Document:

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                     THE PENN MUTUAL LIFE INSURANCE COMPANY
                                  FOUNDED 1847

CONTRACT OWNER   William Penn                         9999999    CONTRACT NUMBER

CONTRACT DATE    November 1, 2001          September 1, 2061,       ANNUITY DATE

ANNUITANT        William Penn                              35   AGE OF ANNUITANT

VALUES AND PAYMENTS UNDER THIS CONTRACT, WHEN BASED UPON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THEY MAY DECREASE OR INCREASE
AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.

RIGHT TO REVIEW CONTRACT: The Contract Owner may cancel this contract within ten
days after its receipt. Simply return or mail it to the Company or the
representative through whom it was purchased. The Company will refund the
Contract Value as of the time notification is received.

    This is a legal contract between the Contract Owner and Penn Mutual. Please
read the contract carefully.

Executed on the Contract Date by The Penn Mutual Life Insurance Company.

/s/ Laura M. Ritzko                         /s/ Robert E. Chappell
-------------------                         ------------------------------------
Secretary                                   Chairman and Chief Executive Officer

INDIVIDUAL VARIABLE AND FIXED
ANNUITY CONTRACT
FLEXIBLE PURCHASE PAYMENTS

o Annuity Payments payable on Annuity Date
o Flexible Purchase Payments payable until Annuity Date
o Participating
o The Company will make monthly annuity payments and other payments as set forth
  in this contract.

The Penn Mutual Life Insurance Company, Philadelphia, Pennsylvania 19172
LVA-01

<PAGE>

GUIDE TO CONTRACT SECTIONS------------------------------------------------------

1.  Contract Specifications      9.  Annuity Payments
2.  Endorsements                 10.  Fixed Annuity Payments
3.  Definitions                  11.  Variable Annuity Payments
4.  Purchase Payments            12.  Annuity Options
5.  The Separate Account         13.  Death Benefit
6.  The Fixed Account            14.  Transfers
7.  Charges and Deductions       15.  Withdrawal
8.  Contract Value               16.  General

A copy of any applications follow Section 16.

<PAGE>

1.  CONTRACT SPECIFICATIONS

--------------------------------------------------------------------------------
CONTRACT OWNER:                                                CONTRACT NUMBER:

CONTRACT DATE:                                                 ANNUITY DATE:

ANNUITANT:                                                     AGE OF ANNUITANT:
--------------------------------------------------------------------------------

MARKET TYPE:

SEPARATE ACCOUNT:  PML Variable Annuity Account III

SCHEDULE OF PURCHASE PAYMENTS

         Variable Account
         Fixed Account

Subsequent Purchase Payments may be made subject to the provisions of the
contract. The minimum amount is $1,000.

SCHEDULE OF BENEFITS
DEATH BENEFIT RIDER:

SCHEDULE OF ANNUAL CHARGES
Annual Contract Administration Charge*: $40, or 2% of the Variable Account
                                        Value, whichever is less
Asset Based Contract Administration Charge**:  .15%
Mortality & Expense Risk Charge**:            1.30%

Date Annual Charges are deducted each year:

*THE CONTRACT ADMINISTRATION CHARGE APPLIES EACH YEAR THERE IS A VARIABLE
ACCOUNT VALUE WHICH IS LESS THAN $100,000.

**THE MORTALITY AND EXPENSE RISK CHARGE AS WELL AS THE ASSET BASED CONTRACT
ADMINISTRATION CHARGE ARE MADE DAILY AGAINST THE ASSETS OF THE SEPARATE ACCOUNT.

SCHEDULE OF CONTINGENT DEFERRED SALES CHARGE

NUMBER OF CONTRACT YEARS                                   CONTINGENT DEFERRED
     SINCE ISSUE                                              SALES CHARGE
                                                         (% OF PURCHASE PAYMENT)
          0                                                         8%
          1                                                         7%
          2                                                         6%
          3                                                         5%
          4                                                         0%

REFER TO WITHDRAWAL SECTION OF THE CONTRACT FOR FURTHER INFORMATION ON THE
CONTINGENT DEFERRED SALES CHARGE.

                                                                          Page 3

<PAGE>

1.  CONTRACT SPECIFICATIONS (CONTINUED)

SUBACCOUNTS
                             PENN SERIES FUNDS, INC.

INDEPENDENCE CAPITAL MANAGEMENT INC        TURNER INVESTMENT PARTNERS, INC.
      Money Market                               Mid Cap Growth
      Limited Maturity Bond
      Quality Bond                         T. ROWE PRICE
      Growth Equity                              High Yield Bond
                                                 Flexibly Managed

VONTOBEL USA                               WELLS CAPITAL MANAGEMENT INC.
      International Equity                       Index 500

PUTNAM INVESTMENT MANAGEMENT              RS INVESTMENTS
      Large Cap Value                           Emerging Growth

ROYCE & ASSOCIATES, INC.                   NEUBERGER BERMAN
      Small Cap Value                            Mid Cap Value

FIDELITY INVESTMENTS' VARIABLE             NEUBERGER BERMAN ADVISORS
INSURANCE PRODUCTS FUND                    MANAGEMENT TRUST
   FIDELITY MANAGEMENT                        NEUBERGER BERMAN
      VIP Equity Income                          AMT Balanced
      VIP Growth

FIDELITY INVESTMENTS' VARIABLE             MORGAN STANLEY DEAN WITTER
INSURANCE PRODUCTS FUND II                 UNIVERSAL FUNDS INC.
   FIDELITY MANAGEMENT                        MORGAN STANLEY
      VIP II Asset Manager                       Emerging Markets Equity (Int'l)

FIXED INTEREST OPTIONS
      One Year Fixed Account
      Three Year Fixed Account
      Five Year Fixed Account
      Seven Year Fixed Account

DOLLAR COST AVERAGING ACCOUNTS
      Six Month Dollar Cost Averaging Period
      Twelve Month Dollar Cost Averaging Period

EXCEPT WITH THE CONSENT OF PENN MUTUAL, THERE CAN BE NO ALLOCATION OF PURCHASE
PAYMENTS AND TRANSFERS TO MORE THAN 17 OF THE SUBACCOUNTS AND FIXED INTEREST
OPTIONS PRIOR TO THE ANNUITY DATE. FOLLOWING THE ANNUITY DATE, THE INITIAL
ALLOCATION AND SUBSEQUENT TRANSFERS CAN BE TO NO MORE THAN 1 FIXED INTEREST
OPTION AND 3 SUBACCOUNTS OVER DURING THAT PHASE OF THE CONTRACT.

                                                                 Page 3 (cont'd)

<PAGE>

2.  ENDORSEMENTS

TO BE MADE ONLY BY THE COMPANY

                           THIS PAGE IS INTENTIONALLY

                                   LEFT BLANK.

                                                                          Page 4

<PAGE>

3.  DEFINITIONS

ACCUMULATION UNIT: A unit of measure used to compute the Variable Account Value
under the contract prior to the Annuity Date. See Section 8.

ANNUITANT: The person during whose life annuity payments are made. If the
Contract Owner is a trust satisfying the requirements of Internal Revenue Code
Section 664, the Contract Owner may name one or more persons as contingent
annuitants. If a contingent annuitant has been named and the named annuitant
dies before the Annuity Date, the surviving contingent annuitant shall be the
Annuitant. If two or more contingent annuitants have been named, the surviving
contingent annuitant, oldest in age, shall be the Annuitant upon death of the
named or succeeding annuitant before the Annuity Date.

ANNUITY DATE: The date on which annuity payments start.

