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EXHIBIT 10(b)  

 
PROTECTIVE LIFE INSURANCE COMPANY

DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR FLEXIBLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICIES—Premiere Provider

Pursuant to Rule *6e-3(T)(b)(12)(iii)  

This document sets forth the administrative procedures that will be followed by Protective Life Insurance Company ("Protective Life" or the "Company") concerning the issuance
of an individual Flexible Premium Variable and Fixed Life Insurance Policy (the "Policy"), the transfer of assets held thereunder, and the redemption by Owners of their interests in such Policy. 

 
 

I.  PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES    
  

  
      A. Application and Underwriting    
  

    Upon receipt of a completed application, the Company will follow underwriting (e.g., evaluation of risks) procedures designed to determine whether the
applicant is insurable. The underwriting policies of the Company are established by management. The Company uses information from the application and, in some cases, inspection reports, attending
physician statements, or medical examinations to determine whether a Policy should be issued as applied for, rated, or rejected. Medical examinations of applicants are required for Policies in excess
of certain prescribed amounts and for most insurance applied for by applicants over age 50. Medical examinations are requested of any applicant, regardless of age and amount of requested coverage, if
an examination is deemed necessary to underwrite the risk. Substandard risks may be referred to reinsurers for full or partial reinsurance of the substandard risk. 

    The
Company requires blood samples to be drawn with applications for coverage over $100,000 (ages 16-50) or $150,000 (age 51 and over). Blood samples are tested for a wide range of
chemical values and are screened for antibodies to the HIV virus. Applications also contain questions permitted by law regarding the HIV virus which must be answered by the proposed insureds. The
Company will not issue a Policy until the underwriting procedures have been completed. 

    Insurance
coverage under a Policy will begin as of the Policy Effective Date. If, an initial minimum premium is received with an application, the Policy Effective Date will be the
later of the date that the application is signed or any required medical examination is completed. Temporary life insurance coverage (including various forms of conditional receipt) also may be
provided under the terms of a temporary insurance agreement. In accordance with the terms of such agreements, the total amount of insurance coverage with the Company which may become effective prior
to the delivery of the policy to the Owner may not exceed $500,000 (including the amount of any life insurance and accidental death benefits then in force or applied for with the Company) and may not
be in effect for more than 60 days. 

    In
order to obtain a more favorable Issue Age, the Company may permit Owners to "backdate" a Policy by electing a Policy Effective Date which is up to six months prior to the date of
the original application. Charges will be deducted as of the new Policy Effective Date for the backdated period for Monthly Deductions. 

 
 

    B. Initial Premium Processing and Premium Payments    
  

    Premiums for the Policies will not be the same for all Owners. The Company requires that the initial premium payment for a Policy be at least equal to the
minimum required for the mode of premium selected. For example, the initial premium payment can never be less than $150 quarterly. Owners who request to pay premiums on a preauthorized checking
withdrawal basis may be required to pay an amount equal to two months premiums upon issuance of their Policy. Premiums paid on a preauthorized checking withdrawal basis can never be less than $50 per
month. 

    For
Policies issued in states where, upon cancellation during the Cancellation Period, the Company returns at least the Owner's premium payments, the Company reserves the right to
allocate the initial Net Premium Payment (and any subsequent Net Premium Payments made during the Cancellation Period) to the Protective Money Market Sub-Account or the Fixed Account until the
expiration of the number of days in the Cancellation Period plus six days starting from the date the Policy is 

1

 

mailed from the Home Office. Upon expiration of this period, the Policy Value in the Oppenheimer Money Fund Sub-Account or the Fixed Account and all Net Premium Payments will be allocated according to
the Owner's allocation instructions then in effect. In all other states, the Company will allocate the initial Net Premium Payment (and any subsequent Net Premium Payments made during the Cancellation
Period) in accordance with the Owner's instructions. 

    Following
the initial premium, the Owner may pay planned premiums in any amount on a quarterly, semi-annual, and annual basis. For the first Policy Year, the amount of the planned
premiums can be no less than the minimum initial premium payment calculated on an annual basis. The minimum initial premium payment required depends on a number of factors, including the age, sex and
rate class of the proposed insured, the initial face amount, any supplemental benefits and/or riders and the planned, periodic premiums selected. If the Owner fails to pay the planned premiums, this
will not cause the Policy to lapse. 

    An
Owner may make unscheduled premium payments, at any time, in any amount, subject to the limitations described below. A Policy will remain in force while the cash surrender value is
sufficient to pay the monthly deduction unless the Policy is otherwise protected by the No Lapse Guarantee provision. The amount of premium, if any, which must be paid to keep the Policy in force
depends upon the cash surrender value of the Policy, which in turn depends on such factors as the investment experience and the amount of monthly deductions which includes cost of insurance. While not
every insured is subject to the same cost of insurance rate, there will be a single "rate" for every Insured in a given actuarial category. 

    In
no event may the total of all premiums paid in any Policy year exceed the current maximum premium limitations for that year established by Federal tax laws or by the Company. If
the Owner pays a premium that would result in total premiums exceeding the current maximum premium limitations, the Company will only accept that portion of the premium that will make total premiums
equal the maximum. Any premium in excess of that amount will be returned or applied as otherwise agreed and no further premiums will be accepted until allowed by the current maximum premium
limitations prescribed by Federal tax law. 

    In
addition, Protective Life reserves the right to refund a premium payment, including any earnings thereon, which 

    (1) in
the first Policy Year, causes the Death Benefit to exceed the Initial Face Amount shown on the Policy Specifications Page, or 

    (2) increases
the difference between the Death Benefit and the Policy Value, and 

    (3) exceeds
$20 per $1,000 of Fact Amount. 

    The
cost of insurance rate for a Policy is based on and varies with the Issue Age, duration, sex and rate class of the Insured and on the number of years that a Policy has been in
force. Protective Life currently places Insureds of Issue Ages 18 through 75 in the following rate classes, based on underwriting: Smoker
or Tobacco or Nonsmoker, or Preferred and substandard rate classes, which involve a higher mortality risk than the Smoker or Nonsmoker classes. 

