter rule is provided for certain
life insurance contracts which cover the life of only one individual who is a
20-percent owner, or an officer, director, or employee of, a trade or business.
An additional exception is provided for a Policy owned by an entity engaged in a
trade or business which covers the joint lives of a 20% owner of the entity and
the owner's spouse at the time first covered by the Policy. Entities that are
considering purchasing the Policy, or entities that will be beneficiaries under
a Policy, should consult a tax advisor.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC
(described below), the amount of any withdrawal from the Policy generally will
be treated first as non-taxable recovery of premium and then as income from the
Policy. Thus, a withdrawal from a Policy that is not a MEC generally will not be
includible in income except to the extent it exceeds the investment in the
contract immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As indicated above, Section 7702 places limitations on the amount of
premiums that may be paid and the Policy Values that can accumulate relative to
the Death Benefit. Where cash distributions are required under Section 7702 in
connection with a reduction in benefits during the first 15 years after the
Policy is issued (or if withdrawals are made in anticipation of a reduction in
benefits, within the meaning of the tax law, during this period), some or all of
such amounts may be includible in income notwithstanding the general
rule described in the preceding paragraph. A reduction in benefits may result
upon a decrease in the Face Amount, a change from one Death Benefit Option to
the other, if withdrawals are made, and in certain other instances.
TAX TREATMENT OF LOANS. If a Policy is not classified as a MEC, a loan
received under the Policy generally will be treated as indebtedness of the
Owner. As a result, no part of any loan under a Policy will constitute income to
the Owner so long as the Policy remains in force. If a Policy lapses when a loan
is outstanding, the amount of the loan outstanding will be treated as the
proceeds of a surrender for purposes of determining whether any amounts are
includable in the Owner's income.
Generally, interest paid on any loans under this Policy will not be tax
deductible. The non-deductibility of interest includes interest paid or accrued
on indebtedness with respect to one or more life insurance policies owned by a
taxpayer covering any individual who is or has been an officer or employee of,
or financially interested in, any trade or business carried on by the taxpayer.
A limited exception to this rule exists for certain interest paid in connection
with certain "key person" insurance. In the case of interest paid in connection
with a loan with respect to a Policy covering the life of any key person,
interest is deductible only to the extent that the aggregate amount of loans
under one or more life insurance policies does not exceed $50,000. Further, even
as to such loans up to $50,000, interest would not be deductible if the Policy
were deemed for federal tax purposes to be a single premium life insurance
policy or, in certain circumstances, if the loans were treated as "systematic
borrowing" within the meaning of the tax law. A "key person" is an individual
who is either an officer or a twenty percent owner of the taxpayer. The maximum
number of individuals who can be treated as key persons may not exceed the
greater of (1) 5 individuals or (2) the lesser of 5 percent of the total number
of officers and employees of the taxpayer or
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20 individuals. Owners should consult a tax advisor regarding the deductibility
of interest incurred in connection with this Policy.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. In general, a Policy will be
considered a MEC for federal income tax purposes if (1) the Policy is received
in exchange for a life insurance contract that was a MEC, or (2) the Policy is
entered into after June 21, 1988 and premiums are paid into the Policy more
rapidly than the rate defined by a "7-Pay Test". This test generally provides
that a Policy will fail this test (and thus be considered a MEC) if the
accumulated amount paid under the Policy at any time during the 1st 7 Policy
Years exceeds the cumulative sum of the net level premiums which would have been
paid to that time if the Policy provided for paid-up future benefits after the
payment of 7 level annual premiums. A material change of the Policy (as defined
in the tax law) will generally result in a re-application of the 7-Pay Test. Due
to the coverage of Joint Insureds under the Policy, there is some uncertainty
about how to apply the 7-Pay Test to the Policy. There are also special
considerations regarding the application of the 7-Pay Test to the Policy. For
example, a reduction in the Death Benefit at any time, such as may occur upon a
partial surrender, may cause a Policy to be a MEC, resulting in the tax
treatment described below applying.
