Document:

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                                  EXHIBIT 10.1
                                  ------------

                                    SMART BUY

                                [GRAPHIC OMITTED]

                                                                           STOCK
                                                                        PURCHASE
                                                                            PLAN

                              [COMMERCE BANK LOGO]

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                                   SMART BUY

The smart way to
make your
money
grow.

                               [GRAPHIC OMITTED]

                           o Get 10 shares of Commerce
                             Bancorp, Inc. Common
                             Stock free just for joining.

                           o Purchase additional shares
                             of Commerce Bancorp, Inc.
                             Common Stock at a 3%
                             discount (subject to change)
                             from the current market
                             price.

                           o Purchase shares without
                             paying brokerage fees or
                             commissions.

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SmartBuy (the "Plan") is the stock purchase and dividend reinvestment program
for employees of Commerce Bancorp, Inc. ("Commerce") and its subsidiaries. It
provides an easy and convenient way for employees to invest in the Common Stock
of Commerce via payroll deduction. The Plan Administrator is Chase Mellon
Shareholder Services, LLC which also currently serves as Commerce's stock
registrar and transfer agent.

This brochure provides information and answers the most commonly asked questions
about the Plan. If you have additional questions or need more information,
contact the Benefits Department.

Eligibility

All full-time and part-time employees, 18 years of age or older, with at least
one full year of continuous service are eligible to join the Plan. Officers are
eligible to participate from the first date of employment.

Enrollment

You can enroll in the Plan any time after you are eligible. To enroll:

    1. Complete all parts of the enrollment form on the last page of this
       brochure.

    2. Make sure you indicate the amount of your payroll deduction and sign
       where indicated.

    3. Send the completed form to the Payroll Dept. AIM #110-03-09.

Payroll Deduction Authorization

You must specify the amount to be withheld from your pay. The minimum deduction
is $12.50 per pay period for non-officers and $25 per pay for officers. The
payroll deduction may

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be changed or terminated at any time by submitting a written request to the
Payroll Department. The start, change, or termination of deductions will become
effective as soon as possible after your written payroll deduction authorization
form is received by Payroll.

Payroll Deductions

Authorized payroll deductions will be made on the first two pay periods of the
month and the money held in a non-interest bearing account. On a monthly basis
all funds deducted will be combined and invested in Commerce Common Stock.

Purchasing Stock

Once you enroll in the Plan and begin payroll deductions, the Plan Administrator
will establish an individual account in your name. The number of shares
purchased will depend on the market price of the stock at the time the purchase
is made. Full shares as well as fractional shares will be allocated to your
account.

Dividends

Your account will be credited with all dividends paid on the full shares and any
fractional interest in shares purchased and held in your account. Cash dividends
will be reinvested in Commerce Common Stock on the payment date of a particular
dividend. Also, these shares will be issued at a 3% discount (subject to change)
from the current market price.

Stock dividends and/or any stock splits with respect to shares held in your
account will be credited to the account.

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Withdrawal of Shares

You may withdraw a portion of the shares of Commerce Common Stock credited to
your account by notifying the Plan Administrator in writing and specifying the
number of shares you wish to withdraw. Also, you may instruct the Plan
Administrator at any time to terminate your participation in the Plan. The Plan
Administrator will send you a certificate representing the whole shares of
Commerce Common Stock in your account and a check equal to the cash value of any
fractional shares.

Account Statements

You will receive a monthly statement from the Plan Administrator detailing
activity which occurred in your account. The Plan Administrator keeps records,
sends statements and performs other administrative duties relating to the Plan.

Questions regarding your statement should be directed to the Plan Administrator.

Shareholder Reports

The Plan Administrator will promptly deliver to you all notices of shareholder
meetings, proxy statements, annual reports, and other materials distributed by
Commerce to its stockholders. If proxies are distributed, the shares of stock in
your account will be voted in accordance with your signed instructions duly
delivered to the Plan Administrator.

There will be no charge to you for the Plan Administrator's custody of stock
certificates or in connection with notices, proxies, or other such materials.

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Closing Your Account

Terminating payroll deductions will not automatically close your account with
the Plan Administrator--you must contact the Plan Administrator directly to
cease participation in the Plan. Upon electing to terminate participation, the
Plan Administrator will send a certificate to you for the whole shares of common
stock in your account.

Stock Market Investments

Stock prices vary from day to day. Prices are not fixed or regulated--they
depend on many factors including the basic law of supply and demand.

There is no guarantee under the Plan against loss because of market
fluctuations. In seeking the benefits of share ownership, you must also accept
the risks.

Participation in the Plan is entirely voluntary and Commerce makes no
recommendations to its employees with respect to the purchase of its stock and
participation in the Plan. Commerce and its subsidiaries have reserved the right
to amend or discontinue the Plan or to discontinue the use of its payroll
deduction facilities for this purpose at any time.