    Protective
Life will determine a cost of insurance rate for increments of Face Amount above the Initial Face Amount based on the Issue Age, duration, sex and rate class of the Insured
at the time of the request for an increase. The following rules will apply for purposes of determining the Net Amount at Risk for each rate. 

    Protective
Life places the Insured in a rate class when the Policy is issued, based on Protective Life's underwriting of the application. This original rate class applies to the
Initial Face Amount. When an increase in Face Amount is requested, Protective Life conducts underwriting before approving the increase to determine whether a different rate class will apply to the
increase. If the rate class for the increase has lower cost of insurance rates than the original rate class, the rate class for the increase also 

2

 

will be applied to the Initial Face Amount. If the rate class for the increase has a higher cost of insurance rate than the original rate class, the rate class for the increase will apply only to the
increase in Face Amount, and the original rate class will continue to apply to the Initial Face Amount. 

    Protective
Life does not conduct underwriting for an increase in Face Amount if the increase is requested as part of a conversion from a term contract or on exercise of a guaranteed
option to increase the Face Amount without underwriting. 

    If
any premium payment would cause an increase in the Policy's death benefit exceeding the premium received, the Company may require additional evidence of insurability before
accepting any premium payment. 

 
 

    C. Lapse and Reinstatement Procedures    
  

    The Company offers a "No Lapse Guarantee" to all Owners of Policies for a specified period of time from the policy effective date. The specified period for
this "Guarantee" is established based on the age of the insured as of the Policy Effective Date. This guarantee offers continued life insurance coverage for the requested initial face amount provided
the Owner of the Policy continues to pay minimum monthly premiums equivalent to one twelfth of the minimum first year annual premium, and after that, pays premiums (after deductions for any loans or
withdrawals) equivalent to a minimum monthly guarantee premium throughout the Guarantee period. The minimum monthly guarantee premium in the second
year and later is equal to the minimum renewal annual premium divided by 12 and multiplied by the number of months left in the Guarantee period. 

    The
Policy's No Lapse Guarantee Provision will be threatened if the Company does not receive an amount equal to the minimum monthly guarantee premium specified in the Policy or if
loans or withdrawals cause the premiums received to fall below that amount. The No Lapse Guarantee does not apply to coverage under the Flexible Coverage Rider (FCR). 

    During
the first 10 Policy Years a surrender charge will be deducted if the Policy lapses. 

    The
Policy may be reinstated within five years after lapse and while the Insured is still living unless the Policy has been surrendered. A Policy will be reinstated upon receipt by
the Company of: (1) a written application for reinstatement; (2) evidence of insurability satisfactory to the Company; (3) payment of net premiums equal to (a) all monthly
deductions due upon lapse and (b) which are at least sufficient to keep the Reinstated Policy in force for three months; and (4) the Owner repays or reinstates any outstanding policy
debt or liens as of the date of lapse. 

    The
amount of cash value in the Policy on the date the Policy is approved for reinstatement will be equal to the amount of any Policy Debt reinstated or repaid at the time of
reinstatement plus the Net Premiums paid at reinstatement. The effective date of reinstatement will be the date the Company approves the application for reinstatement. A full monthly deduction will be
charged for the month of reinstatement. 

 
 

II.  REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS    
  

    The principal policy provisions and administrative procedures regarding "redemption" transactions are summarized below. Due to the insurance nature of the
Policies, the procedures that will be followed may be different from the redemption procedures for mutual funds and contractual plans. 

 
 

    A. Surrenders and Partial Withdrawals    
  

    An Owner of a Policy may submit a written request to the Company to surrender the Policy at any time prior to the maturity date while the insured is living and
while the Policy is in effect. The amount available for surrender is the surrender value as of the valuation day on or next following the date the written surrender request, the Policy and any other
required documents are submitted and received by the Company. If the Policy itself is not returned to the Company the request must be accompanied by 

3

 

completed affidavit of lost policy. Amounts payable from the Variable Account upon surrender or a partial withdrawal will be paid within seven calendar days of receipt of the written request. 

    Upon
surrender, the Company will pay in a lump sum the surrender value that is equal to the cash value as of the valuation day less any outstanding Policy Debt which includes accrued
interest less any applicable surrender charges. Coverage under a Policy will end as of the date of surrender. 

    If
the Policy is surrendered, if the Policy lapses, or if the initial face amount is reduced, through the first 10 Policy Years, a surrender charge will be deducted from the Policy
Value for the initial face amount (or the reduction thereof). The surrender charge, which is a contingent/deferred sales charge, will be deducted before any surrender value is paid. 

    The
surrender charge varies depending on issue-age, sex and rate-classification of the Insured and is set forth in your Policy. Representative surrender charges per $1,000 of inital
face amount for the first Policy Year for an Insured male non-smoker at each specified issue age are set forth below. The surrender charge decreases over the ten-year period. For a decrease in the
initial face amount, the charge shown is per $1,000 of decrease. 

	

Issue Age
 
	
 	

Surrender Charge (First Year)

per $1,000 of

Initial Face Amount
 

	30	 	$	1.75
	35	 	 	2.00
	40	 	 	3.45
	45	 	 	5.45
	50	 	 	7.43
	55	 	 	10.25
	60	 	 	16.82
	65	 	 	23.00
	70	 	 	25.76
	75	 	 	28.50

    After the 10th Policy Year, there is no surrender charge for the initial face amount. If the initial face amount is decreased at any time during the first 10
Policy Years, a Contingent Deferred Sales Charge will be imposed which will be equal to the stated surrender charge for such Policy Year per $1,000 of decrease. In the event of a decrease in the
initial face Amount, the pro-rated surrender charge will be allocated to each Sub-Account and to the Fixed Account based on the proportion of Policy Value in each Sub-Account and in the Fixed Account.
A surrender charge imposed in connection with a reduction in the initial face amount reduces the remaining surrender charge that may be imposed in connection with a surrender of the Policy. 