Protective Life will monitor the Policies and will attempt to notify Owners
on a timely basis if a Policy is in jeopardy of becoming a MEC. The Policy Owner
may then request that Protective Life take whatever steps are available to avoid
treating the Policy as a MEC, if that is desired.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. If
the Policy is a MEC, withdrawals from the Policy will be treated first as
withdrawals of income and then as a recovery of premiums paid. Thus, withdrawals
will be includible in income to the extent the Policy Value exceeds the
investment in the contract. The amount of any Policy Debt will be treated as a
withdrawal for tax purposes. In addition, the discussion of interest on loans
and of lapses while loans are outstanding under the caption "Policies Which Are
Not MECs" also applies to Policies which are MECs.
If the Owner assigns or pledges any portion of the Policy Value (or agrees
to assign or pledge any portion), such portion will be treated as a withdrawal
for tax purposes. The Owner's investment in the contract is increased by the
amount includible in income with respect to any assignment, pledge, or loan,
though it is not affected by any other aspect of the assignment, pledge, or loan
(including its release or repayment). Before assigning, pledging, or requesting
a loan under a Policy treated as a MEC, an Owner should consult a qualified tax
advisor.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawal (or the
amount of any deemed withdrawal) from a MEC are subject to a penalty tax equal
to 10% of the portion of the proceeds that is includible in income, unless the
surrender or withdrawal is made (1) after the Owner attains age 59 1/2,
(2) because the Owner has become disabled (as defined in the tax law), or
(3) as substantially equal periodic payments over the life or life expectancy of
the Owner (or the joint lives or life expectancies of the Owner and his or her
beneficiary, as defined in the tax law).
AGGREGATION OF POLICIES. All life insurance contracts which are treated as
MECs and which are purchased by the same person from Protective Life or any of
its affiliates within the same calendar year will be aggregated and treated as
one contract for purposes of determining the tax on withdrawals (including
deemed withdrawals). The effects of such aggregation are not clear; however, it
could affect the amount of a withdrawal (or a deemed withdrawal) that is taxable
and the amount which might be subject to the 10% penalty tax described above.
ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW. -- Protective Life believes that
the maximum amount of premiums it has determined for the Policies will comply
with the federal tax definition of life insurance. However, there is some
uncertainty with respect to this definition, and in particular regarding how it
applies to a life insurance contract that covers more than one insured.
Protective Life will monitor the amount of premiums paid, and, if the premiums
paid exceed those permitted by the tax definition of life
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insurance, Protective Life will immediately refund the excess premiums.
Protective Life also reserves the right to increase the Death Benefit (which may
result in larger charges under a Policy) or to take any other action deemed
necessary to ensure the compliance of the Policy with the federal tax definition
of life insurance.
OTHER CONSIDERATIONS. -- Changing the Owner, exchanging the Policy, changing
from one Death Benefit Option to another, and other changes under the Policy may
have tax consequences (other than those discussed herein) depending on the
circumstances of such change or withdrawal. Federal estate and state and local
estate, inheritance and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or beneficiary.
FEDERAL INCOME TAX WITHHOLDING
Protective Life will withhold and remit to the federal government a part of
the taxable portion of a surrender and withdrawal made under a Policy unless the
Owner notifies Protective Life in writing at the Home Office and such notice is
received at or before the time of the surrender or withdrawal that he or she
elects not to have any amounts withheld. Regardless of whether the Owner
requests that no taxes be withheld or whether Protective Life withholds a
sufficient amount of taxes, the Owner will be responsible for the payment of any
taxes including any penalty tax that may be due on the amounts received. The
Owner may also be required to pay penalties under the estimated tax rules, if
the Owner's withholding and estimated tax payments are insufficient to satisfy
the Owner's total tax liability.
The exchange of one life insurance contract for another life insurance
contract generally is not taxed if the insured lives are the same under both
contracts (unless cash is distributed or a loan is reduced or forgiven). Thus,
in the case of an exchange involving the Policy, the other life insurance
contract involved in the exchange must also cover the same Joint Insureds. In
addition, the exercise of the Policy Split Option Endorsement may result in the
taxation of the Policy as if there were a full surrender.
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE
SALE OF THE POLICIES
Investment Distributors, Inc. ("IDI"), a wholly-owned subsidiary of
Protective Life Corporation, acts as a principal underwriter of the Policies.
