Document:

EXHIBIT 10.1

 

SETTLEMENT
AGREEMENT

 

THIS SETTLEMENT AGREEMENT,
dated as of April 24, 2009 (the “Agreement”), is by and between Telephone
and Data Systems, Inc., a Delaware corporation (the “Company”), and GAMCO
Asset Management Inc., a New York corporation (“GAMCO”).

 

WHEREAS,
GAMCO and its affiliates are the beneficial owners, on behalf of their
investment advisory clients, of approximately 4,888,754 Common Shares, $0.01
par value per share (“Common Shares”), and 3,306,696 Special Common Shares,
$0.01 par value per share (“Special Common Shares” and, together with the
Common Shares, the “Publicly Traded Shares”), representing a total of
approximately 8,195,450, or 7.75%, of the outstanding Publicly Traded Shares of
the Company;

 

WHEREAS, the holders of Publicly Traded Shares elect four of
the twelve directors of the Company, and the holders of Series A Common
Shares, $0.01 par value per share (“Series A Common
Shares”), and of Preferred Shares, $0.01 par value per share (“Preferred Shares”
and, together with the Series A Common Shares, the “Series A Group
Shares”), of the Company, elect eight of the twelve directors of the Company;

 

WHEREAS, on February 17-20, 2009, GAMCO delivered
notices (the “Notices”) to the Company, indicating its intention to nominate four
individuals for election to the Board of Directors of the Company (the “Board”)
by the holders of Publicly Traded Shares;

 

WHEREAS, on March 12,
2009, the Board nominated the following incumbent directors for election as
directors at the Company’s 2009 Annual Meeting of Stockholders (the “2009
Annual Meeting”) by Publicly
Traded Shares:  Gregory P. Josefowicz,
Christopher D. O’Leary, Mitchell H. Saranow and Herbert S. Wander.

 

WHEREAS, on March 13,
2009, the Company filed a preliminary proxy statement with the Securities and
Exchange Commission (“SEC”), which was amended on March 25, 2009;

 

WHEREAS, the
Company and GAMCO have determined that the interests of the Company and its
shareholders would be best served by the termination and withdrawal of the Notices
in consideration for the agreements set forth herein;

 

NOW, THEREFORE,
in consideration of the foregoing recitals, the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:

 

Section 1.                                          Board
Matters.

 

a.                                       The Company
agrees that the Company and the Board will amend the Board’s prior nomination
of persons for election as directors by the holders of Publicly 

 

1

 

Traded Shares at the 2009 Annual Meeting, to cause such slate of
nominees standing for election and recommended by the Board to include
Christopher D. O’Leary and Herbert S. Wander (the “Incumbent Nominees”) and (ii) Clarence
A. Davis (“Davis”) and Gary L. Sugarman (“Sugarman” and, with Davis, the “GAMCO
Nominees” and, together with the Incumbent Nominees, the “Public Nominees”) and
to name the GAMCO Nominees in the Company’s Proxy Statement, the Proxy and the
ballot for the Company’s 2009 Annual Meeting as part of the Company’s proposed
slate of directors for election by the holders of the Publicly Traded
Shares.  In addition, the Company shall
recommend in its Proxy Statement, Proxy and ballot that the holders of the
Publicly Traded Shares vote to elect the GAMCO Nominees.

 

b.                                      GAMCO will, and
will cause each of its controlled affiliates to, vote all Publicly Traded
Shares that it is entitled to vote at the 2009 Annual Meeting in favor of the
election of each of the identified Public Nominees at the 2009 Annual Meeting.

 

c.                                       GAMCO will use its reasonable best efforts to
cause the GAMCO Nominees to cooperate fully with the Company in connection with
the Company’s process for selecting, evaluating and appointing directors to
serve on the Board.

 

d.                                      If, prior to the 2010 annual meeting of
shareholders of the Company, either Davis or Sugarman (or any replacement
therefor) is unable or unwilling to serve as a GAMCO Nominee, then GAMCO (and
no other person, group, or entity) shall select a replacement director, and the
Company shall take any and all action to fill such vacancy with such
replacement director, subject to the reasonable determination of the Corporate
Governance and Nominating Committee that any proposed replacement meets all
applicable independence and qualification standards with respect to serving as
a director.