    After
the first Policy Year, the Owner may also request a partial withdrawal by sending a written request to the Company. An Owner may make a partial withdrawal of an amount equal to
or greater than $500. The request must be submitted in writing to the Company. The Company will withdraw the amount requested, plus a withdrawal charge, as of the date the request is received in the
Home Office. The Owner may elect to deduct the amount of the withdrawal from any Sub-Account or the Fixed Account. If
the Owner does not specify an allocation, or if the Sub-Account value or Fixed Account value is insufficient to carry out the request, the withdrawal will be based on the proportion that such Sub-
Account value(s) and Fixed Account value, bear to the unloaned Policy Value on the valuation day immediately prior to the withdrawal. No withdrawal amounts will be processed if the withdrawal would
result in there being insufficient surrender value to pay any surrender charges applicable upon a full surrender. 

    The
Company will deduct an administrative charge upon a withdrawal. This charge is the lesser of 2% of the amount withdrawn or $25. This withdrawal charge will be deducted from the
Policy Value in addition to the amount requested to be withdrawn and will be considered to be part of the withdrawal 

4

 

amount. The withdrawal charge will be allocated in the manner described above for the requested amount. 

    The
death benefit will be affected by withdrawals. If death benefit option A is in effect, then the Company reserves the right to reduce the face amount by the amount withdrawn
(inclusive of withdrawal charge). If the Owner requests that the initial face amount be retained, the Company will honor this request provided the amount of withdrawal does not exceed $2,000. If the
request for withdrawal exceeds $2,000, then the Company will request that satisfactory evidence of insurability be provided with the withdrawal request. If death benefit option B is in effect, then
the Company will not reduce the face amount. 

    The
face amount after a partial withdrawal may not be less than the minimum amount for which the Policy would be issued under the Company's current rules. If the withdrawal causes the
Policy to fail to qualify as a life insurance contract under applicable tax laws, as interpreted by the Company it will not be processed. If the Face Amount at the time of withdrawal requires a
decrease of Face Amount, the reduction is made first from the most recent increase, then from prior increases, if any in reverse order of their being made and finally from the initial Face Amount. 

 
 

    B. Changes in Face Amount    
  

    An Owner may increase or decrease the face amount of the Policy after the first Policy Anniversary by submitting a written request to the Company. A
supplemental application is required for an increase in face amount. The Company reserves the right to require satisfactory evidence of insurability for the requested increase portion. Face Amount
increases and decreases are subject to the following rules: 

    1. For
increases in face amount, the insured's attained age must be less than the maximum current issue age for the Policies, as determined by the Company from time to
time. 

    2. The
amount of the requested increase must be at least $10,000. 

    3. Any
increase in face amount will be effective on the monthly anniversary day on or next following the date the request for the increase is received and approved by
the Company. 

    4. If
the No-Lapse Guarantee provision is in effect, the minimum monthly premium amount required to keep the Policy in force will generally increase and additional
premium payments may be required. 

    5. The
monthly cost of insurance charge will be adjusted as of the next monthly anniversary day following the date of the written request. 

    6. There
will be an administrative charge assessed based on a rate per $1,000 of increased coverage. This administrative charge will be deducted from the Policy Value
monthly during the twelve month period following the effective date of the increase. This administrative charge is set forth in the Policy. 

    7. A
decrease in face amount will not be accepted by the Company, if the amount requested would decrease the face amount below $50,000 (standard smoker or standard
nonsmoker class), or $100,000 (preferred nonsmoker class). 

    8. A
proportionate Contingent Deferred Sales Charge will be imposed for decreases in face amount (please note previous section on "Surrenders and Partial Withdrawals"). 

    The
Company reserves the right to not process any decrease in Face Amount if compliance with guideline premium limitations or cash value accumulation test, if applicable, under
current tax law resulting from such a decrease would result in immediate termination of the Policy, or if to effect the requested decrease payments to the Owner would have to be made from Policy Value
for compliance with the guideline premium limitations, and the amount of such payments would exceed the Surrender Value of the Policy. In addition, the Company reserves the right to prohibit any
decrease in Face Amount 

5

 

(i) for three years following an increase in Face Amount and (ii) for One Policy Year following the last decrease in Face Amount. 

 
 

    C. Change in Death Benefit Option    
  

    On or after the first Policy Anniversary, the Owner may request in writing a change in the death benefit option. Any change will go into effect on the monthly
anniversary day that coincides with or next follows the date the Company receives and accepts the request for change. If the Owner requests a change from the Option A to Option B, the face amount will
be increased to equal the face amount on the effective date of change. If the Owner requests a change from a Option B to Option A, the face amount will be decreased so that it equals the death benefit
less the policy value on the date of the change. The Company reserves the right to require satisfactory proof of insurability before allowing a change in death benefit options. 

 
 

    D. Death Benefit Claims    
  

    While the Policy remains in force, the Company will pay a death benefit to the named beneficiary in accordance with the death benefit option elected by the
Owner. The Company will pay the death benefit within seven calendar days after receipt in its home office of all necessary proof of death of the insured. Payment of a death benefit may be postponed
under certain circumstances, such as the New York Stock Exchange being closed for reasons other than customary weekend and holiday closings. The death benefit proceeds will be determined as of the
date of the insured's death and will be equal to: 

	1.
	the
death benefit under the option elected; plus
    

	2.
	any
additional benefits due under any supplemental and/or riders benefits attached to this Policy; less
    

	3.
	any
policy debt; less
    

	4.
	any
liens for payments made under an accelerated death benefit rider or endorsement plus accrued interest; less
    

	5.
	any
unpaid monthly deductions if the insured dies during the grace period. 

    The
death benefit proceeds will be determined based on the death benefit option and tax compliance test elected by the Owner on the application for insurance or any request for change
in death benefits. If the Owner does not elect to include the Cash Value Accumulation Test Endorsement the Guideline Premium Limitation/Cash Value Corridor Test will apply. 

    If
the Policy is intended to satisfy the guideline premium limitation/cash value corridor test of Federal tax law, and Death Benefit Option A is chosen, the death benefit will be the
greater of (a) the face amount of insurance on the insured's date of death; or (b) a specified percentage of the policy value on the date of the insured's death as indicated on the table
of percentages included in the Policy. If the guideline premium limitation applies and Death Benefit Option B is chosen, the death benefit will be the greater of (a) the face amount of
insurance on the insured's date of death plus the policy value on the insured's date of death: or (b) a specified percentage of the policy value on the insured's date of death as indicated on
the Table of Percentages included in the Policy. The specified percentage is 250% when the Insured has reached an "Attained Age" of 40 or less by date of death, and decreases each year thereafter to
100% when the Insured has reached an "Attained Age" of 95 at death. 