IDI also acts as principal underwriter of variable annuity contracts issued
through Protective Variable Annuity Separate Account and separate accounts of
certain affiliates of Protective Life. IDI is a registered broker-dealer under
the Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. The Policies are sold by certain registered
representatives of broker-dealers (including ProEquities, Inc., an affiliate of
Protective Life and IDI) that have entered into selling agreements with IDI, who
are also appointed and licensed as insurance agents of Protective Life.
Registered representatives may be paid commissions on Policies they sell based
on premiums paid in amounts up to 115% of a targeted first year premium payment.
A targeted first year premium payment is approximately equal to your minimum
initial premium on an annual basis. For premiums paid in the first Policy Year
which exceed this targeted amount, registered representatives may receive up to
4.5% on premiums in excess of target. For premiums received during policy years
two through ten, the registered representatives may be paid up to 5.0% on
premiums. After the first ten Policy Years registered representatives may be
paid up to 1.00% on premiums received and .25% on unloaned Policy Value. Other
allowances and overrides, and non-cash compensation, also may be paid.
Registered representatives who meet certain productivity and profitability
standards may be eligible for additional compensation.
Protective Life may reduce or waive the sales charge, administrative fees
and/or any other charges on any Policy sold to (i) directors, officers or
employees of Protective Life or any of its affiliates, (ii) employees and
registered representatives of any broker-dealer that has entered into a selling
agreement with Protective Life or IDI, as well as employees of such registered
representatives and (iii) the immediate family of the above persons, due to the
generally lower sales and administrative expenses
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attributable to such individuals. No such reduction or waiver will be permitted
where it would be unfairly discriminatory against any person.
CORPORATE PURCHASERS
The Policy may be available for individuals and for corporations and other
institutions. For corporate or other group or sponsored arrangements, fee-only
arrangements or clients of registered investment advisors purchasing one or more
Policies, Protective Life may reduce the amount of the premium expense charge,
monthly administration fee, or other charges where the expenses associated with
the sale of the Policy or Policies or the underwriting or other administrative
costs associated with the Policy or Policies are reduced. Sales, underwriting or
other administrative expenses may be reduced for reasons such as expected
economies resulting from a corporate purchase, a group or sponsored arrangement
or arrangements, fee-only arrangements or clients of registered investment
advisors.
PROTECTIVE LIFE DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, address and principal
occupations during the past five years of each of Protective Life's directors
and executive officers. The address for each of these individuals is c/o
Protective Life Insurance Company 2801 Highway 280 South, Birmingham, Alabama
35223.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PROTECTIVE LIFE
- -------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Drayton Nabers, Jr. 59 Chairman of the Board and Director
John D. Johns 48 President and Director
R. Stephen Briggs 50 Executive Vice President and Director
Jim E. Massengale 57 Executive Vice President, Acquisitions and Director
A.S. Williams III 63 Executive Vice President, Investments, Treasurer and Director
Danny L. Bentley 42 Senior Vice President, Dental and Consumer Benefits and Director
Richard J. Bielen 39 Senior Vice President, Investments and Director
T. Davis Keyes 47 Senior Vice President, Information Services, and Director
Carolyn King 49 Senior Vice President, Investment Products and Director
Deborah J. Long 46 Senior Vice President, General Counsel, Secretary and Director
Steven A. Schultz 46 Senior Vice President, Financial Institutions and Director
Wayne E. Stuenkel 46 Senior Vice President and Chief Actuary and Director
Judy Wilson 42 Senior Vice President, Guaranteed Investment Contracts
Jerry W. DeFoor 47 Vice President and Controller, and Chief Accounting Officer
</TABLE>
Mr. Nabers has been Chairman of the Board and a Director of Protective Life
since August 1996. Mr. Nabers has been Chairman of the Board and Chief Executive
Officer of PLC and a Director since August 1996. From May 1994 to August 1996,
Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and
a Director of PLC. From May 1992 to May 1994, he was President and Chief
Executive Officer and a Director of PLC. Mr. Nabers has served in various
capacities with PLC and its subsidiaries since 1979. He is also a director of
Energen Corporation, National Bank of Commerce of Birmingham, and Alabama
National Bancorporation.