 

Section 2.                                          Withdrawal
of Nominations; Termination of Proxy Solicitation.

 

a.                                       Subject to the Company’s compliance with Section 1
hereof, GAMCO hereby withdraws the Notices of its intention to nominate persons
for election as directors at the 2009 Annual Meeting and will not nominate any
persons for election as directors at the 2009 Annual Meeting.

 

b.                                      Concurrently, with the execution of this
Agreement, GAMCO will cease, and will cause all of its controlled affiliates to
cease, any and all efforts with respect to any proxy solicitation in connection
with such Notices and nominations, except as provided in Section 1.

 

Section 3.                                          Role
of GAMCO Nominees.

 

The Company agrees that the GAMCO Nominees,
upon election or appointment to the Board, will serve as integral members of
the Board and will be governed by the same protections and obligations
regarding confidentiality, conflicts of interest, fiduciary duties, trading and

 

2

 

disclosure policies, and other governance guidelines, and will have the
same rights and benefits, including with respect to insurance coverage,
indemnification and contribution rights, exculpation, advancement of expenses,
and compensation and fees, access to personnel and information as are
applicable to all independent directors of the Company.  So
long as any GAMCO Nominee is a member of the Board, the Corporate Governance
and Nominating Committee in good faith will recommend each GAMCO Nominee to
serve on any committee or committees of the Board which it determines to be
appropriate, taking into account each of their specific backgrounds and
experience as a member of the Board. 
Each GAMCO Nominee will be given the same consideration in this regard
as any other independent director of the Company.

 

Section 4.                                          Indemnification.

 

In connection
with the GAMCO Nominees’ indemnification rights, the Company hereby confirms
that each GAMCO Nominee will be indemnified to the same extent as other
directors as provided by the Company’s Bylaws, including Section 8.1(o) of
the Company’s Bylaws, which provides that any person who ceases to be a director
shall continue to be entitled to indemnification and advancement of expenses
with respect to alleged acts and omissions that occur during the period of time
that such persons was a director.

 

Section 5.                                          Press
Release.

 

The
Company and GAMCO shall provide at least 24 hours notice to the other party
prior to issuing any press release or other written public announcement with
respect to this Agreement or any GAMCO Nominee; provided, however, that the
Company or GAMCO may issue any such press release or make such written public
statements and may make any regulatory filings as the Company or GAMCO
determines in its sole discretion, is required by law or the rules or
regulations of the SEC, FINRA or other regulatory authorities.

 

Section 6.                                          Agreements
Regarding 2010 Annual Meeting

 

If the Board nominates both of the GAMCO Nominees (including any GAMCO
Replacement identified pursuant to Section 1.d.) for election as directors
at the Company’s 2010 annual meeting  (“2010
Annual Meeting”), GAMCO agrees that it and its controlled affiliates (a) will
vote all Publicly Traded Shares that it is entitled to vote at the 2010 Annual
Meeting in favor of the election of each of the persons nominated by the Board
for election as directors by the holders of Publicly Traded Shares at the 2010
Annual Meeting (the “2010 Public Nominees”), and (b) will not (i) provide
a notice to the Company that it intends to nominate or nominate persons for
election as directors at the 2010 Annual Meeting, (ii) take any action,
including as part of any group, to solicit proxies or votes for any persons
other than the 2010 Public Nominees or (iii) advise, assist, encourage or
seek to persuade any other person to take any of the action in subclauses (i) or
(ii) of this clause (b).

 

In the event that the Board determines to nominate only one of the
GAMCO Nominees or neither of the GAMCO Nominees (including any GAMCO
Replacement) for election as directors at the Company’s 2010 annual meeting,
the Company agrees to provide notice of such determination 

 

3

 

(“Notice”) to GAMCO in writing no less than 60 days prior to the last
date (the “Advance Notice Date”) on which a stockholder of the Company would be
required to give notice to the Company of its intention to nominate directors
for election at the Company’s 2010 annual meeting, as set forth in the Company’s
bylaws.  In the event that the Board
determines to nominate only one of the GAMCO Nominees or neither of the GAMCO
Nominees (including any GAMCO replacement), or in the event that the Company’s
Notice is not provided to GAMCO at least 60 days prior to the Advance Notice
Date, GAMCO will not be subject to any of the limitations referred to in Section 6
above.   Further, in the event that the
Company’s Notice is provided to GAMCO less than 60 days prior to the Advance
Notice Date, the Company agrees that GAMCO’s time in which to provide notice of
its intention to nominate persons for election as directors at the Company’s
2010 annual meeting shall be extended by an equal number of days.