Questions And Answers

Here are answers to the most frequently asked questions about the Plan.

What are the advantages of the Plan?

The Plan offers you a convenient method for becoming a stockholder in Commerce.
It encourages regular, scheduled investing and is a means of supplementing your
individual investment savings program.

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How much stock will be bought for me?

Each month, the Plan Administrator will purchase for you as many full shares
and/or fractional shares as the funds deducted from your pay will allow. There
is no limit to the number of shares you may accumulate in your account.

What if the money I'm investing won't buy an even number of shares or a full
share?

It makes no difference since you are buying stock by the dollars worth instead
of by the share. That's why you may see fractional shares on your monthly
statement.

What happens to the shares of stock that are purchased for me?

Once the shares have been purchased for you, they will be held by the Plan
Administrator. No stock certificates will be issued to you unless you make a
direct request to the Plan Administrator. Upon receipt of a request, the Plan
Administrator will deliver a stock certificate to you for the full shares
accumulated in your account.

What do I receive to show I own stock?

No actual stock certificate for the shares you own will be issued to you unless
requested. You will receive a monthly statement summarizing all activity in your
account.

The statement will show your name and address, the number of shares purchased,
the price per share for those shares purchased, the total shares accumulated,
the total value of those shares as of the statement date, plus other valuable
information.

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Will I receive information provided to stockholders?

You will receive any material received by the Plan Administrator and issued by
Commerce for the benefit and information of its stockholders, such as annual
reports and proxy material.

What happens if I stop my payroll deductions?

If for any reason you notify Commerce to discontinue your payroll deductions,
the Plan Administrator will continue your account unless you elect to close it.
To close your account, you may request the Plan Administrator to send you a
stock certificate for the number of full shares you own plus a check for the net
proceeds for any fractional interest in a share credited to you. You may
re-enter the Plan at any time by completing an enrollment form and forwarding it
to the Payroll Department. You will not receive an additional 10 shares of
Commerce Common Stock at the time of re-enrollment.

What happens if I stop working for Commerce or its subsidiaries?

It is not necessary that your accumulated shares be sold if you stop working for
Commerce or its subsidiaries. You will still have an account with the Plan
Administrator and can still buy stock at a 3% discount (subject to change) by
making direct payments. If you request, your account will be closed as explained
above.

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Can I invest my own funds without payroll deductions?

Once your SmartBuy account is established, you can invest through a combination
of payroll deductions or direct payments to the Plan Administrator. The current
monthly maximum is $3,000, which is subject to change. All transactions will be
made at a 3% discount (subject to change) from the current market price.

Can I change my payroll deduction amount?

You can change your payroll deduction amount at any time by submitting a written
request to the Payroll Department. However, you must stay at or above the
minimum deduction amount for officers and non-officers.

Do I have to pay taxes on the initial 10 shares received in the Plan?

The value of the 10 free shares of Commerce Common Stock issued to employees
through the Plan is taxable. FICA, SUI, and state taxes will be withheld in the
first pay of the next quarter following enrollment. Federal income tax will be
the responsibility of the employee. Any other transactions in the Plan,
especially the sale of stock, are subject to the normal federal, state, and
local taxes that apply to stock transactions. You should consult your tax
advisor if you have any questions concerning the tax implications of buying or
selling stocks.

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What records must I keep?

The statements from the Plan Administrator will indicate the number of shares
purchased and the cost of the shares. You should always keep your statements
because the information they contain will be necessary for tax reporting
purposes.

Whom do I contact if I have questions concerning my account?

Write or call:
Investment Services
P.O. Box 3338
South Hackensack, NJ 07606-1938
888-470-5884

Is this a complete description of the Plan?

This brochure is a convenient source of information if you have any questions
about the Plan. A full explanation of the Plan may be found in the Prospectus
for the Commerce Bancorp, Inc. Dividend Reinvestment and Stock Purchase Plan.

If there is a discrepancy between the description presented in this brochure and
the Prospectus, the Prospectus will govern. The Prospectus is available from the
Benefits Department.

Additional questions may be answered by the Benefits Department (x-3545).

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Enroll me as a participant in the Commerce Bancorp, Inc. Smartbuy Stock Purchase
Plan (the "Plan"). As a participant, I understand that I will receive, as a
contribution from Commerce, ten shares of Commerce Common Stock without the
payment of any service charges or brokerage commission.

As a participant in the Plan, I will be eligible to purchase shares of Commerce
Common Stock at a 3% discount (subject to change) from the current market price
without payment of any service charges or brokerage commissions. The Plan will
require that I have a minimum monthly payroll deduction to purchase Commerce
Common Stock as follows:

        o Non-Officers: An amount of at least $12.50 per pay.

        o Officers:     An amount of at least $25 per pay.