Mr. Johns has been President of Protective Life and President and Chief
Operating Officer of PLC since August 1996. He was Executive Vice President and
Chief Financial Officer of Protective Life and PLC from October 1993 to August
1996. From August 1988 to October 1993, he served as Vice President and General
Counsel of Sonat Inc. He is a director of National Bank of Commerce of
Birmingham and Alabama National Bancorporation.
Mr. Briggs has been Executive Vice President of Protective Life and PLC
since October 1993. From January 1993 to October 1993 he was Senior Vice
President, Life Insurance and Investment Products of Protective Life and PLC.
Mr. Briggs had been Senior Vice President, Ordinary Marketing of Protective Life
since April 1986 and PLC since August 1988. Mr. Briggs has been associated with
PLC and its subsidiaries since 1977.
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Mr. Massengale has been Executive Vice President, Acquisitions of Protective
Life and PLC since August 1996. From May 1992 to August 1996 he served as Senior
Vice President of Protective Life and PLC. Mr. Massengale has been employed by
PLC and its subsidaries since 1983.
Mr. Williams has been Executive Vice President, Investments and Treasurer of
Protective Life and PLC since August 1996. From July 1981 to August 1996 he was
Senior Vice President, Investments and Treasurer of Protective Life and PLC. Mr.
Williams has been employed by the PLC and its subsidiaries since 1964.
Mr. Danny L. Bentley has been Senior Vice President, Dental and Consumer
Benefits of Protective Life and PLC since August 1996. From May 1989 to August
1996, he was Vice President, Group Marketing of Protective Life. Mr. Bentley has
been employed by PLC and its subsidiaries since 1980.
Mr. Bielen has been Senior Vice President, Investments of Protective Life
and PLC since August 1996. From August 1991 to August 1996, he was Vice
President, Investments of Protective Life.
Mr. Keyes has been Senior Vice President, Information Services of Protective
Life and PLC since April, 1999. He was Vice President, Information Services of
Protective Life and PLC from May 1993 to April 1999. He has been employed by
Protective Life and PLC in various capacities since 1982. Mr. Keyes has been
employed in the information services field since 1979.
Ms. King has been Senior Vice President, Investment Products Division of
Protective Life and PLC since April 1995. From August 1994 to March 1995, she
served as Senior Vice President and Chief Investment Officer of Provident Life
and Accident Insurance Company and of its parent company, Provident Life and
Accident Insurance Company of America. She served as President of Provident
National Assurance Company from November 1987 to March 1995. From November 1986
to August 1994, she served as Vice President of Provident Life and Accident
Insurance Company of America.
Ms. Long has been Senior Vice President, Secretary and General Counsel of
Protective Life since September 1996 and of PLC since November 1996. Ms. Long
was Senior Vice President and General Counsel of Protective Life from February
1994 to September 1996 and of PLC from February 1994 to November 1996. From
August 1993 to January 1994, Ms. Long served as General Counsel of PLC and from
February 1984 to January 1994 she practiced law with the law firm of Maynard,
Cooper & Gale, P.C.
Mr. Schultz has been Senior Vice President, Financial Institutions of
Protective Life and PLC since March 1993. Mr. Schultz served as Vice President,
Financial Institutions of Protective Life from February 1989 to March 1993 and
of PLC from February 1993 to March 1993. Mr. Schultz has been employed by PLC
and its subsidiaries since 1989.
Mr. Stuenkel has been Senior Vice President and Chief Actuary of Protective
Life and PLC since March 1987. Mr. Stuenkel is a Fellow in the Society of
Actuaries and has been employed by PLC and its subsidiaries since 1978.
Ms. Wilson has been Senior Vice President, Guaranteed Investment Contracts
of Protective Life and PLC since January 1995. From July 1991 to December 31,
1994, she served as Vice President, Guaranteed Investment Contracts of
Protective Life.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting
Officer of Protective Life and PLC since April 1989, Mr. DeFoor is a certified
public accountant and has been employed by PLC and its subsidiaries since August
1982.
STATE REGULATION
Protective Life is subject to regulation by the Department of Insurance of
the State of Tennessee, which periodically examines the financial condition and
operations of Protective Life. Protective Life is also subject to the insurance
laws and regulations of all jurisdictions where it does business. The Policy
described in this prospectus has been filed with and, where required, approved
by, insurance officials in those jurisdictions where it is sold.