ANNUITY UNIT: A unit of measure used to calculate the amount of a variable
annuity payment. See Section 11.

CONTRACT OWNER: The person specified in the contract as the contract owner. The
Contract Owner has all rights to control all aspects of the contract, including,
after the Annuity Date and before the death of the Annuitant, the right to
transfer amounts among the subaccounts of the Separate Account and the right to
change the beneficiary.

DOLLAR COST AVERAGING PERIOD: The period of time for which an interest rate
declared by the Company is guaranteed. The period begins on the 1st day of the
calendar month following the date of the allocation through the end of the
specified period. The specified periods available are listed in the Dollar Cost
Averaging Accounts on Page 3.

FIXED ACCOUNT: The account under which amounts are held for the Contract Owner
under all Dollar Cost Averaging Accounts and Fixed Interest Options prior to the
Annuity Date.

INTEREST PERIOD: The period of time for which an interest rate declared by the
Company is guaranteed. The period begins on the first day of the calendar month
in which allocation or transfer is made.

QUALIFIED PLAN: A retirement arrangement that receives special tax treatment
under Section 403, 408, or any similar provisions of the Internal Revenue Code.

VARIABLE ACCOUNT: The account under which amounts are held for the Contract
Owner under all subaccounts of the Separate Account prior to the Annuity Date.

THE COMPANY: The Penn Mutual Life Insurance Company.

<PAGE>

4.  PURCHASE PAYMENTS

Purchase payments will be allocated to the subaccounts of the Separate Account
and to the Fixed Account as directed by the Contract Owner in the application
for this contract.

Subsequent purchase payments will be allocated, as specified in the allocation
section of the application, to the subaccounts of the Separate Account and to
the Fixed Account unless the Contract Owner directs that the purchase payments
be allocated otherwise.

Purchase payments applied to the contract after issue may be made at any time
without prior notice to the Company. The minimum subsequent purchase payment is
$1,000.

Total purchase payments may not exceed $2,000,000 at any time without the
consent of the Company.

5.  THE SEPARATE ACCOUNT

THE SEPARATE ACCOUNT. The Separate Account named on Page 3 was established by
the Company for this and other variable contracts. The Separate Account is
divided into subaccounts for the investment of assets in shares of the mutual
funds which are listed on Page 3.

The Company owns the assets held in the Separate Account. However, the portion
of the assets of each subaccount of the Separate Account equal to the reserves
and other contract liabilities with respect to the subaccount of the Separate
Account are not chargeable with the liabilities arising out of any other

                                                                          Page 5

<PAGE>

5. THE SEPARATE ACCOUNT (CONTINUED)

business the Company may conduct. Income and realized and unrealized gains and
losses from the assets held in each subaccount are credited to or charged
against the subaccount without regard to the income, gains or losses in other
investment accounts of the Company. Shares of a mutual fund held in a subaccount
will be redeemed at current net asset value to make transfers, pay benefits and
cover applicable charges and deductions. Any dividend or capital gain
distribution from a mutual fund will be reinvested in shares of that mutual
fund.

SUBSTITUTION OF INVESTMENT. If investment in a subaccount should no longer be
possible, or a subaccount's investment in a particular mutual fund should no
longer be possible, or, in the judgment of the Company, investment in a
subaccount or mutual fund becomes inappropriate to the purposes of the contract,
or, if in the judgment of the Company, investment in another subaccount, mutual
fund or insurance company separate account is in the interest of Contract Owners
of this class of contracts, the Company may substitute another subaccount,
mutual fund or insurance company separate account. Substitution may be made with
respect to existing investments and the investment of future purchase payments.

Substitution will be subject to all approvals required under applicable law.

<PAGE>

6.  THE FIXED ACCOUNT

THE FIXED ACCOUNT. The Fixed Account consists of the Fixed Interest Options and
the Dollar Cost Averaging Accounts which are listed on Page 3.

Amounts allocated or transferred to the Fixed Account under this contract become
a part of the general account assets of the Company and do not fluctuate with
regard to investment experience.

DOLLAR COST AVERAGING OPTION. Amounts may be only allocated to one of the dollar
cost averaging accounts in conjunction with an election of the dollar cost
averaging program. During the Dollar Cost Averaging Period an additional Dollar
Cost Averaging Option cannot be selected. If the dollar cost averaging program
is terminated at the request of the Contract Owner, the remaining balance will
be transferred to the One Year Fixed Interest Option unless otherwise directed
by the Contract Owner.

Amounts held in a dollar cost averaging account of the Fixed Account will be
credited with interest at effective annual rates declared by the Company. The
declared interest rate will apply from the date of the allocation through the
end of the dollar cost averaging period. At the expiration of the period, the
Company will declare a rate not less than 3% for that portion of a dollar cost
averaging account. The periods available under the Dollar Cost Averaging Account
are shown on Page 3.

FIXED INTEREST OPTIONS. Amounts may be allocated or transferred to the Fixed
Interest Options shown on Page 3. Amounts held in the Fixed Interest Options of
the Fixed Account will be credited with interest at effective annual rates
declared by the Company. The declared interest rate will apply from the date of
the allocation or transfer through the end of the elected interest period. At
the expiration of an interest period, the Company will renew the portion of the
Fixed Interest Option that has expired at the new rate declared for the interest
period at that time. For the 25 days following the expiration of such period,
the Contract Owner may transfer all or a portion of the amount held in such
Fixed Interest Option to subaccount(s) of the Separate Account or to another
account of the Fixed Interest Options.

The Company will not declare rates of interest for any Fixed Interest Option and
the Dollar Cost Averaging Accounts of less than 3%.

7.  CHARGES AND DEDUCTIONS

CONTRACT ADMINISTRATION CHARGES. These charges are assessed against contracts
with a Variable Account Value. The first charge is the Annual Contract
Administration Charge which will be no greater than the lesser of 2% of

                                                                          Page 6
<PAGE>

7.  CHARGES AND DEDUCTIONS (CONTINUED)

the Variable Account Value or dollar amount specified on Page 3. This charge
will only be applied if the Variable Account Value at the time the charge is
incurred is less than $100,000. It will be deducted annually on the dates
specified on Page 3. It will also be deducted when the Variable Account Value is
withdrawn or transferred in full if withdrawal or transfer is not on the date
specified on Page 3. The charge will not be deducted after the Annuity Date.

The second charge is an asset based contract administration charge. On an annual
basis the charge will be a percentage of the daily net asset value of the
Variable Account which will not exceed the charge shown on Page 3.

MORTALITY AND EXPENSE RISK CHARGE. This charge is made to compensate the Company
for the mortality guarantees made under this contract and for guaranteeing that
the contract administration charges will not be increased by the Company over
the life of this contract or other contracts under the same class. On an annual
basis the charge will be a percentage of the daily net asset value of the
Variable Account. The charge will not exceed the value shown on Page 3.

CONTINGENT DEFERRED SALES CHARGE. This charge, if applicable, will be deducted
upon withdrawal, in whole or in part, of the Contract Value. This charge will
not be applied on payment at time of annuitization, on a death benefit payment,
medically related withdrawal payment or disability withdrawal payment . For
further definition of the charge, see Section 15 - Withdrawal.

PREMIUM TAXES. The Company may deduct from the Contract Value any premium or
other taxes payable to a state or other government entity. Should the Company
elect not to assess any amount so due, the Company does not waive the right to
collect such amounts at a later date.