Please note: Deductions from salary payments may not total more than $3,000 per
month (subject to change).

I authorize the payroll deduction of $________ from each regular salary payment.
This amount will continue to be deducted until written notification is received
by the Payroll Department to change or discontinue my payroll deduction. Payroll
deductions will be made twice each month. No deduction will be made on the third
pay during those months in which a third payroll occurs.

Purchase of Commerce Common Stock directly from the company with reinvestment of
any dividends and deductions from salary payments will occur monthly, on or
about the 20th day.

                  (Please fill out reverse side if interested.)

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The following information is needed to establish my account:

--------------------------------------------------------------------------------
Social Security Number                                        Date of Employment

--------------------------------------------------------------------------------
Department

--------------------------------------------------------------------------------
First Name                                                        Middle Initial

--------------------------------------------------------------------------------
Last Name

--------------------------------------------------------------------------------
Street Address                                                       Apt. Number

--------------------------------------------------------------------------------
City                                      State                         Zip Code

I have received and read the Prospectus from the Commerce Bancorp, Inc. Dividend
Reinvestment and Stock Purchase Plan.

I have been a prior participant in the Smartbuy Plan, | | Yes   | | No

--------------------------------------------------------------------------------
Signed                                                                      Date

Send the completed form to the
Payroll Department,
AIM #110-03-09.

                              [COMMERCE BANK LOGO]

                                       Member FDIC

 HR-6                                                                    5/00 SR<PAGE>

                     The Penn Mutual Life Insurance Company
                                  Founded 1847

Contract Owner  William Penn                          9999999   Contract Number

Contract Date   October 1, 2000             November  1, 2060      Annuity Date

Annuitant       William Penn                               35  Age of Annuitant

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

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

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

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

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

                                       Individual Variable and Fixed
                                       Annuity Contract
                                       Flexible Purchase Payments

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

    The Penn Mutual Life Insurance Company, Philadelphia, Pennsylvania 19172

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Guide to Contract Sections -------------------------------------------------

1.  Contract Specifications          10.  Annuity Payments
2.  Endorsements                     11.  Fixed Annuity Payments
3.  Definitions                      12.  Variable Annuity Payments
4.  Purchase Payments                13.  Annuity Options
5.  Purchase Payment Enhancement     14.  Death Benefit
6.  The Separate Account             15.  Transfers
7.  The Fixed Account                16.  Withdrawal
8.  Charges and Deductions           17.  General
9.  Contract Value

                                  A copy of any applications follow Section 17.

                                                                          Page 2
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1.  Contract Specifications

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Contract Owner:  William Penn               Contract Number:  9999999

Contract Date:  October 1, 2000             Annuity Date:  November 1, 2060

Annuitant:  William Penn                    Age of Annuitant:  35
--------------------------------------------------------------------------------
Market Type:  Non-Qualified

Separate Account:  PML Variable Annuity Account III

Schedule of Purchase Payments

Initial Purchase Payment of $25,000.00 was allocated to the contract on October
1, 2000 as follows:
         Variable Account           70%
         Fixed Account              30%

Subsequent Purchase Payments may be made subject to the provisions of the
contract. The minimum amount is $5,000.00 for a Non-Qualified contract and
$1,000.00 for a Qualified contract.

Purchase Payment Enhancements
Banding is based on cumulative payments less any withdrawals. Percentage is
applied to Purchase Payments.

    Total Purchase Payments                                  Purchase Payment
       (less withdrawals)                                 Enhancement Percentage

if less than $100,000                                                3%
if $100,000 but less than $500,000                                   4%
if $500,000 or more                                                  5%

If purchase payment on initial application is equal to $2,000,000 or more, a 6%
purchase payment enhancement will be applied to the initial purchase payment
only.

Schedule of Annual Charges

Annual Contract Administration Charge*:  $40, or 2% of the Variable Account
Value, whichever is less
Asset Based Contract Administration Charge**:       .15%
Mortality & Expense Risk Charge**:   1.25%

Date Annual Charges are deducted each year:   September 30

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

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

                                                                          Page 3
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1.  Contract Specifications (continued)

Schedule of Contingent Deferred Sales Charge
Number of contract years since                            Contingent Deferred
purchase payment                                              Sales Charge
                                                        (% of purchase payment)
      0-3                                                        8.0%
      4                                                          7.0%
      5                                                          6.0%
      6                                                          5.0%
      7                                                          3.0%
      8                                                          3.0%
      9 and later                                                0.0%

Refer to Section 8 of the contract for further information on the Contingent
Deferred Sales Charge.

Eligible Mutual Funds

                             PENN SERIES FUNDS, INC.