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Protective Life is required to submit annual statements of operations,
including financial statements, to the insurance departments of the various
jurisdictions where it does business to determine solvency and compliance with
applicable insurance laws and regulations.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained at the SEC's principal office
in Washington, D.C. by paying the SEC's prescribed fees.
INDEPENDENT ACCOUNTANTS
The audited statement of assets and liabilites of the Protective Variable
Life Separate Account (comprised of seventeen Sub-Accounts in 1998 and
twenty-three Sub Accounts in 1999) as of December 31, 1998 and December 31, 1999
and the related statements of operations and changes in net assets for each of
the two years in the period ended December 31, 1999 and included in this
Prospectus, have been included herein in reliance on the report of
PricewaterhouseCoopers L.L.P., independent accountants, given on the authority
of that firm as experts in accounting and auditing.
The consolidated balance sheets of Protective Life as of December 31, 1999,
and 1998 and the consolidated statements of income, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1999 and
the related financial statement schedules included in this Prospectus, have been
included herein in reliance on the report of PricewaterhouseCoopers L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
EXPERTS
Actuarial matters included in this prospectus have been examined by Daniel
J. Keating, F.S.A, M.A.A.A., whose opinion is filed as an exhibit to the
registration statement.
IMSA
Protective Life is a member of the Insurance Marketplace Standards
Association ("IMSA"), and as such may include the IMSA logo and information
about IMSA membership in Protective 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.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain matters relating to the federal securities laws.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities of the Protective Variable
Life Separate Account (comprised of seventeen Sub-Accounts in 1998 and
twenty-three Sub Accounts in 1999) as of December 31, 1999 and December 31, 1998
and the related statements of operations and changes in net assets for each of
the two years in the period ended December 31, 1999 as well as the Report of
Independent Accountants are contained herein.
The audited consolidated balance sheets for Protective Life as of December
31, 1999, and 1998 and the related consolidated statements of income,
stockholder's equity, and cash flows for the years ended December 31, 1999, 1998
and 1997 as well as the Report of Independent Accountants are contained herein.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
THE PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Report of Independent Accountants........................... F-2
Statement of Assets and Liabilities as of December 31,
1999....................................................... F-3
Statement of Assets and Liabilities as of December 31,
1998....................................................... F-5
Statement of Operations for the period ended December 31,
1999....................................................... F-7
Statement of Operations for the period ended December 31,
1998....................................................... F-9
Statement of Changes in Net Assets for the period ended
December 31, 1999.......................................... F-11
Statement of Changes in Net Assets for the period ended
December 31, 1998.......................................... F-13
Notes to Financial Statements............................... F-15
PROTECTIVE LIFE INSURANCE COMPANY
Report of Independent Accountants........................... F-20
Consolidated Statements of Income for the years ended
December 31, 1999, 1998 and 1997........................... F-21
Consolidated Balance Sheets as of December 31, 1999 and
1998....................................................... F-22
Consolidated Statements of Share-Owner's Equity for the
years ended
December 31, 1999, 1998 and 1997........................... F-23
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997........................... F-24
Notes to Consolidated Financial Statements.................. F-25
Financial Statement Schedules:
Schedule III -- Supplementary Insurance Information......... S-1
Schedule IV -- Reinsurance.................................. S-2
</TABLE>
All other schedules to the consolidated financial statements required by
Article 7 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
[To be filed by amendment]
F-1
<PAGE>
APPENDIX A
EXAMPLES OF DEATH BENEFIT COMPUTATION UNDER OPTIONS A AND B
OPTION A EXAMPLE. For purposes of this example, assume that the younger of
Joint Insureds is between age 0 and 40 and that there is no outstanding Policy
Debt. Under Option A, a policy with a $250,000 Face Amount will generally pay
$250,000 in Death Benefits. However, because the Death Benefit must be greater
than or equal to 250% of the Policy Value, any time that the Policy Value
exceeds $100,000, the Death Benefit will exceed the $250,000 Face Amount. Each
additional dollar added to Policy Value above $100,000 will increase the Death
Benefit by $2.50. A policy with a $250,000 Face Amount and a Policy Value of
$125,000 will provide a Death Benefit of $312,500 ($125,000 X 250%); a Policy
Value of $150,000 will provide a Death Benefit of $375,000 ($150,000 X 250%).