    If
at the time of application the Owner selects the Cash Value Accumulation Test Endorsement to the Policy, the Death Benefit will be determined as follows: 

    • Under
Death Benefit Option A, the Death Benefit is the greater of: (1) the Face Amount under the Policy on the date of the Insured's death, or
(2) the minimum death benefit described below. 

6

 

    • Under Death Benefit Option B, the Death Benefit is the greater of: (1) the Face Amount under the Policy plus the Policy Value on the date of the Insured's
death, or (2) the minimum death benefit described below. 

    The
minimum death benefit at any time shall be the amount of level death benefit that the Policy Value would purchase if paid as a net single premium at such time. Such net single
premium shall be determined according to the Cash Value Accumulation Test prescribed under section 7702 of the Internal Revenue Code, as amended or its successor, if such amendment or successor is
applicable to the Policy. 

    For
purposes of determining this net single premium, the mortality charges taken into account generally shall be the maximum mortality charges guaranteed under the Policy. Such
charges will not, however, exceed (except as provided in the Internal Revenue Service regulations) the maximum charges permitted to be taken into account under the Cash Value Accumulation Test of
section 7702. In determining the net single premium, the interest rate taken into account will be the greater of an annual effective interest rate of 4 percent or the annual effective credited
interest rate or rates guaranteed on issuance of the policy. In addition, the Policy shall be deemed to mature the date the Insured attains age 100, and the Policy Value deemed to exist on such date
shall not exceed the least amount payable as a death benefit at any time under the Policy. 

 
 

    E. Policy Loans    
  

    After the first Policy Anniversary and while the insured is still living, an Owner may borrow under a standard loan from the Company no less than $500 and not
more than 90% of the Cash Value minus the Policy Debt on the date the loan is received. Some state variations may apply. The Owner must submit a written request for a Policy loan. Any amount due an
Owner under a loan will generally be paid within seven calendar days after the Company receives a loan request. In addition, the Owner may obtain a carryover loan which is a loan on the Policy the
amount of which is transferred from another policy that is exchanged for the Policy under Section 1035 of the Internal Revenue Code. Such carryover loan must be approved by the Company. 

    When
a Policy loan is made, an amount equal to the loan is transferred out of the sub-account(s) and the fixed account and into the Policy's loan account. The Owner can specify the
Sub-Accounts and Fixed Account from which collateral is transferred to the loan account. If no allocation is specified, collateral is transferred from each Sub-Account and from the Fixed Account in
the same proportion that the cash value in each Sub-Account and the Fixed Account bears to the total cash value on the date that the loan is made. 

    Like
the Fixed Account, a Policy's loan account is part of Protective Life's General Account. During the first ten Policy years, the Company will charge interest daily on any
outstanding standard loan at a maximum effective annual rate of 6.0%. For carryover loans Protective Life currently charges an annual effective rate of 5.0% during Policy Years 1-10. During Policy
Years 11 and after, the Company will charge interest daily on any outstanding loan at a maximum effective annual rate of 4.25%. Interest is due and payable at the end of each Policy Year while a loan
is outstanding. If interest is not paid when due, the amount of the interest is added to the loan and becomes part of the Policy Debt. 

    The
loan account is credited with interest at an effective annual rate of not less than 4.0%. The maximum net cost of a loan is 2.0% per year during Policy Years 1 through 10, and
 .25% thereafter. On each Policy anniversary, the net difference between interest earned and interest charged will be transferred to the loan account and deducted from the Sub-Account(s) and the Fixed
Account in the
same proportion that each sub-account value and the fixed account value bears to the total unloaned Policy value. The Company determines the rate of interest to be credited to the loan account in
advance of each calendar year. The rate, once determined, is applied to the calendar year that follows the date of determination. 

    If
the Insured dies while a loan is outstanding, the Policy Debt is deducted from the death benefit in calculating the death benefit proceeds. 

7

 

    A Policy loan may be repaid in whole or in part at any time while the insured is living and the Policy is in force. Loan repayments will be credited as of the date they are received
in the Home Office. When a loan repayment is made, Policy Value in the loan account in an amount equal to the repayment will be transferred from the loan account to the Sub-Accounts and/or the Fixed
Account in the same manner as loan collateral is transferred to the loan account. Amounts paid while a Policy loan is outstanding will be treated as premiums unless the Owner requests in writing that
these payments be treated as repayment of indebtedness. 

 
 

    F. Terminal Illness Accelerated Death Benefit Endorsement    
  

    The endorsement provides for an accelerated death benefit payment to the owner of a Policy if the insured has a qualifying terminal illness and all of the
conditions of the endorsement are met. The accelerated death benefit will be based on a portion of the current Face Amount of the Policy and subject to a maximum benefit. A lien equal to the
accelerated death benefit payment will be established against the policy and will accumulate interest. 

    When
an accelerated death benefit is paid, an amount equal to the benefit payment is transferred out of the Sub-Accounts and the Fixed Account to a lien account within the Loan
Account established for the Policy. Like the Fixed Account, the lien account is part of Protective Life's general account and amounts therein earn interest as credited by Protective Life from time to
time. 

    The
collateral for the lien is transferred from each Sub-Account and from the Fixed Account in the same proportion that the value in each Sub-Account and the Fixed Account bears to
the total unloaned Policy Value on the date the accelerated death benefit is paid. On each Policy Anniversary, an amount of Policy Value equal to any interest due on the lien will be transferred to
the lien account. Such interest is transferred from each Sub-Account and the Fixed Account in the same proportion that each Sub-Account Value and the Fixed Account Value bears to the total unloaned
Policy Value on such Policy Anniversary. 

    The
primary impact of the lien and any accumulated interest will be the reduction of the death benefit by the amount of the lien, plus accumulated interest. The lien will also reduce
the amount available for loans and withdrawals. This endorsement is not available in all states. 

 
 

III.  TRANSFERS    
  

    A Policy's Policy Value, except amounts credited to the loan account, may be transferred among the Sub-Accounts and between the Fixed Account which is a part
of the Company's General Account and the Sub-Accounts. 