Independence Capital Management Inc       Turner Investment Partners, Inc.
      Money Market                               Mid Cap Growth
      Limited Maturity Bond
      Quality Bond                        T. Rowe Price
      Growth Equity                              High Yield Bond
                                                 Flexibly Managed

Vontobel USA                              Wells Capital Management Inc.
      International Equity                       Index 500

Putnam Investment Management              RS Investments
      Large Cap Value                            Emerging Growth

Royce & Associates, Inc.                  Neuberger Berman
      Small Cap Value                            Mid Cap Value

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

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

      Eligible Fixed Interest Options

      Dollar Cost Averaging Account
          Six Month Dollar Cost Averaging Period
          Twelve Month Dollar Cost Averaging Period

      One Year Fixed Account

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

                                                                 Page 3 (cont'd)
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2.  Endorsements

To be made only by the Company

                           This page is intentionally

                                   left blank.

                                                                         Page 4

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3.  Definitions

Accumulation Unit: A unit of measure used to compute the Variable Account Value
under the contract prior to the Annuity Date. See Section 9.

Annuitant:  The person during whose life annuity payments are made.

Annuity Date:  The date on which annuity payments start.

Annuity Unit: A unit of measure used to calculate the amount of a variable
annuity payment. See Section 12.

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

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

Fixed Account: The account under which amounts are held for the Contract Owner
under all fixed interest options prior to the Annuity Date.

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

Purchase Payment. The amount paid to the Company as consideration for the
benefits provided by the contract. Purchase Payments do not include any credited
Purchase Payment Enhancements.

Purchase Payment Enhancement. An amount credited to the contract value when a
purchase payment is made. The amount credited is considered earnings in the
contract.

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

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

The Company:  The Penn Mutual Life Insurance  Company.

<PAGE>

4.  Purchase Payments

Purchase payments will be allocated to the subaccounts of the Separate Account
and to the fixed interest options of the Fixed Account as directed by the
Contract Owner.

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

Purchase payments applied to the contract after issue may be made at any time
without prior notice to the Company. The minimum subsequent purchase payment is
$5,000 for nonqualified plans and $1,000 for qualified plans.

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

5.  Purchase Payment Enhancement

Purchase Payment Enhancements will be credited to the contract by the Company
based upon total purchase payments less withdrawals made under the contract.
Purchase Payments Enhancements will be allocated to the subaccounts of the
Separate Account and to the fixed interest options of the Fixed Interest Account
as directed by the Contract Owner.

                                                                         Page 5

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5.  Purchase Payment Enhancement (continued)

The Company will determine the amount of a Purchase Payment Enhancement as
discussed below and credit the contract value at the same time as the purchase
payment. When a purchase payment is credited to the contract, the amount of the
purchase payment will be multiplied by the applicable purchase payment
enhancement percentage specified on Page 3. The percentage will be based on
cumulative purchase payments less withdrawals. The result will be the amount of
the purchase payment enhancement.

During the first contract year, if more than one purchase payment is made, the
Company will determine if any additional purchase payment enhancements will be
credited for the prior purchase payments made. The amount of any additional
purchase payment enhancements to be credited to the contract will be determined
by taking the difference between (1) and (2) where:

(1) equals the sum of all prior purchase payments made during that contract year
multiplied by the purchase payment enhancement percentage applied to the current
purchase payment.

(2) equals the prior total purchase payment enhancements credited to the
contract during that contract year.

If the difference is greater than zero, an additional purchase payment
enhancement will be credited to the contract value at the same time as the
current purchase payment.

If the contract is canceled within the specified days listed in the Right to
Review Contract provision, the contract owner will forfeit any purchase payment
enhancement.

If a withdrawal is taken where a Contingent Deferred Sales Charge is applied,
any purchase payment enhancement will be forfeited by the Contract Owner if the
purchase payment enhancement was credited in the prior 12 months.

The Company reserves the right to limit purchase payment enhancements in the
future.

6.  The Separate Account

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

The Company owns the assets held in the Separate Account. However, the portion
of the assets of each subaccount of the Separate Account equal to the reserves
and other contract liabilities with respect to the subaccount of the Separate
Account are not chargeable with the liabilities arising out of any other
business the Company may conduct. Income and realized and unrealized gains and
losses from the assets held in each subaccount are credited to or charged
against the subaccount without regard to the income, gains or losses in other
investment accounts of the Company. Shares of a mutual fund held in a subaccount
will be redeemed at current net asset value to make transfers, pay benefits and
cover applicable charges and deductions. Any dividend or capital gain
distribution from a mutual fund will be reinvested in shares of that mutual
fund.