PREMATURE WITHDRAWAL CHARGE. This charge will be deducted from any amount
withdrawn from the Fixed Interest Options shown on Page 3, excluding the One
Year Fixed Account, before the end of the period for which a declared effective
annual interest rate is guaranteed on such amount.

<PAGE>

The Premature Withdrawal Charge, for any contract year, will be determined by
multiplying the Premature Withdrawal Rate by the Premature Withdrawal Amount.

The Premature Withdrawal Rate equals one-half of the most recent effective
annual interest rate then applicable to the Fixed Interest Option Account from
which the Premature Withdrawals Amount is withdrawn.

The Premature Withdrawal Amount equals (a) less the greater of (b) or (c) where:

(a) is the total amount withdrawn from the Fixed Interest Option Accounts,
excluding the One Year Fixed Account;

(b) is the amount for which the declared effective annual interest rate has
expired in the immediately preceding 25 days; and

(c) is 10% of Purchase Payments less any previous amount withdrawn from the
Contract in that Contract Year.

The Premature Withdrawal Charge shall not apply to any disability Free
Withdrawal set forth in Section 16, a payment on Death or any Variable or Fixed
Annuity Payments.

MAXIMUM CHARGE. In no event will the sum of the Premature Withdrawal Charge and
the Contingent Deferred Sales Charge set forth in this Section exceed 10% of the
amount withdrawn or such lesser percentage as may be the maximum in the
jurisdiction in which this contract is issued. In no event will the Premature
Withdrawal Charge invade the Contract Owner's principal investment in the
applicable fixed interest account.

DEDUCTIONS. The asset based contract administration charge and the mortality and
expense risk charge will be computed and deducted from each subaccount of the
Separate Account in which the Contract Owner is invested. These deductions will
be made daily.

The Company will deduct other charges applicable to the Variable Account by
canceling Accumulation Units or Annuity Units. The value of the canceled units
will be equal to the amount of the charges. Cancellation of Accumulation Units
will be in the ratio of the Contract Owner's share in each subaccount of the
Separate Account to the Variable Account Value.

8.  CONTRACT VALUE

THE CONTRACT VALUE. The contract value is the sum of the Variable Account Value
and the Fixed Account Value.

The Fixed Account Value. The Fixed Account Value is the sum of all money
allocated or transferred to the Fixed Account plus all interest credited to the
Fixed Account.

This amount shall be adjusted for withdrawals, transfers and charges.

                                                                          Page 7
<PAGE>

8. CONTRACT VALUE (CONTINUED)

THE VARIABLE ACCOUNT VALUE. The Variable Account Value is the sum of the values
of the Accumulation Units held in the subaccounts of the Separate Account for
this contract.

NUMBER OF ACCUMULATION UNITS. For each subaccount of the Separate Account, the
number of Accumulation Units is the sum of (a) divided by (b), where:

(a) is each amount allocated to the subaccount; and

(b) is the value of the Accumulation Unit for that subaccount for the valuation
    period in which the purchase payment was received.

The number of Accumulation Units will be adjusted for transfers, withdrawals and
charges. Adjustments will be made as of the valuation period in which all
requirements for the transaction are received.

VALUE OF EACH ACCUMULATION UNIT. For each subaccount of the Separate Account,
the value was arbitrarily set at $10 when the subaccount was established. The
value may increase or decrease from one valuation period to the next. For any
valuation period the value is (a) multiplied by (b), where:

(a) is the value of an Accumulation Unit for the prior valuation period; and

(b) is the net investment factor for that subaccount for the current valuation
    period.

NET INVESTMENT FACTOR. As used in this contract, net investment factor is an
index used to measure the investment performance of a subaccount from one
valuation period to the next. For any subaccount, the net investment factor for
a valuation period is found by dividing (a) by (b) and subtracting (c), where:

(a) is the net result of:

    (1) net asset value per-share of the mutual fund held in the subaccount as
        of the end of the valuation period; plus

    (2) the per-share amount of any dividend or capital gain distributions by
        the mutual fund if the "ex-dividend" date occurs in the valuation
        period; plus or minus

    (3) a per-share charge or credit as the Company may determine, as of the end
        of the valuation period, for tax reserves.

(b) is the net result of:

    (1) the net asset value per-share of the mutual fund held in the subaccount
        as of the end of the last prior valuation period; plus or minus

    (2) the per-share charge or credit for tax reserves as of the end of the
        last prior valuation period.

(c) is the sum of the daily asset based contract administration charge and the
    daily mortality and expense risk charge. On an annual basis, the sum of such
    charges will not exceed the values shown on Page 3.

VALUATION PERIOD. It is the interval of time from one valuation to the next.
Valuation is the time when shares of the applicable mutual funds are valued.

<PAGE>

9.  ANNUITY PAYMENTS

ANNUITY DATE. Unless another Annuity Date was chosen in the application or later
written notification, the Annuity Date will be the later of the first day of the
next month after the Annuitant's 95th birthday or 10 years after the Contract
Date.

The Annuity Date must be on the first day of a month. The Contract Owner may
change the Annuity Date up to 30 days before the current Annuity Date.

ANNUITY OPTIONS. The Contract Owner may choose a fixed annuity option, a
variable annuity option, or a combination of both up to 30 days prior to the
Annuity Date.

On the Annuity Date, the Contract Value, net of premium taxes if applicable,
must be annuitized. If not otherwise specified by the Contract Owner, the
contract will be annuitized on the Annuity Date based on a life annuity with
payments guaranteed for a 10 year period. If not otherwise specified by the
Contract Owner, the Fixed Account Value will be annuitized under the fixed
annuity option and the Variable Account Value will be annuitized under the
variable annuity option.

                                                                          Page 8
<PAGE>

MINIMUM ANNUITY PAYMENTS. If the Contract Value to be applied at the Annuity
Date is less than $5,000, the Company may pay such amount in a lump sum. Annuity
payments will be made monthly, quarterly, semi-annually or annually at the
Contract Owner's request. If any payment would be less than $50, the Company may
change the frequency so that payments are at least $50 each.

10. FIXED ANNUITY PAYMENTS

AMOUNT OF FIXED ANNUITY PAYMENTS. The portion of the Contract Value designated
by the Contract Owner for a fixed annuity option, will be applied to that
annuity option as of the Annuity Date. In no event will the monthly income under
Option 1, Option 2, Option 3 and Option 4 be less than the guaranteed monthly
income. The guaranteed monthly income will be equal to that portion of the
Contract Value, designated by the Contract Owner for a fixed annuity option,
applied to the Fixed Annuity Options Table in this section. The Fixed Annuity
Options Table shows the amount of the first payment for each $1,000 so applied,
according to the age at the Annuity Date. The tables are based on the Annuity
2000 Basic Table, without projections, 50% male/50% female with an effective
annual interest rate of 3%. Adjusted ages are used in applying those tables.