 

Section 7.                                          Representations.

 

Each of the parties hereto represents and warrants to the other party
that:

 

a.                                       such
party has all requisite authority and power to execute and deliver this
Agreement and to consummate the transactions contemplated hereby;

 

b.                                      the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of such party and by all other required action on the part
of such party and no other proceedings on the part of such party are necessary
to authorize the execution and delivery of this Agreement or to consummate the
transactions contemplated hereby;

 

c.                                       this
Agreement has been duly and validly executed and delivered by such party and
constitutes the valid and binding obligation of such party enforceable against
such party in accordance with their respective terms; and

 

d.                                      this
Agreement will not result in a violation or default of any terms or provisions
of such party’s organizational or governing documents, any material agreements
to which such person is a party or by which such party may otherwise be bound
or any law, rule, license, regulation, judgment, order or decree governing or
affecting such party.

 

Section 8.                                          Compliance
with the Federal Securities Laws.

 

The Company and GAMCO each hereby acknowledge that they are aware of
the federal securities laws, which, among other things, prohibit any person
from trading securities of an issuer while in possession of material,
non-public information concerning the issuer, and from communicating such
material, non-public information to another person under circumstances in which
it is reasonably foreseeable that such person is likely to effect transactions
in such securities. The Company and GAMCO hereby agree to comply with such
laws.

 

4

 

Section 9.                                          Specific
Performance.

 

Each of GAMCO and the Company acknowledges and agrees that irreparable
injury to the other party to this Agreement would occur in the event any
provision of this Agreement was not performed in accordance with its specific
terms.  It is accordingly agreed that
GAMCO and the Company will each be entitled to specific enforcement of, and
injunctive relief to prevent any violation of, the terms of this Agreement, and
in either case no bond or other security shall be required in connection
therewith.

 

Section 10.                                   Governing
Law; Entire, Binding Agreement.

 

This Agreement, and any claim arising out of, relating to or associated
with this Agreement will be governed by and construed and enforced in
accordance with the laws of the State of Delaware without reference to the
conflict of laws principles or any other principle that could require the
application of the laws of any other jurisdiction.  This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and the respective
successors, representatives and assigns of the parties hereto.

 

Section 11.                                   Notices.

 

All notices and other communications pursuant
to this Agreement shall be in writing and shall be delivered personally, sent
by facsimile (with receipt confirmed), sent by nationally-recognized overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the respective parties at the following address (or at such
other address for a party as shall be specified by like notice):

 

If to the Company:

 

Telephone and Data Systems, Inc.

30 N. LaSalle Street, Suite 4000

Chicago, IL 60602

Attention: LeRoy T. Carlson, Jr.,
President and CEO

Telephone: 
(312) 630-1900

Facsimile: 
(312) 630-9299

 

with a copy (which shall not constitute
notice) to:

 

Telephone and Data Systems, Inc.

c/o Sidley Austin LLP

One South Dearborn

Chicago, IL 60603

Attention: William S. DeCarlo, General
Counsel

Telephone: (312) 853-6094

Facsimile: (312) 853-7036

 

5

 

If to GAMCO:

 

GAMCO Asset Management Inc.

One Corporate Center

Rye, New York 10580-1435

Attention: 
Douglas R. Jamieson, President

Telephone: 
(914) 921-5020

Facsimile: (914) 921-5384

 

with a copy (which shall not constitute
notice) to:

 

GAMCO Asset Management Inc.

One Corporate Center

Rye, New York 10580-1435

Attention: Peter D. Goldstein, Director of
Regulatory Affairs

Telephone: 
(914) 921-7732

Facsimile: (914) 921-5384

 

Each such notice or other communication shall
for all purposes of this Agreement be treated as effective or having been
given: (i) if delivered personally, when delivered, (ii) if sent by
facsimile, upon confirmation of facsimile transfer, (iii) if sent by
nationally-recognized overnight courier, on the first business day after the business
day on which the same has been deposited with such overnight courier, or (iv) if
sent by registered or certified mail, at the earlier of its receipt or 72 hours
after the same has been deposited in a regularly-maintained receptacle for the
deposit of the United States mail, addressed and mailed as aforesaid.