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

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

                                                                          Page 6

<PAGE>

7.  The Fixed Account

The Fixed Account. The Fixed Account consists of the fixed interest options
which are listed on Page 3.

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

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

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

One Year Fixed Interest Option. Amounts may be allocated or transferred to this
fixed interest option. Amounts held in this fixed interest option of the Fixed
Account will be credited with interest at effective annual rates declared by the
Company. The declared interest rate will apply from the date of the allocation
or transfer through the end of a one year interest period. At the expiration of
an interest period, the Company will renew the portion of the fixed interest
option that has expired at the new rate declared for the interest period at that
time. For the 25 days following the expiration of such period, the Contract
Owner may transfer all or a portion of the amount held in such fixed interest
option to subaccount(s) of the Separate Account.

The Company will not declare rates of interest for any fixed interest option of
less than 3%.

8.  Charges and Deductions

Contract Administration Charges. These charges are assessed against contracts
with a Variable Account Value. The first charge is the Annual Contract
Administration Charge which is deducted annually on the date specified on Page
3. This charge will only be applied if the Variable Account Value at the time
the charge is incurred is less than $100,000. It will also be deducted when the
Variable Account Value is withdrawn or transferred in full, if withdrawal or
transfer, is not on the date specified on Page 3. The charge will not be
deducted after the Annuity Date.

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

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

Contingent Deferred Sales Charge. This charge, if applicable, will be deducted
upon withdrawal, in whole or in part, of the Contract Value. This charge will
not be applied on payment at time of annuitization, on a death benefit payment,
medically related withdrawal payment or disability withdrawal payment . For
further definition of the charge, see Section 16 - Withdrawal.

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

Deductions. The asset based contract administration charge and the mortality and
expense risk charge will be computed and deducted from each subaccount of the
Separate Account in which the Contract Owner is invested. These deductions will
be made daily.
                                                                         Page 7

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8.  Charges and Deductions (continued)

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

9.  Contract Value

The Contract Value. The contract value is the sum of the Variable Account Value
and the Fixed Account Value.

The Fixed Account Value. The Fixed Account Value is the sum of all money
allocated or transferred to the fixed interest options of the Fixed Account plus
all interest credited to the Fixed Account. This amount shall be adjusted for
withdrawals, transfers and charges.

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

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

(a)  is each amount allocated to the subaccount; and
(b)  is the value of the Accumulation Unit for that subaccount for the valuation
     period in which the purchase payment was received.
The number of Accumulation Units will be adjusted for transfers, withdrawals and
charges. Adjustments will be made as of the valuation period in which all
requirements for the transaction are received.

Value of Each Accumulation Unit. For each subaccount of the Separate Account,
the value was arbitrarily set at $10 when the subaccount was established. The
value may increase or decrease from one valuation period to the next. For any
valuation period the value is (a) multiplied by (b), where:
(a) is the value of an Accumulation Unit for the prior valuation period; and
(b) is the net investment factor for that subaccount for the current valuation
     period.

Net Investment Factor. As used in this contract, net investment factor is an
index used to measure the investment performance of a subaccount from one
valuation period to the next.
<PAGE>

For any subaccount, the net investment factor for a valuation period is found by
dividing (a) by (b) and subtracting (c), where:

(a)  is the net result of:
     (1) net asset value per-share of the mutual fund held in the subaccount
         as of the end of the valuation period; plus
     (2) the per-share amount of any dividend or capital gain distributions by
         the mutual fund if the "ex-dividend" date occurs in the valuation
         period; plus or minus
     (3) a per-share charge or credit as the Company may determine, as of the
         end of the valuation period, for tax reserves.
(b)  is the net result of:
     (1) the net asset value per-share of the mutual fund held in the subaccount
         as of the end of the last prior valuation period; plus or minus
     (2) the per-share charge or credit for tax reserves as of the end of the
         last prior valuation period.
(c)  is the sum of the daily asset based contract administration charge, the
     daily mortality and expense risk charge. On an annual basis, the sum of
     such charges will not exceed the values shown on Page 3.

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

                                                                          Page 8
<PAGE>

10.  Annuity Payments

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

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

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

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

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

11.  Fixed Annuity Payments

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

                                                                          Page 9
<PAGE>

11.  Fixed Annuity Payments (continued)

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

                    Date of First Payment                     Adjusted Age
                 Before calendar year 2010             Actual Age
                         2010-2019                     Actual age decreased by 1
                         2020-2029                     Actual age decreased by 2
                       2030 and later                  Actual age decreased by 3