                                                                          Page 9

<PAGE>
10. FIXED ANNUITY PAYMENTS (CONTINUED)

FIXED ANNUITY OPTION TABLES

The following tables show the amount of the first monthly income payment for
each $1,000 of value applied under an annuity option. "Age" as used in the
tables for Options 2,3, and 4 means an adjusted age determined in the following
manner from the actual age of the Annuitant on the birthday nearest the date of
the first payment:

       DATE OF FIRST PAYMENT                            ADJUSTED AGE
     Before calendar year 2010                   Actual Age
             2010-2019                           Actual age decreased by 1
             2020-2029                           Actual age decreased by 2
          2030 and later                         Actual age decreased by 3

                OPTION 1 - ANNUITY FOR SPECIFIED NUMBER OF YEARS
<TABLE>
<CAPTION>
<S>                 <C>
-----------------------------------------------------------------------------------------------------
Number of Years     5      6      7      8      9     10    11    12    13    14    15    16    17
Monthly Income    17.91  15.14  13.16  11.68  10.53  9.61  8.86  8.24  7.71  7.26  6.87  6.53  6.23
-----------------------------------------------------------------------------------------------------
Number of Years    18     19     20     21     22     23    24    25    26    27    28    29    30
Monthly Income    5.96   5.73   5.51   5.32   5.15   4.99  4.84  4.71  4.59  4.47  4.37  4.27  4.18
-----------------------------------------------------------------------------------------------------
</TABLE>

        OPTION 2 - LIFE ANNUITY AND OPTION 3 - LIFE ANNUITY WITH PAYMENTS
                         GUARANTEED FOR 10 OR 20 YEARS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------

       LIFE       10 YEARS      20 YEARS             LIFE       10 YEARS      20 YEARS
AGE    ANNUITY    GUARANTEED    GUARANTEED    AGE    ANNUITY    GUARANTEED    GUARANTEED
------------------------------------------------------------------------------------------------
<S>    <C>        <C>           <C>           <C>    <C>        <C>           <C>
50     3.95       3.93          3.86          75     7.61       6.88          5.34
51     4.02       3.99          3.91          76     7.93       7.06          5.37
52     4.08       4.06          3.96          77     8.27       7.25          5.40
53     4.16       4.12          4.02          78     8.64       7.44          5.42
54     4.23       4.20          4.08          79     9.03       7.62          5.44

55     4.31       4.27          4.14          80     9.46       7.81          5.46
56     4.39       4.35          4.20          81     9.91       7.99          5.47
57     4.48       4.43          4.26          82     10.41      8.16          5.48
58     4.58       4.52          4.33          83     10.93      8.32          5.49
59     4.68       4.61          4.39          84     11.50      8.48          5.50

60     4.78       4.71          4.46          85     12.11      8.62          5.50
61     4.90       4.81          4.53          86     12.76      8.76          5.51
62     5.02       4.92          4.60          87     13.46      8.88          5.51
63     5.15       5.03          4.66          88     14.20      8.99          5.51
64     5.28       5.15          4.73          89     14.98      9.09          5.51

65     5.43       5.28          4.80          90     15.81      9.17          5.51
66     5.59       5.41          4.87          91     16.68      9.25          5.51
67     5.76       5.55          4.93          92     17.59      9.32          5.51
68     5.94       5.70          4.99          93     18.55      9.38          5.51
69     6.13       5.85          5.05          94     19.55      9.44          5.51

70     6.33       6.01          5.11          95     20.62      9.48          5.51
71     6.56       6.17          5.17
72     6.79       6.34          5.21
73     7.05       6.51          5.26
74     7.32       6.69          5.30
</TABLE>

                   OPTION 4 - JOINT AND SURVIVOR LIFE ANNUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>   <C>
AGE   50     55     60     65     70     75     80     85      90      95      AGE
50    3.53   3.64   3.73   3.80   3.85   3.89   3.92   3.93    3.94    3.95    50
55    3.64   3.79   3.92   4.04   4.13   4.20   4.24   4.27    4.29    4.30    55
60    3.73   3.92   4.12   4.30   4.45   4.57   4.65   4.71    4.74    4.76    60
65    3.80   4.04   4.30   4.56   4.81   5.02   5.17   5.28    5.35    5.38    65
70    3.85   4.13   4.45   4.81   5.18   5.52   5.80   6.01    6.15    6.23    70
75    3.89   4.20   4.57   5.02   5.52   6.04   6.52   6.91    7.19    7.37    75
80    3.92   4.24   4.65   5.17   5.80   6.52   7.27   7.96    8.50    8.87    80
85    3.93   4.27   4.71   5.28   6.01   6.91   7.96   9.03    9.99    10.73   85
90    3.94   4.29   4.74   5.35   6.15   7.19   8.50   9.99    11.48   12.78   90
95    3.95   4.30   4.76   5.38   6.23   7.37   8.87   10.73   12.78   14.74   95
</TABLE>

                                                                         Page 10
<PAGE>

11. VARIABLE ANNUITY PAYMENTS

FIRST VARIABLE ANNUITY PAYMENT. The portion of the Contract Value designated by
the Contract Owner for a variable annuity option will be applied to one of the
Variable Annuity Option Tables in this section for the variable annuity option
and the assumed interest rate chosen as of the Annuity Date. The tables are
based on the Annuity 2000 Basic Table, without projections, 50% male/50% female
with an effective annual interest rate stipulated on the table. Adjusted ages
are used in applying those tables.

SUBSEQUENT VARIABLE ANNUITY PAYMENTS. Payments after the first will vary in
amount according to the investment performance of the subaccount(s). The payment
amount may change from month to month. The amount of each subsequent payment
EQUALS (a) multiplied by (b) for each applicable subaccount, where:

(a) is the number of Annuity Units for the subaccount; and
(b) is the value of an Annuity Unit for that subaccount for the valuation period
    in which payment is due.

The amount of each annuity payment after the first will not be affected by
variations in expense or mortality experience.

NUMBER OF ANNUITY UNITS. The number of units for the subaccount of each
investment account chosen is (a) divided by (b), where:

(a) is the amount of the first variable annuity payment attributable to that
    subaccount; and
(b) is the value of an Annuity Unit for the subaccount as of the Annuity Date.

The number of Annuity Units is fixed except for adjustments for subaccount
transfers. Adjustments will be made as of the valuation period in which all
requirements for the transfer are received.

VALUE OF EACH ANNUITY UNIT. For each subaccount, the value of an Annuity Unit
was arbitrarily set at $10 when the subaccount was established. The value may
increase or decrease from one valuation period to the next. For any valuation
period the value is (a) multiplied by (b) multiplied by (c), where:

<PAGE>

(a) is the value of an Annuity Unit for the last prior valuation period
(b) is the net investment factor for that subaccount for the valuation period
(c) is an interest factor to neutralize the assumed interest rate built into the
    annuity tables.

NET INVESTMENT FACTOR. The net investment factor is an index used to measure the
investment performance of a subaccount from one valuation period to the next.
For any subaccount, the net investment factor for a valuation period is found by
dividing (a) by (b) and subtracting (c), where:
(a) is the net result of:
    (1) net asset value per-share of the mutual fund held in the subaccount as
        of the end of the valuation period; plus
    (2) the per-share amount of any dividend or capital gain distributions by
        the mutual fund if the "ex-dividend" date occurs in the valuation
        period; plus or minus
    (3) a per-share charge or credit as the Company may determine, as of the end
        of the valuation period, for tax reserves.

(b) is the net result of:
    (1) the net asset value per-share of the mutual fund held in the subaccount
        as of the end of the last prior valuation period; plus or minus
    (2) the per-share charge or credit for tax reserves as of the end of the
        last prior valuation period.

(c) is the sum of the daily asset based contract administration charge and the
    daily mortality and expense risk charge. On an annual basis, this charge
    will be a percentage of the daily net asset value of the Separate Account.
    The sum of such charges will not exceed the values shown on Page 3.