 

Section 12.                                   Further
Assurances.

 

Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as the other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

Section 13.                                   Severability.

 

Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid, but
if any provision of this Agreement is held to be invalid or unenforceable in
any respect, such invalidity or unenforceability shall not render invalid or
unenforceable any other provision of this Agreement.

 

6

 

Section 14.                                   Expenses.

 

All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.

 

Section 15.                                   Third
Party Beneficiaries.

 

Nothing in this Agreement is intended to
confer on any person other than the parties hereto, their respective successors
and assigns or any person who becomes a party to this Agreement by way of
joinder, any rights, benefits, remedies, obligations or liabilities under or by
reason of this Agreement.

 

Section 16.                                   Counterparts.

 

This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

7

 

IN WITNESS WHEREOF, each of the
parties hereto has executed this Agreement, or caused the same to be executed
by its duly authorized representative as of the date first above written.

 

 

	
   

  	
  TELEPHONE AND DATA SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ LeRoy T. Carlson, Jr.

  
	
   

  	
   

  	
  Name: LeRoy T. Carlson, Jr.

  
	
   

  	
   

  	
  Title: President and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GAMCO ASSET MANAGEMENT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas R. Jamieson

  
	
   

  	
   

  	
  Name: Douglas R. Jamieson

  
	
   

  	
   

  	
  Title: President and Chief Operating Officer

  
	
   

  	
   

  	
  of GAMCO Investors, Inc., parent of

  
	
   

  	
   

  	
  GAMCO Asset Management Inc.

  

 

[Signature Page to Settlement Agreement]

 

8Exhibit 4.(r)

 

	
  Protective
  Life Insurance Company

  	
  P. O. Box
  10648

  	
  Birmingham,
  Alabama 35202-0648

  	
  (800) 456-6330

  

 

RIDER SCHEDULE

 

	
  Contract #

  	
  Rider Effective Date:

  
	
  Owner 1 Name:

  	
  Benefit Cost on the Rider Effective
  Date:

  
	
   

  	
  Benefit Base on the Rider Effective
  Date:

  

 

LIFETIME GUARANTEED MINIMUM WITHDRAWAL BENEFIT RIDER

With SecurePayR72

 

We are amending the Contract
to which this rider is attached to add a lifetime Guaranteed Minimum Withdrawal
Benefit (“GMWB”, or “the Benefit”). The terms and conditions in this rider
supersede any conflicting provision in the Contract beginning on the Rider
Effective Date and continuing until the rider is terminated. Contract
provisions not expressly modified by this rider remain in full force and
effect.

 

Lifetime
Guaranteed Minimum Withdrawal Benefit:  Subject to the
terms and conditions of this rider, beginning on the Benefit Election Date and
continuing on each Contract Anniversary thereafter during the lifetime of a
Covered Person, you may take aggregate annual withdrawals from the Contract
that do not exceed the Annual Withdrawal Amount regardless of the Contract
Value at that time.

 

DEFINITIONS

 

Annual
Withdrawal Amount - The maximum amount that may be withdrawn from the
Contract each Contract Year after the Benefit Election Date without reducing
the Benefit Base.

 

Benefit
Base - The amount determined according to the terms of this rider and used to
calculate the Annual Withdrawal Amount and the monthly fee. The maximum Benefit
Base is $5,000,000 (5 million dollars).

 

Benefit
Election Date - The date as of which we first calculate the Annual
Withdrawal Amount and the date on which guaranteed withdrawals may begin.

 

Benefit
Period - The period of time between the Benefit Election Date
and the earlier of the Annuity Commencement Date or the rider termination date.

 

Covered
Person - The person or persons upon whose lives the benefits
of this rider are based. There may not be more than two Covered Persons.

 

RightTime®  - The
option to purchase the Benefit after the Contract’s Effective Date, if we are
offering it at that time.