Similarly, so long as Policy Value exceeds $100,000, each dollar taken out
of Policy Value will reduce the Death Benefit by $2.50. If, for example, the
Policy Value is reduced from $150,000 to $100,000 because of partial surrenders,
charges, or negative investment performance, the Death Benefit will be reduced
from $375,000 to $250,000. If at any time, however, the Policy Value multiplied
by the Face Amount percentage is less than the Face Amount, the Death Benefit
will equal the current Face Amount of the policy. Thus, if the Policy Value is
reduced from $150,000 to $75,000 because of partial surrenders, charges, or
negative investment performance, the Death Benefit will be reduced from $375,000
to $250,000, not to $187,500.
The Face Amount percentage becomes lower as the age of the younger Joint
Insured increases. If the Attained Age of the younger Joint Insured in the
example above was, for example 50 (rather than between 0 and 40), the percentage
by which Policy Value is multiplied would be 185%. The Death Benefit would not
exceed the $250,000 Face Amount unless the Policy Value exceeded approximately
$135,135 (rather than $100,000), and each dollar then added to or taken from the
Policy Value would change the Death Benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume that the younger
Joint Insured's Attained age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option B, a Policy with a Face Amount of $250,000
will generally provide a Death Benefit of $250,000 plus Policy Value. Thus, for
example, a Policy with a Policy Value of $25,000 will have a Death Benefit of
$275,000 ($250,000+$25,000); a Policy Value of $50,000 will provide a Death
Benefit of $300,000 (250,000+$50,000). The Death Benefit, however must be at
least 250% of the Policy Value. As a result, if the Policy Value exceeds
$166,667, the Death Benefit will be greater than the Face Amount plus Policy
Value. Each additional dollar of Policy value above $166,667 will increase the
Death Benefit by $2.50. A policy with a Face Amount of $250,000 and a Policy
Value of $175,000 will provide a Death Benefit of $437,500 ($175,000 X 250%); a
Policy Value of $200,000 will provide a Death Benefit of $500,000 ($200,000 X
250%).
Similarly, any time Policy Value exceeds $166,667, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $200,000 to $175,000 because of partial surrenders,
charges or negative investment performance, the Death Benefit will be reduced
from $500,000 to $437,500. If at any time, however, Policy Value multiplied by
the Face Amount percentage is less than the Face Amount plus the Policy Value,
then the Death Benefit will be the current Face Amount plus Policy Value of the
Policy. Thus, if the Policy Value decreased from $175,000 to $150,000 because of
partial surrenders, charges or negative investment performance, the Death
Benefit will be reduced from $437,500 to $400,000, not to $375,000.
The Face Amount percentage becomes lower as the age of the younger Joint
Insured increases. If the Attained Age of the younger Joint Insured in the
example above was, for example 50 (rather than between 0 and 40), the percentage
by which Policy Value is multiplied would be 185%. The Death Benefit would be
the sum of the Policy Value plus $250,000 unless the Policy Value exceeded
$294,118 (rather than $166,667), and each dollar then added to or taken from the
Policy Value would change the Death Benefit by $1.85 (rather than $2.50).
A-1
<PAGE>
TABLE OF FACE AMOUNT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
0-40 250% 50 185% 60 130% 70 115%
41 243% 51 178% 61 128% 71 113%
42 236% 52 171% 62 126% 72 111%
43 229% 53 164% 63 124% 73 109%
44 222% 54 157% 64 122% 74 107%
45 215% 55 150% 65 120% 75-90 105%
46 209% 56 146% 66 119% 91 104%
47 203% 57 142% 67 118% 92 103%
48 197% 58 138% 68 117% 93 102%
49 191% 59 134% 69 116% 94 101%
95+ 100%
</TABLE>
A-2
<PAGE>
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article XI of the By-laws of Protective Life provides, in substance, that
any of Protective Life's directors and officers, who is a party or is threatened
to be made a party to any action, suit or proceeding, other than an action by or
in the right of Protective Life, by reason of the fact that he is or was an
officer or director, shall be indemnified by Protective Life against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such claim,
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Protective
Life and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. If the claim, action or suit is or
was by or in the right of Protective Life to procure a judgment in its favor,
such person shall be indemnified by Protective Life against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Protective Life, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to Protective
Life unless and only to the extent that the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. To the extent that a director or officer has been successful on the
merits or otherwise in defense of any such action, suit or proceeding, or in
defense of any claim, issue or matter therein, he shall be indemnified by
Protective Life against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, not withstanding that he has
not been successful on any other claim issue or matter in any such action, suit
or proceeding. Unless ordered by a court, indemnification shall be made by
Protective Life only as authorized in the specific case upon a determination
that indemnification of the officer or director is proper in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to, or who have been successful on the merits
or otherwise with respect to, such claim action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion or (c) by the shareholders.