                                                                         Page 11

<PAGE>

11. VARIABLE ANNUITY PAYMENTS(CONTINUED)

VARIABLE ANNUITY OPTION TABLES - 3% INTEREST OPTION

The following tables show the amount of the first monthly income payment for
each $1,000 of value applied under an annuity option. "Age" as used in the
tables for Options 2,3, and 4 means an adjusted age determined in the following
manner from the actual age of the Annuitant on the birthday nearest the date of
the first payment:

       DATE OF FIRST PAYMENT                            ADJUSTED AGE
     Before calendar year 2010                   Actual Age
             2010-2019                           Actual age decreased by 1
             2020-2029                           Actual age decreased by 2
          2030 and later                         Actual age decreased by 3

        OPTION 2 - LIFE ANNUITY AND OPTION 3 - LIFE ANNUITY WITH PAYMENTS
                         GUARANTEED FOR 10 OR 20 YEARS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------

       LIFE       10 YEARS      20 YEARS             LIFE       10 YEARS      20 YEARS
AGE    ANNUITY    GUARANTEED    GUARANTEED    AGE    ANNUITY    GUARANTEED    GUARANTEED
------------------------------------------------------------------------------------------------
<S>    <C>        <C>           <C>           <C>    <C>        <C>           <C>
50     3.95       3.93          3.86          75     7.61       6.88          5.34
51     4.02       3.99          3.91          76     7.93       7.06          5.37
52     4.08       4.06          3.96          77     8.27       7.25          5.40
53     4.16       4.12          4.02          78     8.64       7.44          5.42
54     4.23       4.20          4.08          79     9.03       7.62          5.44

55     4.31       4.27          4.14          80     9.46       7.81          5.46
56     4.39       4.35          4.20          81     9.91       7.99          5.47
57     4.48       4.43          4.26          82     10.41      8.16          5.48
58     4.58       4.52          4.33          83     10.93      8.32          5.49
59     4.68       4.61          4.39          84     11.50      8.48          5.50

60     4.78       4.71          4.46          85     12.11      8.62          5.50
61     4.90       4.81          4.53          86     12.76      8.76          5.51
62     5.02       4.92          4.60          87     13.46      8.88          5.51
63     5.15       5.03          4.66          88     14.20      8.99          5.51
64     5.28       5.15          4.73          89     14.98      9.09          5.51

65     5.43       5.28          4.80          90     15.81      9.17          5.51
66     5.59       5.41          4.87          91     16.68      9.25          5.51
67     5.76       5.55          4.93          92     17.59      9.32          5.51
68     5.94       5.70          4.99          93     18.55      9.38          5.51
69     6.13       5.85          5.05          94     19.55      9.44          5.51

70     6.33       6.01          5.11          95     20.62      9.48          5.51
71     6.56       6.17          5.17
72     6.79       6.34          5.21
73     7.05       6.51          5.26
74     7.32       6.69          5.30

</TABLE>

                   OPTION 4 - JOINT AND SURVIVOR LIFE ANNUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>   <C>
AGE   50     55     60     65     70     75     80     85      90      95      AGE
50    3.53   3.64   3.73   3.80   3.85   3.89   3.92   3.93    3.94    3.95    50
55    3.64   3.79   3.92   4.04   4.13   4.20   4.24   4.27    4.29    4.30    55
60    3.73   3.92   4.12   4.30   4.45   4.57   4.65   4.71    4.74    4.76    60
65    3.80   4.04   4.30   4.56   4.81   5.02   5.17   5.28    5.35    5.38    65
70    3.85   4.13   4.45   4.81   5.18   5.52   5.80   6.01    6.15    6.23    70
75    3.89   4.20   4.57   5.02   5.52   6.04   6.52   6.91    7.19    7.37    75
80    3.92   4.24   4.65   5.17   5.80   6.52   7.27   7.96    8.50    8.87    80
85    3.93   4.27   4.71   5.28   6.01   6.91   7.96   9.03    9.99    10.73   85
90    3.94   4.29   4.74   5.35   6.15   7.19   8.50   9.99    11.48   12.78   90
95    3.95   4.30   4.76   5.38   6.23   7.37   8.87   10.73   12.78   14.74   95

</TABLE>

                                                                         Page 12

<PAGE>

11. VARIABLE ANNUITY PAYMENTS(CONTINUED)

VARIABLE ANNUITY OPTION TABLES - 5% INTEREST OPTION

The following tables show the amount of the first monthly income payment for
each $1,000 of value applied under an annuity option. "Age" as used in the
tables for Options 2,3, and 4 means an adjusted age determined in the following
manner from the actual age of the Annuitant on the birthday nearest the date of
the first payment:

       DATE OF FIRST PAYMENT                            ADJUSTED AGE
     Before calendar year 2010                   Actual Age
             2010-2019                           Actual age decreased by 1
             2020-2029                           Actual age decreased by 2
          2030 and later                         Actual age decreased by 3

        OPTION 2 - LIFE ANNUITY AND OPTION 3 - LIFE ANNUITY WITH PAYMENTS
                         GUARANTEED FOR 10 OR 20 YEARS

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------

       LIFE       10 YEARS      20 YEARS             LIFE       10 YEARS      20 YEARS
AGE    ANNUITY    GUARANTEED    GUARANTEED    AGE    ANNUITY    GUARANTEED    GUARANTEED
------------------------------------------------------------------------------------------------
<S>    <C>        <C>           <C>           <C>    <C>        <C>           <C>
50     5.17       5.14          5.04          75     8.79       7.93          6.35
51     5.23       5.19          5.09          76     9.11       8.10          6.38
52     5.29       5.25          5.13          77     9.45       8.28          6.41
53     5.36       5.31          5.18          78     9.82       8.46          6.43
54     5.43       5.38          5.23          79     10.22      8.64          6.44

55     5.50       5.45          5.29          80     10.65      8.81          6.46
56     5.58       5.52          5.34          81     11.12      8.98          6.47
57     5.67       5.60          5.40          82     11.62      9.14          6.48
58     5.76       5.68          5.45          83     12.15      9.29          6.49
59     5.86       5.77          5.51          84     12.73      9.44          6.50

60     5.96       5.86          5.57          85     13.34      9.58          6.50
61     6.07       5.96          5.63          86     14.00      9.70          6.51
62     6.19       6.06          5.69          87     14.71      9.81          6.51
63     6.32       6.17          5.75          88     15.46      9.92          6.51
64     6.45       6.28          5.82          89     16.25      10.01         6.51

65     6.60       6.40          5.88          90     17.08      10.09         6.51
66     6.75       6.53          5.94          91     17.96      10.17         6.51
67     6.92       6.66          5.99          92     18.88      10.23         6.51
68     7.10       6.80          6.05          93     19.84      10.29         6.51
69     7.29       6.95          6.10          94     20.84      10.34         6.51

70     7.50       7.10          6.15          95     21.91      10.38         6.51
71     7.72       7.25          6.20
72     7.96       7.42          6.24
73     8.22       7.58          6.28
74     8.49       7.75          6.32
</TABLE>

                   OPTION 4 - JOINT AND SURVIVOR LIFE ANNUITY
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>   <C>
AGE   50     55     60     65     70     75     80     85      90      95      AGE
50    4.74   4.83   4.92   4.99   5.04   5.09   5.12   5.14    5.15    5.16    50
55    4.83   4.96   5.09   5.20   5.29   5.36   5.42   5.45    5.47    5.49    55
60    4.92   5.09   5.26   5.43   5.58   5.71   5.80   5.86    5.90    5.93    60
65    4.99   5.20   5.43   5.68   5.92   6.13   6.29   6.41    6.49    6.54    65
70    5.04   5.29   5.58   5.92   6.27   6.61   6.90   7.12    7.27    7.37    70
75    5.09   5.36   5.71   6.13   6.61   7.12   7.60   8.01    8.30    8.50    75
80    5.12   5.42   5.80   6.29   6.90   7.60   8.34   9.03    9.59    9.99    80
85    5.14   5.45   5.86   6.41   7.12   8.01   9.03   10.11   11.07   11.84   85
90    5.15   5.47   5.90   6.49   7.27   8.30   9.59   11.07   12.57   13.87   90
95    5.16   5.49   5.93   6.54   7.37   8.50   9.99   11.84   13.87   15.83   95

</TABLE>
                                                                         Page 13

<PAGE>

12. ANNUITY OPTIONS

OPTION 1 - ANNUITY FOR SPECIFIED NUMBER OF YEARS. Payments will be made for a
specified number of years, which may not be less than 5 nor more than 30. This
option is available for a fixed annuity only.