    Upon
receipt of written notice or a telephone request from the Owner, the Company will accept transfer requests subject to the limitations described below. Transfer requests will be
accepted at any time on or after the later of the following: (1) thirty days after the Policy effective date, or (2) six days after the expiration of the cancellation period. Transfers
(including telephone transfers) are processed as of the date the request is received by the Company. The minimum amount of Policy value that may be transferred is the lesser of: (1) $100; or
(2) the entire amount in any Sub-Account or the Fixed Account from which the transfer is made. If, after the transfer, the amount remaining in a Sub-Account(s) or the Fixed Account is less than
$100, the Company reserves the right to transfer the entire amount instead of the requested amount. The Company also reserves the right to limit transfers to 12 per Policy year and to charge a
transfer fee for each additional transfer over 12 in any Policy year. If the fee is imposed, it will be deducted from the amount requested to be transferred. If an amount is being transferred from
more than one Sub-Account or the Fixed Account, the transfer fee will be deducted proportionately from the amount be transferred from each. 

    The
maximum amount that may be transferred from the Fixed Account in any Policy Year to the greater of: (1) $2,500; or (2) 25% of the fixed account value. 

    Telephone
transfers may be made upon instructions given by telephone, provided the appropriate election has been made on the application or written authorization is provided. We
require a form of 

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personal identification before acting on these telephone instructions. All transfer requests made by telephone instruction will be recorded as a method of documenting authenticity. A confirmation of
all instructions received by telephone will be mailed to the Owner. 

    The
Company currently intends to allow transfers for the foreseeable future, Although the Prospectus provides that the Company may at any time, for any class of Policies, modify,
restrict, suspend, or eliminate the transfer privilege (including telephone transfers). In particular, we reserve the right not to honor transfer requests by a third party holding a power of attorney
from an Owner where that third party requests simultaneous transfers on behalf of the Owners of two or more Policies. 

    The
Owner may direct the Company to systematically and automatically transfer, on a monthly or quarterly basis, specified dollar amounts from or to the Fixed Account or from or to any
Sub-Account(s). This is known as the dollar cost averaging method of investment. By transferring on a regularly scheduled basis as opposed to allocating the total amount at one time, an Owner may be
less susceptible to the impact of market fluctuations in Sub-Account unit values. The Company makes no guarantee that the dollar cost averaging method will result in a profit or protect against loss.
The Company reserves the right to assess a processing fee for this service. The Company reserves the right to stop offering dollar cost averaging upon 30 days written notice. 

    To
elect dollar-cost averaging, the policy value in the fixed account or the source Sub-Account must be at least $5,000 at the time of election. The Owner may elect dollar cost
averaging for periods of at least 12 months but no longer than 48 months. At least $100 must be transferred on a monthly basis and a minimum of $300 on a quarterly basis. Dollar-cost averaging
transfers may commence on any day of the month that the Owner requests, except the 29th, 30th, or 31st. 

    The
Company will continue to process dollar cost averaging transfers until the earlier of the following: 

	(1)
	the
designated number of transfers has been completed;
    

	(2)
	the
Fixed Account value is depleted;
    

	(3)
	the
Owner, by written notice, instructs the Company to cease the automatic transfers;
    

	(4)
	a
grace period begins under the Policy; or
    

	(5)
	the
maximum amount of Policy value has been transferred under a dollar cost averaging election. 

    The
owner may direct the Company to systematically and automatically transfer on a quarterly, semiannual, or annual basis, contract value among specified Sub-Accounts. This is known
as the portfolio
rebalancing method of investment and is done to achieve a particular percentage allocation among such Sub-Accounts. By transferring on a regularly scheduled basis as opposed to allocating the total
amount at one time, an Owner may be less susceptible to the impact of market fluctuations in Sub-Account unit values. The Fixed Account value will not be considered in the automatic transfer process.
The Company makes no guarantee that the portfolio rebalancing method will result in a profit or protect against loss. The Company reserves the right to assess a processing fee for this service. The
Company reserves the right to stop offering portfolio rebalancing upon 30 days written notice. 

    The
Applicant/Owner can elect portfolio rebalancing at the time of application or any time thereafter by submitting a written request to the Company. This feature is available on a
quarterly, semiannual, and annual basis and may commence on any day of the month that the Owner requests, except the 29th, 30th or 31st. Once elected, portfolio rebalancing will begin on the first
modal anniversary following the election. 

    The
Company will continue to process these automatic transfers until the earlier of the following: 

	(1)
	Sub-Account
values are depleted;
    

	(2)
	the
Owner requests the company to cease the automatic transfers, by written notice. This can also be requested by telephone if the owner previously
authorized us to take telephone instructions. 

9

 

 
 

IV.  REFUNDS    
  

  
      A. Cancellation Privilege    
  

    The right to examine and cancel the policy is as defined in the Policy. The Owner may cancel a Policy for a refund during the Cancellation Period by returning
it to the Company's home office or to the sales representative who sold it along with a written request. The Cancellation Period is determined by the law of the state in which the application is
signed and is shown in the Policy. In most states, it expires at the
latest of: (1) 10 days after the Owner receives the Policy; or (2) 45 days after the Owner signs the application. Return of the Policy by mail is effective when it is received at the
home office. 

    Within
seven calendar days after receiving the returned Policy, the Company will refund (i) the difference between premiums paid and amounts allocated to the fixed account or
the variable account, plus (ii) fixed account value determined as of the date the returned Policy is received, plus (iii) variable account value determined as of the date the returned
Policy is received. This amount may be more or less than the aggregate Premium Payments. In states where required, the Company will refund Premium Payments to the Owner of the Policy. 

    An
increase in Face Amount may also be cancelled by the Owner in accordance with the Policy's cancellation period provisions. The amount refunded will be calculated in accordance with
the provisions described above. If no additional Premium Payments are required in connection with the Face Amount increase, the amount refunded is limited to that portion of the first monthly
deduction following the increase and will be reallocated to the sub-account(s) and the fixed account in the same proportion that each sub-account value and the fixed account value bears to the total
unloaned Policy Value as of the effective date of the cancellation. The effective date of this cancellation will be equal to the effective date of the face increase. 