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

        Option 2 - Life Annuity and Option 3 - Life Annuity with Payments
                         Guaranteed for 10 or 20 Years
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                         Life      10 Years     20 Years                         Life          10 Years     20 Years
              Age      Annuity     Guaranteed   Guaranteed            Age        Annuity       Guaranteed   Guaranteed
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>        <C>          <C>          <C>                 <C>        <C>          <C>          <C>
              50         3.95         3.93         3.86                75         7.61         6.88         5.34
              51         4.02         3.99         3.91                76         7.93         7.06         5.37
              52         4.08         4.06         3.96                77         8.27         7.25         5.40
              53         4.16         4.12         4.02                78         8.64         7.44         5.42
              54         4.23         4.20         4.08                79         9.03         7.62         5.44

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

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

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

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

                   Option 4 - Joint and Survivor Life Annuity
--------------------------------------------------------------------------------
Age    50     55     60    65     70     75    80     85      90      95    Age
50    3.53   3.64   3.73  3.80   3.85   3.89  3.92   3.93    3.94    3.95    50
55    3.64   3.79   3.92  4.04   4.13   4.20  4.24   4.27    4.29    4.30    55
60    3.73   3.92   4.12  4.30   4.45   4.57  4.65   4.71    4.74    4.76    60
65    3.80   4.04   4.30  4.56   4.81   5.02  5.17   5.28    5.35    5.38    65
70    3.85   4.13   4.45  4.81   5.18   5.52  5.80   6.01    6.15    6.23    70
75    3.89   4.20   4.57  5.02   5.52   6.04  6.52   6.91    7.19    7.37    75
80    3.92   4.24   4.65  5.17   5.80   6.52  7.27   7.96    8.50    8.87    80
85    3.93   4.27   4.71  5.28   6.01   6.91  7.96   9.03    9.99    10.73   85
90    3.94   4.29   4.74  5.35   6.15   7.19  8.50   9.99    11.48   12.78   90
95    3.95   4.30   4.76  5.38   6.23   7.37  8.87   10.73   12.78   14.74   95

                                                                         Page 10

<PAGE>

12. Variable Annuity Payments

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

Subsequent Variable Annuity Payments. Payments after the first will vary in
amount according to the investment performance of the subaccount(s). The payment
amount may change from month to month. The amount of each subsequent payment is
the sum of (a) multiplied by (b) for each applicable subaccount, where:

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

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

Number of Annuity Units. The number of units for the subaccount of each
investment account chosen is (a) divided by (b), where:

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

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

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

<PAGE>

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

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

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

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

                                                                         Page 11
<PAGE>

12.  Variable Annuity Payments(continued)

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

                   Date of First Payment                    Adjusted Age
                 Before calendar year 2010             Actual Age
                        2010-2019                      Actual age decreased by 1
                        2020-2029                      Actual age decreased by 2
                      2030 and later                   Actual age decreased by 3

        Option 2 - Life Annuity and Option 3 - Life Annuity with Payments
                         Guaranteed for 10 or 20 Years
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                         Life      10 Years     20 Years                         Life          10 Years     20 Years
              Age      Annuity     Guaranteed   Guaranteed            Age        Annuity       Guaranteed   Guaranteed
------------------------------------------------------------------------------------------------------------------------------------
<S>           <C>        <C>          <C>          <C>                 <C>        <C>          <C>          <C>
              50         3.95         3.93         3.86                75         7.61         6.88         5.34
              51         4.02         3.99         3.91                76         7.93         7.06         5.37
              52         4.08         4.06         3.96                77         8.27         7.25         5.40
              53         4.16         4.12         4.02                78         8.64         7.44         5.42
              54         4.23         4.20         4.08                79         9.03         7.62         5.44

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

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

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

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

                   Option 4 - Joint and Survivor Life Annuity
--------------------------------------------------------------------------------
Age    50     55     60    65     70     75    80     85      90      95    Age
50    3.53   3.64   3.73  3.80   3.85   3.89  3.92   3.93    3.94    3.95    50
55    3.64   3.79   3.92  4.04   4.13   4.20  4.24   4.27    4.29    4.30    55
60    3.73   3.92   4.12  4.30   4.45   4.57  4.65   4.71    4.74    4.76    60
65    3.80   4.04   4.30  4.56   4.81   5.02  5.17   5.28    5.35    5.38    65
70    3.85   4.13   4.45  4.81   5.18   5.52  5.80   6.01    6.15    6.23    70
75    3.89   4.20   4.57  5.02   5.52   6.04  6.52   6.91    7.19    7.37    75
80    3.92   4.24   4.65  5.17   5.80   6.52  7.27   7.96    8.50    8.87    80
85    3.93   4.27   4.71  5.28   6.01   6.91  7.96   9.03    9.99    10.73   85
90    3.94   4.29   4.74  5.35   6.15   7.19  8.50   9.99    11.48   12.78   90
95    3.95   4.30   4.76  5.38   6.23   7.37  8.87   10.73   12.78   14.74   95