OPTION 2 - LIFE ANNUITY. Payments will be made for the life of the Annuitant.
Payments will cease with the last payment due prior to the Annuitant's death.

OPTION 3 - LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 OR 20 YEARS. Payments
will be made for the life of the Annuitant. A guaranteed payment period of
either 10 or 20 years may be chosen.

OPTION 4 - JOINT AND SURVIVOR LIFE ANNUITY. The initial payment will be made if
either the Annuitant or the designated second Annuitant are living. Subsequent
payments will continue during the joint lives of the Annuitants and thereafter
during the life of the surviving annuitant. Payments will end with the last
payment due before the death of the last Annuitant to die.

Other annuity forms may be available with the consent of the Company.

If the Annuitant dies prior to the end of the specified period under Option 1 or
the guaranteed period under Option 3, the beneficiary may choose either:

(1) To have the payments continue for the remainder of the specified or
guaranteed period, or

(2) To receive at any time in one sum the present value of the remaining
payments to be made over the specified or guaranteed period.

If the beneficiary dies while receiving annuity payments under Option 1 or the
guaranteed period of Option 3, the present value of remaining payments will be
paid in one sum to the beneficiary's estate unless otherwise specified. The
present value will be computed as of the valuation period in which due proof of
death and the necessary forms to make payment to a beneficiary are received at
our Administrative Office. At that time, the present value of the fixed annuity
option will be commuted at a rate set by the Company on the annuity date and the
present value of the variable annuity option will be commuted at the assumed
interest rate built into the annuity table chosen at annuitization.

PAYMENTS. Payments will be made on the first day of the month starting with the
Annuity Date. Payments under all options will be made to or at the direction of
the Contract Owner.

13. DEATH BENEFIT

DEATH BEFORE THE ANNUITY DATE. A death benefit shall be payable upon the earlier
of the death of:
     (1) the Contract Owner or
     (2) the Annuitant.

Prior to the Annuity Date and upon receipt of due proof of death and the
necessary forms to make payment to a beneficiary, the Company will pay a death
benefit to the beneficiary.

Upon the Annuitant's death, the death benefit is equal to the Fixed Account
death benefit plus the Variable Account death benefit. The Fixed Account death
benefit is equal to the Fixed Account Value on the date of receipt of due proof
of death and the necessary forms to make payment to a beneficiary. The Variable
Account death benefit is the greater of:
     (1) the Variable purchase payments, plus or minus transfers in to and out
         of the Variable Account, less the total amount of any partial
         withdrawals from the Variable Account; or
     (2) the Variable Account Value at the date of receipt of due proof of death
         and the necessary forms to make payment to a beneficiary.

Upon the Contract Owner's death, if the Contract Owner is not the annuitant, the
death benefit is equal to the Contract Value on the date of receipt of due proof
of death.

Within one year of the date of death, the beneficiary may elect one of the
following payout options if death occurs before the Annuity Date.

     (1) The death benefit may be paid in a single sum. The payment will
         generally be made within 7 days of receipt of the necessary forms to
         make payment.

                                                                         Page 14

<PAGE>

13. DEATH BENEFIT (CONTINUED)

     (2) The death benefit may be paid in the form of one of the Annuity
         Options. If the death benefit becomes payable upon the death of the
         Annuitant, election to receive the death benefit in the form of an
         annuity must be made within 60 days of the death of the Annuitant. The
         payments must be made over the life of the beneficiary or over a period
         not extending beyond the life expectancy of the beneficiary. Payments
         under this option must commence within one year after the date of
         death.

     (3) If the Beneficiary is not the surviving spouse, the Beneficiary may
         elect to continue this contract in force but the Contract Value must be
         paid out within 5 yeas after the date of death. The Contract Value may
         be paid out in a single sum within five years after the date of death.
         At the time of this election, the beneficiary must specify the
         allocation of the Contract Value to the subaccounts of the Separate
         Account and the Fixed Interest Options of the Fixed Account. During
         this election and within five years after the date of death, the
         beneficiary may transfer amounts among the subaccounts of the Separate
         Account and the Fixed Interest Options of the Fixed Account. Transfers
         from the Fixed Interest Options are subject to the limitations imposed
         on such options prior to the end of the interest period.

     (4) If the Beneficiary is the surviving spouse of the deceased Contract
         Owner, the spouse may elect to become the Contract Owner and, upon such
         election, the contract value shall be adjusted to equal the amount of
         the Death Benefit.

If no such election is made within one year of the date of death, the Company
will pay the Contract Value to the beneficiary at that time. If there is more
than one surviving beneficiary, the beneficiaries must choose to receive their
respective portions of the death benefit according to either (1) or (2) or (3)
in the preceding paragraph. If no beneficiary survives the first to die of the
Contract Owner or the Annuitant, the death benefit will be paid in a lump sum to
the Contract Owner's estate or the Contract Owner, respectively.

DEATH AFTER THE ANNUITY DATE. This death benefit shall be payable upon the death
of the Annuitant. If death occurs after the Annuity Date, the death benefit
payable, if any, will be according to the annuity option in force.

BENEFICIARY. The beneficiary is the person(s) who is to receive:

     (1) Payment on the earlier of the death of the Contract Owner or the
         Annuitant prior to the Annuity Date, or

     (2) Remaining payments under specified or guaranteed annuity payments, if
         any, on death of the Annuitant on or after the Annuity Date.

The Contract Owner shall designate the beneficiary in the application. The
Contract Owner may change the beneficiary at any time before the death of the
Contract Owner or the Annuitant, whichever occurs first.

The estate of a beneficiary who predeceases the Contract Owner of the Annuitant
shall have no rights under this contract.

14. TRANSFERS

TRANSFERS. Subject to and in accordance with the provisions of this contract and
prior to the Annuity Date, the Contract Owner may transfer amounts among the
subaccounts of the Separate Account and the Fixed Interest Options of the Fixed
Account, provided that:

(a) the minimum amount which may be transferred is $250 or, if less, the full
    amount held in the subaccount or fixed interest option;
(b) for partial transfers, the amount remaining in a subaccount or Fixed
    Interest Option must be at least $250;
(c) amounts may be transferred from the Fixed Interest Option(s) to other
    subaccounts only during the 25 day period immediately following the end of
    the interest period for which an interest rate is declared on such Fixed
    Interest Option(s).

Subject to and in accordance with the provisions of this contract and after the
Annuity Date, the Contract Owner may transfer amounts among subaccounts of the
Separate Account. Upon death of the Contract Owner or the Annuitant and under
the election of a Variable Annuity option, the beneficiary shall have the right
to transfer amounts among the subaccounts of the Separate Account, provided
that:

                                                                         Page 15

<PAGE>

14. TRANSFERS

(a) the minimum amount which may be transferred is $250 or, if less, the full
    amount held in the subaccount;

(b) for partial transfers, the amount remaining in a subaccount must be at least
    $250.