In addition, the executive officers and directors are insured by PLC's
Directors' and Officers' Liability Insurance Policy including Company
Reimbursement and are indemnified by a written contract with PLC which
supplements such coverage.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification may be against public policy as expressed in the Act and
may be, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
II-1
<PAGE>
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.
REPRESENTATIONS PURSUANT TO RULE Section 26(e) of the Investment Company Act of
1940
Protective Life hereby represents that the fees and charges deducted under
the variable life insurance policies described herein are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by it under such policies.
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
The facing sheet.
The prospectus consisting of 55 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations pursuant to Section 26(e) of the Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Nancy Kane, Esq.
Daniel J. Keating, F.S.A., M.A.A.A.
Sutherland Asbill & Brennan LLP
PricewaterhouseCoopers LLP
The following exhibits:
<TABLE>
<S> <C> <C>
1.A. (1) Certified resolutions of the board of directors of Protective Life Insurance Company establishing
Protective Variable Life Separate Account.*
(2) None.
(3)(a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors,
Inc. and Protective Variable Life Separate Account.**
(a)(1) Amendment I to the Underwriting Agreement+++
(b) Form of Distribution Agreement between Investment Distributors, Inc. and selling broker-dealers.**
(4) None.
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission on
May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form N-4 Registration Statement (File No. 333-60149) as filed with the
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 3, 1998.
++++To be filed by Amendment.
II-2
<PAGE>
<TABLE>
<S> <C> <C>
(5)(a) Form of Contract.++++
(b)
(6)(a) Charter of Protective Life Insurance Company.*
(b) By-Laws of Protective Life Insurance Company.*
(7) None
(8) None
(9)(a) Participation/Distribution Agreement.**
(a)(1) Amendment I to the Participation/Distribution Agreement+++
(b) Participation Agreement (Oppenheimer Variable Account Funds).***
(c) Participation Agreement (MFS Variable Insurance Trust).***
(d) Participation Agreement (Acacia Capital Corporation).***
(e) Participation Agreement (Van Eck Worldwide Insurance Trust).++
(f) Participation Agreement (Van Kampen Life Investment Trust).++++
(10) Contract Application.++++
2. Opinion and consent of Nancy Kane, Esq.++++
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Not Applicable
7. Opinion and consent of Daniel J. Keating, F.S.A., M.A.A.A.++++
8. Consent of Sutherland Asbill & Brennan LLP++++
9. Consent of PricewaterhouseCoopers, L.L.P.++++
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption
procedures.++++
11. Power of Attorney.
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission on
May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form N-4 Registration Statement (File No. 333-60149) filed with the
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to the
Form S-6 Registration Statement (File No. 333-45963) filed with the
Commission on June 3, 1998.
++++To be filed by Amendment.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Protective Variable Life
Separate Account has duly caused this Registration Statement on Form S-6 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Birmingham, State of Alabama on March 7, 2000.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
PROTECTIVE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
As required by the Securities Act of 1933, this Registration Statement on
Form S-6 has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
------------------------------------------- Chairman of the Board and Director (Principal Executive
Drayton Nabers, Jr. Officer)
/s/ JOHN D. JOHNS
------------------------------------------- President and Director (Principal Financial Officer)
John D. Johns
/s/ JERRY W. DEFOOR
------------------------------------------- Vice President, Controller and Chief Accounting Officer
Jerry W. DeFoor (Principal Accounting Officer)
*
------------------------------------------- Director
R. Stephen Briggs
*
------------------------------------------- Director
Jim E. Massengale
*
------------------------------------------- Director
A.S. Williams III
<CAPTION>
SIGNATURE DATE
--------- ----
<C> <C>
*
------------------------------------------- March 7, 2000
Drayton Nabers, Jr.