 
 

V.  GENERAL PROVISIONS    
  

  
      A. Suicide    
  

    If the insured commits suicide, while sane or insane, within two years from the Policy Effective Date, the death benefit will be limited to the premiums paid
before death, less any Policy debt and less any withdrawals. If the insured commits suicide, while sane or insane, within two years after an increase in face amount, the death benefit with respect to
such increase shall be limited to the sum of the monthly cost of insurance charges deducted for such increase. 

 
 

    B. Representations and Contestability    
  

    The Company can not contest the Policy or any supplemental benefit and/or rider after the Policy or rider has been in force during the Insured's lifetime for
two years from the Policy Effective Date or the effective date of the rider, unless fraud is involved. The Company also has the right to contest the validity of any policy change based on material
misstatements made in any application for that change and any reinstatement of benefits within two years during the lifetime of the insured after the reinstatement has been approved. 

 
 

    C. Misstatement of Age or Sex    
  

    Questions in the application concern the insured's date of birth and sex. If the date of birth or sex given in the application or any application for
supplemental benefits and/or riders is not correct, the death benefit and any benefits provided under any riders to this Policy will be adjusted to those that would have been purchased by the most
recent cost of insurance change and the cost of any such supplemental benefits provided by such riders, at the correct age and sex. 

10

QuickLinks

I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES

A. Application and Underwriting

B. Initial Premium Processing and Premium Payments

C. Lapse and Reinstatement Procedures

II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS

A. Surrenders and Partial Withdrawals

B. Changes in Face Amount

C. Change in Death Benefit Option

D. Death Benefit Claims

E. Policy Loans

F. Terminal Illness Accelerated Death Benefit Endorsement

III. TRANSFERS

IV. REFUNDS

A. Cancellation Privilege

V. GENERAL PROVISIONS

A. Suicide

B. Representations and Contestability

C. Misstatement of Age or Sex<PAGE>

                                                                 EXHIBIT 10.39.1

                    AMENDMENT TO LOAN AND SECURITY AGREEMENT

         Startec Global Communications Corporation, a Delaware corporation (the
"Borrower"), and NTFC Capital Corporation, a Delaware corporation (the "Lender")
enter into this Amendment to Loan and Security Agreement (this "Amendment") as
of the 30th day of June, 2000.

                              W I T N E S S E T H :
                              --------------------

         Whereas, Startec Global Communications Corporation, a Maryland
corporation ("Startec Maryland"), and Lender entered into that certain Loan and
Security Agreement dated as of December 31, 1998 (the "Loan Agreement"); and

         Whereas, Startec Maryland merged with Borrower, with Borrower as the
surviving corporation; and

         Whereas, Borrower transferred all, or substantially all, of its assets
to Startec Global Operating Company, a Delaware corporation ("Guarantor"); and

         Whereas, as a condition to Lender's consent to the merger of Startec
Maryland into Borrower and the transfer of all, or substantially all, of Startec
Maryland's assets to Guarantor, (a) Borrower subsequently assumed and agreed to
perform all the obligations of Startec Maryland as set forth in the Loan
Agreement pursuant to that certain Assumption Agreement dated March 26, 1999 by
Borrower for the benefit of the Lender and (b) Guarantor guaranteed the
obligations of Borrower under the Loan Agreement pursuant to that certain
Guaranty dated March 26, 1999 by Guarantor in favor of Lender; and

         Whereas, the Borrower and the Lender wish to amend the Loan Agreement
to increase the amount of credit available under the Loan Agreement and to make
certain additional modifications to the Loan Agreement.

         Now, therefore, in consideration of the foregoing, the mutual covenants
and agreements contained in this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which each party hereby
acknowledges, the parties agree as follows:

                     ARTICLE 1: AMENDMENTS TO LOAN AGREEMENT

         1.01. COMMITMENT. The parties hereby amend Schedule 2.01 to the Loan
Agreement to increase the maximum principal amount of the Loan to $50,000,000
and to extend the date for drawing down until on or before December 31, 2000. In
addition, The parties hereby amend Section 2.01 of the Loan Agreement to read,
in its entirety, as follows:

                  2.01. COMMITMENT. Subject to the terms and conditions provided
         in this Agreement and as long as no Default has occurred and is
         continuing under this Agreement, the Lender shall lend to the Borrower
         from time to time before the Financing Termination Date, an aggregate
         principal amount not to exceed the amount set forth on SCHEDULE 2.01 to
         this Agreement as the maximum amount (the

<PAGE>

         "COMMITMENT"). The Lender and the Borrower acknowledge and agree that
         the outstanding principal balance of the Loan as of June 30, 2000 (the
         "Tranche 1 Amount),is $27,933,435. The remaining aggregate principal
         amount available under the Commitment, therefore, shall equal a maximum
         of $22,000,000 (the "Tranche 2 Amount"). The Borrower may use all of
         the available funds under the Tranche 2 Amount for general corporate
         purposes, including working capital (the "General Corporate Advances"),
         as well as for the purchase of Nortel Equipment and/or Vendor
         Equipment.

         1.02. EXISTING LOAN BALANCE. The Lender and the Borrower acknowledge
and agree that the outstanding principal balance of the Loan as of June 30, 2000
is $27,933,435.

         1.03 FINANCING TERMINATION DATE. The parties hereby amend Schedule 2.02
to the Loan Agreement to extend the Financing Termination Date to December 31,
2000.

         1.04. INTEREST RATE. The parties hereby amend the definition of
"Interest Rate" as set forth on Schedule 2.02 to the Loan Agreement to read, in
its entirety, as follows:

                  "INTEREST RATE": For each Advance comprising all or part of
         the Tranche 1 Amount, a fixed rate equal to the average yield to
         maturity on matching term Treasury Notes as reported in the Federal
         Reserve Statistical Release H.15(519) (the "Release") in effect three
         Business Days prior to the applicable Borrowing Date(s) plus the Rate
         Adjustment (as described in the Note). For each Advance comprising all
         or part of the Tranche 2 Amount, a fixed rate equal to the average
         yield to maturity on five-year Treasury Notes as reported in the
         Release in effect three Business Days prior to the applicable Borrowing
         Date(s) plus 4.50 percentage points. Interest shall accrue monthly
         based on a 365-day year.