The contract is not designed for individuals, advisers, or professional market
timing organizations that engage in professional or frequent transfers among
investment options. The Company reserves the right to restrict frequent use of
transfers for market timing and to otherwise restrict market timing when it
believes that it is in the interest of all contract owners.

15. WITHDRAWAL

WITHDRAWAL. Prior to the earlier of the Annuity Date, the death of the Contract
Owner or the death of the Annuitant, the Contract Owner may withdraw all or part
of the Contract Value.

WITHDRAWAL PAYMENTS. The Contract Owner may make a full or partial withdrawal.
The minimum withdrawal is $500 or, at the time of the first withdrawal in each
contract year, the free withdrawal amount defined below, if less.

At the time of a partial withdrawal, the amount remaining in the contract must
be at least $5,000 or such lower amount as the Company may require. A minimum
balance of $250 must remain in each subaccount or a Fixed Interest Option. If
the Contract Owner makes a full withdrawal, the contract must be returned to the
Company.

Unless otherwise specified by the Contract Owner, the withdrawal will be made
first prorata from the subaccounts of the Separate Account up to the Variable
Account Value, and then from the Fixed Account beginning with the Fixed Interest
Option with the shortest interest period. Within a Fixed Interest Option,
partial withdrawals will be made from amounts most recently allocated, renewed
or transferred.

FREE WITHDRAWAL. Prior to the Annuity Date, Purchase Payment withdrawals up to
the Free Withdrawal Amount will not be assessed a Contingent Deferred Sales
Charge.

FREE WITHDRAWAL AMOUNT. The free withdrawal amount each contract year is equal
to 10% of the cumulative purchase payments as of the date of the request less
any prior free withdrawals during that Contract year.

CONTINGENT DEFERRED SALES CHARGE. The Contingent Deferred Sales Charge will be
imposed upon withdrawals.

If the Contract Owner is a trust satisfying the requirements of Internal Revenue
Code Section 664, for purposes of calculating the Contingent Deferred Sales
Charge, the difference, if any, between the Contract Value at the time of a
withdrawal and the purchase payments to which the Contract Value is attributable
(available earnings) shall be treated as withdrawn prior to the withdrawal of
any purchase payment.

If the Contract Owner is not a trust satisfying the requirements of Internal
Revenue Code Section 664, for purposes of calculating the Contingent Deferred
Sales Charge, purchase payments shall be treated as withdrawn prior to any
available earnings. Available earnings equals the difference, if any between the
Contract Value at the time of a withdrawal and the purchase payments to which
the Contract Value is attributable.

There will no Contingent Deferred Sales Charge on amounts withdrawn that exceed
the total purchase payments of the contract.

The percentage charge will vary depending on the age of the contract and the
schedule of Contingent Deferred Sales Charges shown on Page 3.

The Contingent Deferred Sales Charge will be equal to the product of (a)
multiplied by (b), where

(a) is the amount of purchase payment associated with the withdrawal; and

(b) is the percentage that corresponds to the number of full contract years
    since the inception of the contract.

SYSTEMATIC WITHDRAWALS. After the contract is issued and prior to the Annuity
Date, the Contract Owner may withdraw systematically. The minimum Contract Value

                                                                         Page 16

<PAGE>
15. WITHDRAWAL (CONTINUED)

to be eligible for a withdrawal of this type is $10,000 or such lower amount as
the Company may require. The maximum systematic withdrawal amount is the amount
available under the Free Withdrawal provision of this Contract. The minimum
systematic withdrawal amount is $100. The withdrawals can be made on a monthly,
quarterly, semiannual or annual basis.

A level systematic withdrawal payment will begin one modal period after the date
of receipt of the request. No Contingent Deferred Sales Charge will be applied
to systematic withdrawals under this provision.

The Contract Owner must send the Company written notice to either stop the
systematic withdrawals or to change the amount or the mode of the withdrawals.
The systematic withdrawals will terminate upon the earlier of the death of the
Contract Owner or the Annuitant.

16. GENERAL

OWNERSHIP OF CONTRACT. The Contract Owner must be named in the application. Upon
written notice to the Company, the Contract Owner may assign the contract to a
new Contract Owner.

DISABILITY. The Contract Owner may at any time withdraw all or any part of the
Contract Value free of Contingent Deferred Sales Charge if:
(i)   the Contract Owner, or the Annuitant in a Qualified Plan, is then disabled
      as defined in Section 72(m)(7) of the Internal Revenue Code and as applied
      under the Social Security Act, and
(ii)  the disability began after the Contract Date, and
(iii) the disability has continued without interruption for four months.

MEDICALLY RELATED WITHDRAWAL. After the first contract year for contracts issued
to Contract Owners prior to their 75th birthday and prior to the Annuity Date,
the Contract Owner may request to withdraw all or any part of the Contract Value
free of Contingent Deferred Sales

Charge if either of the following events occur.

(a)  While the contract is in force, the Contract Owner is first confined to a
     Medical Care Facility and remains there for at least 90 consecutive days.
     The Medical Care Facility must be a state licensed facility which provides
     medically necessary in-patient care. The facility must be prescribed based
     on physical limitations which prohibit daily living in a non-institutional
     setting by a licensed physician in writing.
(b)  While the contract is in force, the Contract Owner is diagnosed by a
     licensed physician with a Fatal Illness which is expected to result in
     death within 2 years of the diagnoses for 80% of the diagnosed cases.

The Company must receive due proof of the Contract Owner's confinement or Fatal
Illness in writing. The Contract Owner must be living as of the date the
Medically Related Withdrawal proceeds are paid. The maximum payout for all
annuities with this benefit, at or issued by the Company and affiliated
companies, is $500,000.

DEFERMENT OF TRANSFERS AND PAYMENTS. Transfers and payments of withdrawals from
the Variable Account and payment of the Variable Account death benefit will be
made within seven days after receipt by the Company of all documents required
for such transfer, payment of withdrawal or payment of death benefits. However,
the Company may defer a transfer, a withdrawal, a death benefit payment, the
Annuity Date or annuity payments under the contract, if:

(1) The New York Stock Exchange is closed (other than customary weekend and
    holiday closings);
(2) Trading on the New York Stock Exchange is restricted;
(3) An emergency exists such that it is not reasonably practical to dispose of
    securities held in the Separate Account or to fairly determine the value of
    its assets; or
(4) The Securities and Exchange Commission by order so permits for the
    protection of security holders.
<PAGE>

Conditions in (2) and (3) will be decided by, or in accordance with rules of,
the Securities and Exchange Commission.

The Company may defer a transfer or payment of a withdrawal from the Fixed
Account or payment of the Fixed Account death benefit for a period not exceeding
six months, if it reasonably determines that investment conditions are such that
an orderly sale of assets held as part of general assets is not possible.

INCONTESTABILITY. No material misstatement made by the applicant will void the
contract unless it is contained in the written application attached to the
contract. The contract will be incontestable after it has been in force for 2
years from the Contract Date.

                                                                         Page 17
<PAGE>

16. GENERAL (CONTINUED)

MISSTATEMENT OF AGE. If the age of the Annuitant or a joint payee is misstated,
any amount payable under this contract will be that amount which the purchase
payments paid would have purchased on the basis of the correct age.

If the annuity payments have been overpaid because the age of the Annuitant or
joint payee has been misstated, the amount overpaid, with interest at the rate
of 6% per year or such higher rate as state law may permit, compounded annually,
will be charged against the payments still to be made under this contract.