                                                                         Page 12
<PAGE>

12. Variable Annuity Payments(continued)

Variable Annuity Option Tables - 5% Interest Option
The following tables show the amount of the first monthly income payment for
each $1,000 of value applied under an annuity option. "Age" as used in the
tables for Options 2,3, and 4 means an adjusted age determined in the following
manner from the actual age of the Annuitant on the birthday nearest the date of
the first payment:

                   Date of First Payment                    Adjusted Age
                 Before calendar year 2010             Actual Age
                        2010-2019                      Actual age decreased by 1
                        2020-2029                      Actual age decreased by 2
                      2030 and later                   Actual age decreased by 3

         Option 2 - Life Annuity and Option 3 - Life Annuity with Payments
                    Guaranteed for 10 or 20 Years

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                         Life      10 Years     20 Years                         Life          10 Years     20 Years
              Age      Annuity     Guaranteed   Guaranteed            Age        Annuity       Guaranteed   Guaranteed
------------------------------------------------------------------------------------------------------------------------------------
              <S>         <C>         <C>          <C>                <C>         <C>           <C>         <C>
              50         5.17         5.14        5.04                 75         8.79         7.93         6.35
              51         5.23         5.19        5.09                 76         9.11         8.10         6.38
              52         5.29         5.25        5.13                 77         9.45         8.28         6.41
              53         5.36         5.31        5.18                 78         9.82         8.46         6.43
              54         5.43         5.38        5.23                 79         10.22        8.64         6.44

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

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

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

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

</TABLE>

                   Option 4 - Joint and Survivor Life Annuity
--------------------------------------------------------------------------------
Age    50     55     60    65     70     75    80     85      90      95    Age
50    4.74   4.83   4.92  4.99   5.04   5.09  5.12   5.14    5.15    5.16    50
55    4.83   4.96   5.09  5.20   5.29   5.36  5.42   5.45    5.47    5.49    55
60    4.92   5.09   5.26  5.43   5.58   5.71  5.80   5.86    5.90    5.93    60
65    4.99   5.20   5.43  5.68   5.92   6.13  6.29   6.41    6.49    6.54    65
70    5.04   5.29   5.58  5.92   6.27   6.61  6.90   7.12    7.27    7.37    70
75    5.09   5.36   5.71  6.13   6.61   7.12  7.60   8.01    8.30    8.50    75
80    5.12   5.42   5.80  6.29   6.90   7.60  8.34   9.03    9.59    9.99    80
85    5.14   5.45   5.86  6.41   7.12   8.01  9.03   10.11   11.07   11.84   85
90    5.15   5.47   5.90  6.49   7.27   8.30  9.59   11.07   12.57   13.87   90
95    5.16   5.49   5.93  6.54   7.37   8.50  9.99   11.84   13.87   15.83   95

                                                                         Page 13

<PAGE>

13. Annuity Options

Option 1 - Annuity for Specified Number of Years. Payments will be made for a
specified number of years, which may not be less than 5 nor more than 30. This
option is available for a fixed annuity only.

Option 2 - Life Annuity. Payments will be made for the life of the Annuitant.
Payments will cease with the last payment due prior to the Annuitant's death.

Option 3 - Life Annuity with Payments Guaranteed for 10 or 20 years. Payments
will be made for the life of the Annuitant. A guaranteed payment period of
either 10 or 20 years may be chosen.

Option 4 - Joint and Survivor Life Annuity. The initial payment will be made if
either the Annuitant or the designated second Annuitant are living. Subsequent
payments will continue during the joint lives of the Annuitants and thereafter
during the life of the surviving annuitant. Payments will end with the last
payment due before the death of the last Annuitant to die.

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

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

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

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

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

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

14. Death Benefit

Death Before the Annuity Date. A death benefit shall be payable upon the earlier
of the death of:

(1) the Contract Owner or
(2) the Annuitant.

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

Upon the Contract Owner's death, the death benefit is equal to the Contract
Value on the date of receipt of due proof of death.

Upon the Annuitant's death, the death benefit is equal to the Fixed Account
death benefit plus the Variable Account death benefit. The Fixed Account death
benefit is equal to the Fixed Account Value on the date of receipt of due proof
of death and the necessary forms to make payment to a beneficiary. The Variable
death benefit is the greater of:

(1) the Variable purchase payments, net of Variable Account transfers and less
    the total amount of any partial withdrawals from the Variable Account; or
(2) the Variable Account Value at the date of receipt of due proof of death and
    the necessary forms to make payment to a beneficiary.