 

GMWB COST AND FEES

 

Benefit
Cost - On the Rider Effective Date, the annualized Benefit Cost as a
percentage of the Benefit Base is shown in the ‘Schedule’ of this rider. We
have the right to change the Benefit Cost at any time. The new Benefit Cost
will be the Benefit Cost in effect on that date for that option. The annualized
Benefit Cost will never exceed {1.60%} of the Benefit Base. We will notify you
of the new Benefit Cost in writing at the address contained in our records not
less than 30 days prior to the date on which the new Benefit Cost becomes
effective.

 

1

 

You may avoid changes in the
Benefit Cost. We must receive your Written Notice declining the change before
the end of the Valuation Period during which the new Benefit Cost becomes
effective. However if you decline a Benefit Cost change, the SecurePay Anniversary Value on all future
Contract Anniversaries will equal $0 and the Roll-up Period associated with SecurePay R72 will terminate immediately.

 

Monthly Fee
- Beginning on the Rider Effective Date and continuing monthly until the
Benefit terminates, we will calculate the fee for this rider and deduct that
amount from the Contract Value. The monthly fee is calculated as of the end of
the Valuation Period that includes the same day of the month as the Contract
Effective Date, or the last Valuation Period of the month if that date does not
occur during the month. We calculate the monthly fee using the formula:

 

Monthly Fee = [1 – (1 – Benefit Cost)1/12] x Benefit Base as of the calculation date.

 

Deducting
the Monthly Fee - We deduct the monthly fee as of the Valuation
Period immediately following the Valuation Period during which it was
calculated. The monthly fee is deducted from the Allocation Options in the same
proportion that the value of each bears to the total Contract Value on that
date. Deduction of the monthly fee is a partial surrender for the purpose of
determining the Contract Value, but we will not assess a surrender charge on
these deductions and the monthly fee will not reduce any penalty free surrender
amount available under the Contract.

 

GENERAL PROVISIONS

 

Restrictions
on Allocation, Transfer and Surrender of Contract Value - While this
rider is in force, your Contract allocation is restricted by the Allocation by
Investment Category (“AIC”) program guidelines. The AIC program divides the
Allocation Options into categories and specifies range of percentages that must
be allocated to each category. Within each category, you select the
Sub-Accounts and amounts allocated to them, provided the total percentage in
each category is not less than the minimum required, nor more than the maximum
permitted. The AIC guidelines on the Rider Effective Date were set out on the
application you completed to purchase the rider. We may change the AIC
guidelines from time to time but if we do, we will not require you to
re-allocate your Contract Value.

 

You may transfer Contract
Value among the Allocation Options by Written Notice provided the Contract
Value immediately after the transfer meets the AIC guidelines in effect at that
time. Your instruction to transfer Contract Value among the Allocation Options
changes the Contract allocation as of the Valuation Period during which the
transfer occurs. Purchase Payment allocation instructions also change the
Contract allocation and must meet the AIC guidelines in effect at that time.
Purchase Payments applied to the Contract and automatic transfers to facilitate
dollar cost averaging made after any such instruction will use the new Contract
allocation.

 

We rebalance the Variable
Account Value each time the Contract allocation is changed, and semi-annually
based on the Rider Effective Date, unless you instruct us to rebalance
quarterly or annually.

 

Partial surrenders and
withdrawals including applicable surrender charges, if any, are deducted from
the Allocation Options in the same proportion that the value of each bears to
the total Contract Value on that date.

 

Determining
the Benefit Base Prior to the Benefit Election Date - On the Rider
Effective Date, the Benefit Base is equal to the initial Purchase Payment, or
the Contract Value as of the end of the Valuation Period that includes the
Rider Effective Date if you purchased the Benefit by exercising the RightTime®
option. Thereafter, we increase the Benefit Base dollar-for-dollar for Purchase
Payments credited to the Contract within 2 years of the Rider Effective Date,
if any. We reduce the Benefit Base pro-rata for each partial surrender. The
pro-rata reduction for each partial surrender is the amount that reduces the
Benefit Base in the same proportion that the partial surrender including
applicable surrender charges, if any, reduced the Contract Value as of the
Valuation Period during which the partial surrender was deducted.