         1.05. MATURITY DATE. The parties hereby amend the definition of
"Maturity Date" as set forth on Schedule 2.02 to the Loan Agreement to read, in
its entirety, as follows:

                  "MATURITY DATE": For each Advance comprising all or part of
         the Tranche 1 Amount, the 60th Payment Date (January 2, 2004) upon
         which date all then outstanding principal, interest, premium, expenses,
         fees, penalties and other amounts relating to the Tranche 1 Amount
         shall become due and payable. For each Advance comprising all or part
         of the Tranche 2 Amount, the 60th Payment Date after the date of the
         initial Advance comprising all or part of the Trance 2 Amount, upon
         which date all then outstanding principal, interest, premium, expenses,
         fees, penalties and other amounts relating to the Tranche 2 Amount
         shall become due and payable.

         1.06. MANDATORY PREPAYMENTS. In addition to the Mandatory Prepayments
currently required by the Loan Agreement, all General Corporate Advances in
excess of 40% of the aggregate Advances shall become immediately due and payable
from the proceeds of the sale of any equity securities, excluding the sale of
any equity securities relating to exercise of any existing stock options or
warrants, and/or Subordinated Indebtedness of the Borrower, if the net proceeds
to the Borrower from the sale exceed $50 million.

                                       2

<PAGE>

         1.07. ADDITIONAL COLLATERAL. As additional Collateral for the Loan, the
Borrower shall have its subsidiary, Startec Global Operating Company (the
"Operating Company"), grant a security interest to the Lender in all of the
assets of the Operating Company as additional Collateral securing the Operating
Company's obligations under that certain Guaranty Agreement, dated as of March
26, 1999. In addition, the Borrower shall grant a security interest to the
Lender in all of the capital stock of the Operating Company now held or later
acquired by the Borrower as additional Collateral securing the Obligation of the
Borrower under the Loan Agreement.

         1.08. ADDITIONAL GUARANTEES AND COLLATERAL. The Borrower represents and
warrants that the accounts receivable of the Operating Company currently exceed
85% of the consolidated accounts receivable of the Borrower. In addition to the
provisions of Section 3.09 of the Loan Agreement, the Borrower shall provide
additional guarantees and pledges of assets by its other Subsidiaries sufficient
to result in the Lender having a security interest in at least 85% of the
Borrower's consolidated accounts receivable as of the end of each fiscal quarter
of the Borrower.

         1.09. REGULATORY AUTHORIZATIONS. The parties hereby amend and replace
Schedule 4.05 to the Loan Agreement with the schedule attached as Exhibit A to
this Amendment.

         1.10. RESTRICTIONS ON LOANS. The parties hereby amend and replace
Schedule 4.07 to the Loan Agreement with the schedule attached as Exhibit B to
this Amendment.

         1.11. FINANCIAL STATEMENTS. The parties hereby amend and replace
Schedule 4.08 to the Loan Agreement with the schedule attached as Exhibit C to
this Amendment.

         1.12. ASSUMED NAMES. The parties hereby amend and replace Schedule 4.27
to the Loan Agreement with the schedule attached as Exhibit D to this Amendment.

         1.13 SUBSIDIARIES OF BORROWERS. The Borrower hereby amends and replaces
Schedule 4.30 to the Loan Agreement with the schedule attached hereto as Exhibit
E to this Amendment.

         1.14. FINANCIAL COVENANTS. The parties hereby amend and replace
Schedule 7.14 to the Loan Agreement with the form of schedule attached as
Exhibit F to this Amendment.

         1.15. EQUIPMENT LOCATED IN FRANCE. With regard to any additional
Equipment financed or refinanced by the Loan which the Borrower intends to
locate in France, the Borrower or its applicable Subsidiary shall pledge the
Equipment in accordance with the regulations of the law no. 51-59 dated 18
January 1951; provided, further, that the Borrower or its applicable Subsidiary
shall serve as the direct purchaser and the real user of the Equipment, the
Borrower or its applicable Subsidiary shall execute the appropriate pledge
documentation within two months after the first delivery of any of the Equipment
in France, and the Borrower or its applicable Subsidiary shall register the
pledge with the relevant Tribunal de Commerce within 15 days after the execution
of the pledge documents.

                             ARTICLE 2: AFFIRMATIONS

         The Borrower hereby represents and warrants that (a) on the date of
this Amendment no Default or Event of Default has occurred and is continuing or
exists or will occur or exist after giving effect to this Amendment; (b) the
execution and terms of this Amendment have been duly authorized by all necessary
and appropriate corporate action; and (c) the representations and warranties
contained

                                       3
<PAGE>

in Article 4 of the Loan Agreement, as amended by this Amendment, remain true
and correct on and as of the date of this Amendment as though made on and as of
the date of this Amendment, except as follows:

         2.01. The first sentence of Section 4.01 should read, "The Borrower is
duly organized, validly existing, and in good standing as a corporation under
the laws of Delaware.

         2.02. The word "Borrower" in Sections 4.05, 4.13 and 4.36 should change
to read "the Borrower or one or more Subsidiaries of the Borrower."

         2.03. The representation made in Section 4.14 remains true as of the
date of the Certificate of Financial Condition referred to in Section 4.14.

         2.04. The Borrower's federal taxpayer identification number set forth
on Schedule 1 should change to 52-2099559.

                              ARTICLE 3: CONDITIONS

         3.01. The effectiveness of this Amendment shall depend on the
fulfillment of all of the following conditions precedent:

                  (a) The Lender shall have received a Certificate of Financial
         Condition of the Borrower executed by one of its officers dated as the
         date of this Amendment.

                  (b) The Lender shall have received a fully-executed Amended
         and Restated Promissory Note in the amount of $50,000,000 substantially
         in the form of Exhibit G to this Amendment. The Lender promptly shall
         return the original executed Promissory Note to the Borrower with a
         signed notation marked on it as being amended and replaced by the
         Amended and Restated Promissory Note.

                  (c) The Lender shall have received a fully-executed
         Supplemental Security Agreement from the Operating Company in the form
         of Exhibit H to this Amendment.

                  (d) The Lender shall have received a fully-executed Pledge
         Agreement from the Borrower in the form of Exhibit I to this Amendment.