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

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

                                                                         Page 14
<PAGE>

14. Death Benefit (continued)

(2) The Contract Value may be paid out in a single sum within five years after
    the date of death. At the time of this election, the beneficiary must
    specify the allocation of the Contract Value to the subaccounts of the
    Separate Account and the fixed interest options of the Fixed Account. During
    this election and within five years after the date of death, the beneficiary
    may transfer amounts among the subaccounts of the Separate Account and the
    fixed interest options of the Fixed Account. Transfers from the fixed
    interest options are subject to the limitations imposed on such options
    prior to the end of the interest period.

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

(4) If the beneficiary is the Contract Owner's surviving spouse, the surviving
    spouse may elect to become the Contract Owner.

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

Death After the Annuity Date. This death benefit shall be payable upon the death
of the Annuitant. If death occurs after the Annuity Date, the death benefit
payable, if any, will be according to the annuity option in force.

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

(1) Payment on the earlier of the death of the Contract Owner or the Annuitant
    prior to the Annuity Date, or
(2) Remaining payments under specified or guaranteed annuity payments, if any,
    on death of the Annuitant on or after the Annuity Date.

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

The estate of a beneficiary who dies before the first to die of the Contract
Owner or the Annuitant shall have no rights under this contract.

15. Transfers

Transfers. Subject to and in accordance with the provisions of this contract and
prior to the Annuity Date, the Contract Owner may transfer amounts among the
subaccounts of the Separate Account and the one year fixed interest option of
the Fixed Account, provided that:

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

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

                                                                         Page 15
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15. Transfers (continued)

(a) the minimum amount which may be transferred is $250 or, if less, the full
    amount held in the subaccount;
(b) for partial transfers, the amount remaining in a subaccount must be at least
    $250.

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

16. Withdrawal

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

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

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

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

Free Withdrawal. Prior to the Annuity Date, on the last day of the first
contract year and once each Contract year thereafter, the first withdrawal of
the contract year, up to the free withdrawal amount will not be assessed a
Contingent Deferred Sales Charge.

Free Withdrawal Amount. The free withdrawal amount is equal to 15% of the
purchase payments as of the date of the request.

Contingent Deferred Sales Charge. The Contingent Deferred Sales Charge will be
imposed upon withdrawals.

For purposes of calculating the Contingent Deferred Sales Charge, purchase
payments will be allocated to the amount withdrawn. The Company will allocate
the purchase payment with the earliest effective date first, then the next
earliest purchase payment until the allocation is equal to the withdrawal
amount. There will be no Contingent Deferred Sales Charge on amounts withdrawn
that exceed the total purchase payments of the contract. Subject to the
provisions of the contract, the free withdrawal amount will be applied to the
purchase payments that have been in the contract for the longest length of time.

The percentage charged will vary depending upon the number of full contract
years since the purchase payments were made to the time of the withdrawal in
accordance with the table shown on Page 3

The Contingent Deferred Sales Charge will be equal to the sum of charges applied
to the purchase payments associated with the withdrawal. The charge applied to
each purchase payment is equal to the product of (a) multiplied by (b) for each
purchase payment associated with the withdrawal, where:

(a) is the amount of the purchase payment associated with the withdrawal, and
(b) is the percentage that corresponds to the number of full contract years
    since the purchase payment.

                                                                         Page 16
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16. Withdrawal (continued)

Systematic Withdrawals. After the contract is issued and prior to the Annuity
Date, the Contract Owner may withdraw systematically if no previous free
withdrawal has been made during the current contract year. The minimum Contract
Value to be eligible for a withdrawal of this type is $25,000 or such lower
amount as the Company may require. The maximum systematic withdrawal amount is
set annually; it is equal to the Free Withdrawal Amount as defined in the
provision above. The minimum systematic withdrawal amount is $100. The
withdrawals can be made on a monthly, quarterly, semiannual or annual basis.

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

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

17. General

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

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

Medically Related Withdrawal. After the first contract year for contracts issued
to Contract Owners prior to their 75th birthday and prior to the Annuity Date,
the Contract Owner may request to withdraw all or any part of the Contract Value
free of Contingent Deferred Sales Charge if either of the following events
occur:

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

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

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

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

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

                                                                         Page 17

<PAGE>

17. General (continued)

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

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

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

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

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

Proof of Age and Survival. The Company may require satisfactory proof of correct
age at any time. If any payment under this contract depends on the payee being
alive, the Company may require satisfactory proof of survival.

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

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

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

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

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

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

Contract Payments. All sums payable to or by the Company are payable at its
designated service office.

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

Compliance with Minimum Value Requirements. Annuity, death and withdrawal
benefits are not less than the minimum benefits required under applicable laws
and regulations of the jurisdiction in which this contract is delivered.

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

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

                                                                         Page 18
<PAGE>

Please notify the Company promptly of any change in address.

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

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

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

The Penn Mutual Life Insurance Company, Philadelphia, Pennsylvania 19172
BVA-00

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