 

2

 

SecurePay Anniversary Value - If you have not
declined a Benefit Cost change, we calculate a SecurePay
Anniversary Value for each Contract Anniversary after the Rider
Effective Date. The SecurePay
Anniversary Value is equal to the Contract Value as of that Contract
Anniversary minus Purchase Payments credited to the Contract on or after the 2nd anniversary of the Rider Effective Date.

 

SecurePay R72 - On each
Contract Anniversary following the Rider Effective Date, we compare the Benefit
Base to the SecurePay Anniversary
Value and the R72 Anniversary
Value (if one is calculated). The greatest of these three will become the new
Benefit Base as of that date.

 

We calculate an R72 Anniversary Value for each Contract
Anniversary that occurs during the Roll-up Period. The R72 Anniversary Value is equal to the
Benefit Base as of the end of the Valuation Period immediately prior to the
Contract Anniversary, plus the Roll-up Amount applicable to that Contract
Anniversary.

 

If on a Contract Anniversary
for which an R72 Anniversary
Value is being calculated, the Contract Value is greater than or equal to 50%
of the Benefit Base immediately prior to that Contract Anniversary, the Roll-up
Amount is equal to 7.2% of the Benefit Base on the prior Contract Anniversary
reduced proportionally for partial surrenders made since the prior Contract
Anniversary. If on that Contract Anniversary the Contract Value is less than
50% of the Benefit Base immediately prior to that Contract Anniversary, the
Roll-up Amount is equal to $0.

 

The Roll-up Period begins on
the Rider Effective Date and ends on the Valuation Period immediately following
the 10th Contract Anniversary on which we increase the
Benefit Base to equal either the SecurePay
or R72 Anniversary Value. When
determining the Roll-up Period, we will not count Contract Anniversaries on
which the Benefit Base does not increase.

 

We will also terminate the
Roll-up Period if any of the following occur before the date described in the
paragraph above:

 

1.               you decline a
change in the Benefit Cost; or,

2.               you establish
the Benefit Election Date; or,

3.               the GMWB rider
terminates.

 

Termination
- This rider, every benefit it provides, and deduction of the monthly fee
terminate at the end of the Valuation Period during which any of the following
first occur.

 

1.               We receive your
instruction to:

 

a)              allocate any
purchase payment; or,

b)             dollar cost
average; or,

c)              transfer any
Contract Value; or,

d)             deduct any
partial surrender or withdrawal;

 

in a manner inconsistent with the AIC guidelines or the provisions of
this rider.

 

2.               We receive your
instruction to stop Portfolio Rebalancing.

3.               We receive your
instruction to terminate this rider more than 10 years after its Rider
Effective Date.

4.               We receive your
instruction to change a Covered Person after the Benefit Election Date.

5.               We receive your
instruction to annuitize the Contract.

6.               We receive any
instruction that terminates the Contract to which this rider is attached.

 

We will notify you in
writing that the rider has terminated and identify the cause. If this rider
terminated as a result of a prohibited instruction described in items 1 or 2 of
this provision, you may reinstate it within 30 days of the rider termination
date unless a Purchase
Payment was applied to the Contract since the rider termination date.

 

3

 

We must receive your Written
Notice requesting reinstatement and providing allocation instructions that meet
current AIC guidelines, and/or resume portfolio rebalancing within 30 days of
this rider’s termination date. We will deduct any fees and make any other
adjustments that were scheduled during the period of termination so that after
the reinstatement, the Contract and this rider will be as though the
termination never occurred.

 

Exercising
the RightTime® Option After the
Rider Terminates - If the rider terminates as a result of any of the
reasons in the ‘Terminations’ provision other than annuitization or termination
of the Contract to which it is attached, you may purchase the Benefit using the
RightTime®
option, if:

 

1.               we are offering
the RightTime® option when we receive your request to purchase
it; and,

2.               5 years or more
have elapsed since this rider terminated; and,

3.               the oldest
Owner or Annuitant will not be older than age 85 on the new Rider Effective
Date; and,

4.               the Contract
has not reached the Annuity Commencement Date.

 

If this rider terminates because
you instruct us to change a Covered Person, we will waive the 5-year waiting
period as described in item #2 of this provision.