                  (e) The Lender shall have received a Consent and Agreement to
         Amendment by all of the Borrower's Subsidiaries that have guaranteed
         the Loan in the form of Exhibit J to this Amendment.

                  (f) The Lender shall have received an officer's certificate
         evidencing all actions taken by the Borrower and the Operating Company
         to authorize the execution, delivery and performance of the Borrower of
         this Amendment, the Amended and Restated Promissory Note, and the
         Supplemental Security Agreement, and the Pledge Agreement.

                                       4
<PAGE>

                  (g) The Lender shall have received a written opinion of
         counsel relating to the Borrower and the Operating Company
         substantially in the form of Exhibit K to this Amendment.

                            ARTICLE 4: MISCELLANEOUS

         4.01. Except as amended as provided above, the Loan Agreement shall
remain in full force and effect. The Borrower and the Lender hereby ratify the
Loan Agreement, as amended by this Amendment.

         4.02. Except to the extent otherwise provided in the Loan Agreement,
the laws of New York shall govern this Amendment and its construction.

         4.03. Unless otherwise specifically defined in this Amendment, all
capitalized terms used in this Amendment shall have the meanings assigned to
them in the Loan Agreement.

         IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the day and year first set forth above.

                                     Startec Global Communications Corporation

                                     By: /s/ PRABHAV V. MANIYAR
                                         ---------------------------------
                                         CFO

                                     NTFC Capital Corporation

                                     By: /s/ LI-BIN WANG
                                         ---------------------------------

                                       5
<PAGE>

                                                                SCHEDULE 7.14 TO
                                                     LOAN AND SECURITY AGREEMENT

                               FINANCIAL COVENANTS

         (a) TOTAL SECURED DEBT TO TOTAL CAPITALIZATION. At the time of each
Advance and at the end of each fiscal quarter, the Borrower shall maintain a
ratio of Total Secured Debt to Total Capitalization of not more than .50 to
1.00. For the purposes of that ratio, the following definitions shall apply:

                  (i) "TOTAL CAPITALIZATION": All equity as shown on the balance
         sheet of the Borrower plus all funded Indebtedness of the Borrower.

                  (ii) "TOTAL SECURED DEBT": Indebtedness of the Borrower
         secured by a Lien on the assets of the Borrower, excluding Indebtedness
         secured by accounts receivable.

         (b) CASH FLOW COVERAGE RATIO. The Borrower shall maintain a minimum
Cash Flow Coverage Ratio (measured at the end of each fiscal quarter for the
past four fiscal quarters) of at least 1.25, beginning at the end of the second
fiscal quarter of fiscal year 2002. For the purposes of that ratio, the
following definitions shall apply:

                  (i) "CASH FLOW COVERAGE RATIO": At the end of any fiscal
         period, the ratio of the Borrower's Cash Flow (as defined in the
         Agreement) plus interest income for the fiscal period to the Borrower's
         Debt Service for the fiscal period.

                  (ii) "DEBT SERVICE": For any fiscal period of Borrower, the
         sum of all principal and interest payments that Borrower is required to
         make during the period on account of all of its Indebtedness, including
         (without limitation) (a) amounts due during the period on account of
         capitalized leases; (b) the then current portion of any long-term
         Indebtedness, including any Subordinated Indebtedness; (c) amounts due
         on short-term Indebtedness; and (d) amounts due under this Agreement
         and the Note.

         (c) MINIMUM REVENUES. The Borrower shall maintain "Minimum Revenues" in
an amount equal to or greater than the quarterly amounts set forth below.

<TABLE>
<CAPTION>
                  QUARTER ENDED                               AMOUNT
                  -------------                               ------
<S>                                                   <C>
                  March 31, 2000                         $   59,534,000
                  June 30, 2000                              71,441,000
                  September 30, 2000                         77,394,000
                  December 31, 2000                          89,301,000
                  March 31, 2001                             71,739,000
                  June 30, 2001                              86,087,000
                  September 30, 2001                         93,261,000
                  December 31, 2001                         107,609,000
                  March 31, 2002                             90,133,999
                  June 30, 2002                             108,159,000
                  September 30, 2002                        117,173,000
                  December 31, 2002                         135,199,000

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                  QUARTER ENDED                               AMOUNT
                  -------------                               ------
<S>                                                   <C>
                  March 31, 2003                            102,751,000
                  June 30, 2003                             123,302,000
                  September 30, 2003                        133,577,000
                  December 31, 2003                         154,127,000
                  March 31, 2004                            117,137,000
                  June 30, 2004                             140,564,000
                  September 30, 2004                        152,278,000
                  December 31, 2004                         175,705,000

</TABLE>

         The phrase "Minimum Revenues" shall mean the Borrower's total
consolidated revenues for the fiscal quarter ending on the date of measurement.

         (d) MINIMUM EBITDA. The Borrower shall maintain "Minimum EBITDA" in an
amount equal to or greater than the quarterly amounts set forth below.

<TABLE>
<CAPTION>
                  QUARTER ENDED                               AMOUNT
                  -------------                               ------
<S>                                                    <C>
                  March 31, 2000                          $  (5,798,000)
                  June 30, 2000                              (6,394,000)
                  September 30, 2000                          2,000,000
                  December 31, 2000                           3,592,000
                  March 31, 2001                              3,675,000
                  June 30, 2001                               6,045,000
                  September 30, 2001                          8,441,000
                  December 31, 2001                          10,753,000
                  March 31, 2002                             11,046,000
                  June 30, 2002                              13,255,000
                  September 30, 2002                         13,807,000
                  December 31, 2002                          17,121,000
                  March 31, 2003                             15,275,000
                  June 30, 2003                              16,673,000
                  September 30, 2003                         17,438,000
                  December 31, 2003                          19,050,000
                  March 31, 2004                             18,635,000
                  June 30, 2004                              20,340,000
                  September 30, 2004                         21,274,000
                  December 31, 2004                          23,240,000
</TABLE>

         The term "Minimum EBITDA" shall mean the Borrower's EBITDA for the
fiscal quarter ending on the date of measurement. The term "EBITDA" shall mean,
for any fiscal period, the Borrower's actual operating earnings from ongoing
operations and before interest, taxes, depreciation and amortization for the
fiscal period.

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