/s/ JOHN D. JOHNS
------------------------------------------- March 7, 2000
John D. Johns
/s/ JERRY W. DEFOOR
------------------------------------------- March 7, 2000
Jerry W. DeFoor
*
------------------------------------------- March 7, 2000
R. Stephen Briggs
*
------------------------------------------- March 7, 2000
Jim E. Massengale
*
------------------------------------------- March 7, 2000
A.S. Williams III
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
*
------------------------------------------- Director
Danny L. Bentley
*
------------------------------------------- Director
Richard J. Bielen
*
------------------------------------------- Director
T. Davis Keyes
*
------------------------------------------- Director
Carolyn King
*
------------------------------------------- Director
Deborah J. Long
*
------------------------------------------- Director
Steven A. Schultz
*
------------------------------------------- Director
Wayne E. Stuenkel
*By: /s/ NANCY KANE
--------------------------------------
Nancy Kane
Attorney-in-Fact
<CAPTION>
SIGNATURE DATE
--------- ----
<C> <C>
*
------------------------------------------- March 7, 2000
Danny L. Bentley
*
------------------------------------------- March 7, 2000
Richard J. Bielen
*
------------------------------------------- March 7, 2000
T. Davis Keyes
*
------------------------------------------- March 7, 2000
Carolyn King
*
------------------------------------------- March 7, 2000
Deborah J. Long
*
------------------------------------------- March 7, 2000
Steven A. Schultz
*
------------------------------------------- March 7, 2000
Wayne E. Stuenkel
*By: /s/ NANCY KANE
--------------------------------------
Nancy Kane
Attorney-in-Fact March 7, 2000
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
11 Power of Attorney
</TABLE>
<PAGE>
EXHIBIT 11
<PAGE>
EXHIBIT 11
DIRECTORS' POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors of
Protective Life Insurance Company, a Tennessee corporation, ("Company") by his
execution hereof or upon an identical counterpart hereof, does hereby constitute
and appoint John D. Johns, Nancy Kane or Jerry W. DeFoor, and each or any of
them, his true and lawful attorney-in-fact and agent, for him and in his name,
place and stead, to execute and sign the Registration Statement on Form S-6,
including any amendments thereto, to be filed by the Company with respect to the
Protective Premiere Survivor variable universal life product with the Securities
and Exchange Commission, pursuant to the provisions of the Securities Act of
1933 and the Investment Company Act of 1940, and to file same, with all exhibits
and schedules thereto and all other documents in connection therewith, with the
Securities and Exchange Commission and with such state securities authorities as
may be appropriate, granting unto said attorney-in-fact and agent, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes of the undersigned might or could do in person, hereby
ratifying and confirming all the acts of said attorney-in-fact and agent or any
of them which they may lawfully do in the premises or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand and
seal this 7th day of March, 2000.
<TABLE>
<S> <C>
WITNESS TO ALL SIGNATURES:
/s/ DEBORAH J. LONG
- ------------------------------------------
Deborah J. Long
/s/ DRAYTON NABERS, JR. /s/ DANNY L. BENTLEY
- ------------------------------------------ ------------------------------------------
Drayton Nabers, Jr. Danny L. Bentley
/s/ JOHN D. JOHNS /s/ RICHARD J. BIELEN
- ------------------------------------------ ------------------------------------------
John D. Johns Richard J. Bielen
/s/ R. STEPHEN BRIGGS /s/ CAROLYN KING
- ------------------------------------------ ------------------------------------------
R. Stephen Briggs Carolyn King
/s/ DEBORAH J. LONG /s/ JIM E. MESSENGALE
- ------------------------------------------ ------------------------------------------
Deborah J. Long Jim E. Messengale
/s/ STEVEN A. SCHULTZ /s/ A. S. WILLIAMS III
- ------------------------------------------ ------------------------------------------
Steven A. Schultz A. S. Williams III
/s/ WAYNE E. STUENKEL /s/ T. DAVIS KEYES
- ------------------------------------------ ------------------------------------------
Wayne E. Stuenkel T. Davis Keyes
</TABLE>