 

BENEFIT PERIOD

 

Establishing
the Benefit Election Date - You must establish the
Benefit Election Date to start the Benefit Period and access the guaranteed
withdrawals provided by this rider. To establish the Benefit Election Date, you
must send a Written Notice that instructs us to calculate the Annual Withdrawal
Amount based on either one or two lives, and include proof of age for each
Covered Person. The Benefit Election Date may not be earlier than the date on
which the Covered Person (or the younger of the two Covered Persons) attains
age 591⁄2, nor later than the Annuity Commencement Date.

 

We will not accept
additional Purchase Payments on or after the Benefit Election Date.  Therefore, any Automatic Purchase Payment
Plan in effect on the Benefit Election Date will be terminated as of that date.

 

Partial Automatic
Withdrawals established prior to the Benefit Period terminate as of the Benefit
Election Date.

 

Individuals
Eligible to be a Covered Person - A Covered Person must be a
living person who is either:

 

1.               an Owner of the
Contract; or,

2.               if the spouse
of the sole Owner of the Contract, the sole Primary Beneficiary.

 

If there is one Owner, the
Owner is the Covered Person.

 

If there is one Owner and
the sole Primary Beneficiary is the Owner’s spouse, the Owner is the Covered
Person if the Annual Withdrawal Amount is based on one life. If there is one
Owner and the sole Primary Beneficiary is the Owner’s spouse, both are Covered
Persons if the Annual Withdrawal Amount is based on two lives.

 

If there are two Owners and
they are married to each other, the older of the two is the Covered Person if
the Annual Withdrawal Amount is based on one life. If there are two Owners and
they are married to each other, both are Covered Persons if the Annual
Withdrawal Amount is based on two lives.

 

If there are two Owners and
they are not married to each other, only the older of the two is the Covered
Person.

 

For the purposes of the
GMWB, the terms ‘married’ and ‘spouse’ include bona fide domestic partners in
states that afford legal recognition to same-sex Civil Unions.

 

4

 

Calculating
the Annual Withdrawal Amount - We calculate the initial
Annual Withdrawal Amount as of the end of the Valuation Period during which we
receive your Written Notice establishing the Benefit Election Date. The initial
Annual Withdrawal Amount is equal to the Benefit Base on that date multiplied
by the applicable GMWB withdrawal percentage from the table below. The GMWB
withdrawal percentage is based on the number and age(s) of the Covered
Person(s) on the Benefit Election Date.

 

GMWB
WITHDRAWAL PERCENTAGES

 

	
  Age of (younger) Covered Person

  	
   

  	
  GMWB Withdrawal %

  	
   

  	
  GMWB Withdrawal %

  	
   

  
	
  on the Benefit Election Date

  	
   

  	
  (One Covered Person)

  	
   

  	
  (Two Covered Persons)

  	
   

  
	
  at least 59 1⁄2 but less than 75 years old

  	
   

  	
  5.00

  	
  %

  	
  4.50

  	
  %

  
	
  75 years old or more

  	
   

  	
  6.00

  	
  %

  	
  5.50

  	
  %

  

 

During the Benefit Period,
aggregate withdrawals in any Contract Year that do not exceed the Annual
Withdrawal Amount do not reduce the Benefit Base.

 

We re-calculate the Annual
Withdrawal Amount only on a Contract Anniversary and only if the Benefit Base
changed since the prior Contract Anniversary. The new Annual Withdrawal Amount
is equal to the Benefit Base on the Contract Anniversary multiplied by the GMWB
withdrawal percentage established on the Benefit Election Date.

 

Accessing
the Annual Withdrawal Amount - During the Benefit Period,
you may request withdrawals individually or instruct us to send you specific
amounts periodically. Your Written Notice must include all the information
necessary for us to complete and remit the requested amounts.

 

Withdrawals made during the
Benefit Period reduce the Contract Value in the same manner as partial
surrenders made prior to the Benefit Election Date.  We do not assess surrender charges on
aggregate withdrawals during a Contract Year that do not exceed the Annual
Withdrawal Amount. However, withdrawals count against any penalty free
surrender amounts that would otherwise be available.

 

The Annual Withdrawal Amount
is not cumulative. You may take the entire Annual Withdrawal Amount each
Contract Year, but if you do not, the remaining portion does not carry forward.