If the annuity payments have been underpaid because the age of the Annuitant or
joint payee has been misstated, the amount underpaid, with interest at the rate
of 6% per year or such higher rate as state law may require, compounded
annually, will be paid in full with the next payment due under this contract.

PROOF OF AGE AND SURVIVAL. The Company may require satisfactory proof of correct
age at any time. If any payment under this contract depends on the payee being
alive, the Company may require satisfactory proof of survival.

THE CONTRACT. The contract, any endorsements, any riders and its attached
application are the entire contract. It is issued in consideration of the
application and purchase payments.

Only the President, a Vice President, an Associate Actuary, an Actuary or
Secretary of the Company may change the contract. Any change must be in writing.

At any time, the Company may make such changes in this contract as are required
to make it conform with any law or regulation issued by any government agency to
which it is subject.

PARTICIPATING CONTRACT. The contract may participate in divisible surplus of
Penn Mutual. Divisible surplus, if any, to be apportioned to the contract shall
be apportioned annually and shall be paid in cash or credited to the Contract
Value at the end of the contract year. No divisible surplus is expected to be
apportioned to this contract in the foreseeable future.

DATES. Contract years and anniversaries are measured from the Contract Date.

NOTICES, CHANGES AND CHOICES. To be effective, all notices, changes and choices
which the Contract Owner may make under the contract must be in writing.
Contract Owner should provide notification on a form provided or approved by the
Company, signed and received by the Company at its Administrative Office or
designated service office. If acceptable to the Company, notices, changes and
choices relating to beneficiaries and ownership will take effect as of the date
signed unless the Company has already acted in reliance on the prior status. The
Company is not responsible for their validity.

CONTRACT PAYMENTS. All sums payable to or by the Company are payable at its
designated service office.

PROTECTION OF PROCEEDS. Annuity payments under this contract may not be assigned
by the payee prior to their due dates. To the extent allowed by law, annuity
payments are not subject to legal process for debts of a payee.

COMPLIANCE WITH MINIMUM VALUE REQUIREMENTS. Annuity, death and withdrawal
benefits are not less than the minimum benefits required under applicable laws
and regulations of the jurisdiction in which this contract is delivered.

The benefits provided under the Fixed Account of this contract are increased by
interest credited in excess of the guaranteed minimums, if any.

PERIODIC REPORTS. As required by federal and state law and at least once each
year, the Company will furnish the Contract Owner with periodic reports. The
periodic reports will contain information on the Separate Account, the Variable
Account Value, the number of Accumulation Units, the value per Accumulation Unit
and the Fixed Account Value.

EXCHANGE OF CONTRACT BY SURVIVING SPOUSE. If the Beneficiary is the surviving
spouse of the Contract Owner and elects to continue this contract pursuant to
paragraph (4) under Death Before the Annuity Date in the Death Benefit Section
of the Contract, the surviving spouse may exchange this Contract for a new
contract of the same form or a form designated by the Company if this form is no
longer available for sale at the time this option is exercised. The new contract
which will be issued upon the exercise of this exchange, will:

(a) have the surviving spouse as the annuitant;
(b) have an Issue Date, which is the date of the exchange.

                                                                         Page 18
<PAGE>

16. GENERAL (CONTINUED)

Riders are only available with the approval of the Company. Such exchange shall
not be treated as a withdrawal under this contract for purposes of the
Contingent Deferred Sale Charge provision in the Withdrawal Section. An amount
transferred to this Contract as a result of an Exchange of Contract by Surviving
Spouse subsection shall not be treated as a purchase payment for purpose of the
Contingent Deferred Sales Charge subsection of this Contract.

Purchase Payments to a contract established as a result of an Exchange of
Contract by a Surviving Spouse provision shall not be treated as a purchase
payment for the purpose of the Contingent Deferred Sales Charge provision of
this contract.

                                                                         Page 19
<PAGE>

Please notify the Company promptly of any change in address.

ANNUAL ELECTION - The Company is a mutual life insurance company. It has no
stockholders. The Contract Owner of this contract is a member of The Company
while this contract is in force during the life of the Annuitant before the
Annuity Date and before total withdrawal of the Contract Value. Members have the
right to vote in person or by proxy at the annual election of Trustees held at
the Home Office, on the first Tuesday of March. If more information is desired,
it may be obtained from the Secretary.

VALUES AND PAYMENTS UNDER THIS CONTRACT, WHEN BASED UPON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT.

INDIVIDUAL VARIABLE AND FIXED
ANNUITY CONTRACT
FLEXIBLE PURCHASE PAYMENTS
o Annuity Payments payable on Annuity Date
o Flexible Purchase Payments payable until Annuity Date
o Participating
o The Company will make monthly annuity payments and other payments as set forth
  in this contract.

The Penn Mutual Life Insurance Company, Philadelphia, Pennsylvania 19172
LVA-01<PAGE>

                                              [GRAPHIC OMITTED][GRAPHIC OMITTED]
August 14, 2001

Robert L. Aromando, Jr.
22 Homestead Farm Road
Alexandria Township
Milford, New Jersey 08848

Re: Amendment to Employment Contract dated March 8, 2001

Dear Mr. Aromando:

Pursuant to meetings held on July 18, 2001 by the Compensation Committee and the
Board of Directors of American Bio Medica Corporation, we have outlined below
the amended terms and/or conditions of your original contract dated March 8,
2001. Those terms and/or conditions not noted below will remain unchanged from
your original contract.

                                Salary and Bonus

Your base salary will be $15,000 per month, which is equivalent to $180,000 on
an annualized basis. You will be eligible for your first performance and merit
review by the Board of Directors in May 2001; any merit award will be prorated
for your length of service. In addition, you will be issued options to purchase
300,000 common shares of ABMC at an exercise price determined by the closing
market price on your official start date, March 1, 2001. All of your stock
options will vest over a three-year period in annual increments of 33.3% per
year on the anniversary date of the grant. Also, ABMC will provide you with a
monthly car allowance of $750.00, payable on or about the 1st of each month, and
will also provide reimbursement of all business related expenses including, but
not limited to, gas, tolls, emergency repairs while on ABMC business, telephone
etc.

The bonus plan has been set up to provide rewards to you based on achieving
milestones in both the net sales and net income numbers (as set forth in ABMC's
annual audited financial statements) over a period of time. You will be issued
options to purchase 500,000 common shares of ABMC at an exercise price to be
determined by the closing market price on the date the amendment was approved by
the Compensation Committee, July 18, 2001. The stock options will either vest or
will be cancelled and returned to the option plan, based upon company
performance as indicated below.

                    Net           Net        Cash           Stock
Year               Sales        Income      Bonus          Options

FY 02              $15M         $1.5M      $ 50,000       125,000
FY 03              $25M         $5.0M      $250,000       125,000
FY 04              $40M         $7.5M      $500,000       125,000

The remaining 125,000 options will vest in Fiscal Year 05. Performance criteria
for vesting will be visited at a later date but will not include any additional
large option grants.

Payout of cash bonus and stock options will be contingent upon achieving a
minimum of 90% of the stated goals. Cash bonus will be paid and issued no later
than 30 days after the date ABMC's accountants submit the audited financial
statements to the Board of Directors for its review.

<PAGE>

Sincerely,

---------------------------------------------------
Gerald Moore
Director and Chairman of the Compensation Committee

/s/ Stan Cipkowski
---------------------------------------------------
Stan Cipkowski
President

Accepted this 14th day of August, 2001 by:

/s/ Robert L. Aromando Jr.
---------------------------------------------------
Robert L. Aromando, Jr.
Chief Executive Officer

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