 

Excess
Withdrawals - During the Benefit Period any portion of a
withdrawal that, when aggregated with all prior withdrawals during that
Contract Year, exceeds the Annual Withdrawal Amount constitutes an excess
withdrawal. We will not recalculate the Annual Withdrawal Amount until the next
Contract Anniversary, so any subsequent withdrawal taken that Contract Year is
also an excess withdrawal. We assess applicable surrender charges, if any, on
excess withdrawals.

 

Each excess withdrawal
results in an immediate reduction of the Benefit Base. If, immediately after
the excess withdrawal, the Contract Value minus any non-excess portion of the
withdrawal is greater than the Benefit Base, we reduce the Benefit Base by the
amount of the excess withdrawal including applicable surrender charges, if any.
Otherwise, we reduce the Benefit Base by the same proportion that the excess
withdrawal including applicable surrender charges, if any, reduced the Contract
Value as of the Valuation Period during which the excess withdrawal request was
processed. If the excess withdrawal including applicable surrender charges, if
any, reduces the Contract Value to $0, the Contract will terminate as of that
date.

 

If you have instructed us to
send you all or a portion of the Annual Withdrawal Amount periodically in
specific amounts, an excess or unscheduled withdrawal automatically terminates
those periodic withdrawals. If any Contract Value remains after the excess
withdrawal, you may resume periodic withdrawals beginning on the next Contract
Anniversary based on the recalculated Annual Withdrawal Amount by sending us
instructions in a Written Notice.

 

5

 

Death of a
Covered Person After the Benefit Election Date - If the Annual
Withdrawal Amount is based on the life of one Covered Person, this rider
terminates upon the Covered Person’s death. 
If the Annual Withdrawal Amount is based on the lives of two Covered
Persons, this rider terminates upon the death of the last surviving Covered
Person.

 

Spousal
Continuation After the Benefit Election Date - The surviving spouse of a
sole Covered Person who, pursuant to the Contract’s ‘Payment of the Death
Benefit’ provision, continues the Contract and becomes the new sole Owner may
purchase a new rider immediately using the RightTime® option, if we are offering it
at that time. If not purchased immediately, we will waive the 5-year waiting
period described in item #2 of the ‘Exercising the RightTime®
Option After the Rider Terminates’ provision. However, regardless of when the RightTime®
option is exercised, only the surviving spouse is eligible to be a Covered
Person under the new rider.

 

Annuity
Commencement Date - You must begin periodic distributions of the entire
interest in the Contract not later than the Annuity Commencement Date. If the
Benefit Period has begun but you are not taking periodic withdrawals, we will
begin monthly withdrawals of the Annual Withdrawal Amount on the Annuity
Commencement Date. You may change the frequency of the withdrawals, but must
take the entire Annual Withdrawal Amount available each Contract Year.

 

If this rider is in force on
the Maximum Annuity Commencement Date, in addition to the other Annuity Options
available to you under the Contract, you may select the Annuity Option that
will pay monthly payments for life equal to the Annual Withdrawal Amount
divided by 12. If we have not received your Written Notice with the necessary
information and proof of age for the Covered Person(s) by the Maximum
Annuity Commencement Date and you have not selected an Annuity Option, we will
begin monthly payments on that date. The monthly payments will be an amount
equal to the greater of:

 

1.               the Annual
Withdrawal Amount as of the Maximum Annuity Commencement Date divided by 12,
where the Annual Withdrawal Amount is determined by using the withdrawal
percentage associated with One Covered Person and Owner 1’s age (or the younger
of Owner 1 and Owner 2 if there are two Owners of the Contract); or,

 

2.               the results of
applying the Contract Value plus any applicable annuitization bonus to Annuity
Option B with a 10-year Certain Period based on the life of the named
Annuitant.

 

If we have not received your
Written Notice with the information and proof of age for the Covered Person(s) by
the Maximum Annuity Commencement Date but you have previously selected an
Annuity Option, we will begin distributing the entire interest in the Contract
according to the Annuity Option you have selected.

 

Signed for the Company and
made a part of the Contract as of the Rider Effective Date.

 

	
  Protective
  Life Insurance Company

  	
   

  
	
   

  	
   

  
	
  

  	
   

  
	
  Secretary

  	
   

  

 

6

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