<PAGE>
As filed with the Securities and Exchange Commission on Sept 1, 1999
Registration No. 333-80393
811-08385
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
SEPARATE ACCOUNT D OF PARAGON LIFE INSURANCE COMPANY
(Exact Name of Registrant)
PARAGON LIFE INSURANCE COMPANY
(Name of Depositor)
100 South Brentwood Boulevard
St. Louis, MO 63105
(Address of Depositor's Principal Executive Office)
Matthew P. McCauley, Esquire
Paragon Life Insurance Company
700 Market Street
St. Louis, MO 63101
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Ave., N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the registration statement
Title of securities being registered: Joint and Last Survivor Flexible
Premium Variable Life Insurance Policies.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay is effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration shall become effective on
such date as the Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
[Paragon - VUL Logo Appears Here]
Underlying Funds Through:
Fidelity Variable Insurance Products Fund
Fidelity Variable Insurance Products Fund II
MFS Variable Insurance Trust
Putnam Variable Trust
Scudder Variable Life Investment Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Fixed Income Series, Inc.
. Joint and Last Survivor
Flexible Premium Variable Life
Insurance Policy
[Paragon Logo Appears Here]
Prospectus dated , 1999
50415
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
ISSUED BY
PARAGON LIFE INSURANCE COMPANY
100 South Brentwood
St. Louis, MO 63105
(314) 862-2211
This Prospectus describes a flexible premium joint and last survivor variable
life insurance Policy ("the Policy") offered by Paragon Life Insurance Company
("we," "our," "us" "Paragon" or "the Company"). The Policy is designed to
provide lifetime insurance protection and to provide maximum flexibility to
vary premium payments and change the level of death benefits payable under the
Policy. This flexibility allows you to provide for changing insurance needs
under a single insurance policy. You also have the opportunity to allocate Net
Premiums among several investment portfolios with different investment
objectives.
The Policy provides:
(1) a Cash Surrender Value that can be obtained by surrendering the Policy;
(2) Policy Loans; and
(3) a death benefit payable at the death of the Last Insured. As long as a
Policy remains in force before the younger Insured's Attained Age 100,
the death benefit will be at least the current Face Amount of the
Policy. A Policy will remain in force as long as its Cash Surrender
Value is sufficient to pay the monthly charges.
After the end of the "Right to Examine Policy" period, you may allocate the
Net Premiums to one or more of the Divisions of Paragon's Separate Account D
("the Separate Account") or in certain contracts to Paragon's General Account.
You will find a list of the Funds in the Separate Account, the fund managers,
and the investment objectives in the Summary on page 3. Note that investment
results in the Separate Account are not guaranteed--you may either make money
or lose money. Depending on investment results, the Policy could lapse or the
death benefit could change. The Prospectus of each Fund contains a full
description of the Fund, including the investment policies, restrictions,
risks, and charges. You should receive a Prospectus for each Fund along with
this Prospectus for the Policy.
In most Policies you may also invest all or part of your Cash Value in the
General Account, which guarantees at least 4% annual interest.
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance protection
if the purchaser already owns another flexible premium joint and last survivor
variable life insurance policy.
These securities have not been approved or disapproved by the Securities and
Exchange Commission, nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
Please read this Prospectus carefully and retain it for future reference. The
date of this Prospectus is July 1, 1999. The Policies are not available in all
states.
<PAGE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made. No dealer, salesman, or other person is
authorized to give any information or make any representations in connection
with this offering other than those contained in this prospectus, and, if given
or made, such other information or representations must not be relied upon.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 1
Definitions.............................................................. 9
The Company, the Separate Account, and the Funds......................... 10
The Company
The Separate Account
The Funds
Fidelity Variable Insurance Products Fund
Fidelity Variable Insurance Products Fund II
Putnam Variable Trust
Scudder Variable Life Investment Fund
T. Rowe Price Equity Series, Inc.
T. Rowe Price Fixed Income Series, Inc.
Addition, Deletion, or Substitution of Investments....................... 13
Policy Benefits.......................................................... 14
Death Benefit
Cash Value
Policy Rights............................................................ 17
Loans
Surrender, Partial Withdrawals and Pro Rata Surrender
Transfers
Portfolio Rebalancing
Dollar Cost Averaging
Right to Examine Policy
Death Benefit at Attained Age 100
Payment and Allocation of Premiums....................................... 22
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Charges and Deductions................................................... 24
Premium Expense Charges
Monthly Deduction
Separate Account Charges
The General Account...................................................... 26
General Matters.......................................................... 28
Distribution of the Policies............................................. 30
Federal Tax Matters...................................................... 31
Safekeeping of the Separate Account's Assets............................. 34
Voting Rights............................................................ 34
State Regulation of the Company.......................................... 34
Management of the Company................................................ 35
Legal Matters............................................................ 36
Legal Proceedings........................................................ 38
Experts.................................................................. 38
Additional Information................................................... 38
Financial Statements
Appendix A--Illustration of Death Benefits and Cash Values
</TABLE>
3
<PAGE>
SUMMARY
Throughout this summary, the terms "you" and "your" refer to the owner of the
policy. The owner may or may not be one of the persons insured under the
policy. The terms "we," "us," and "our" refer to Paragon Life Insurance
Company.
The information in this section is just a summary, written in "laymen's terms"
to help you understand the policy. However, both your policy and this
prospectus are legal documents. If you have questions about them, you should
contact your agent or other competent professional advisers.
In preparing this summary, we assume that the Policy is in force, and that you
have not borrowed any of the cash value.
The Policy
You are purchasing a life insurance policy. Like many life insurance policies,
it has both a death benefit and a cash value. The death benefit is the amount
of money that we will pay to the beneficiary if both of the persons insured
under the policy die while the policy is in force. The cash value is the amount
of money accumulated in your policy as an investment at any time. The cash
value consists of the premiums you have paid, reduced by the expenses deducted
for operation of the policy, and either increased or decreased by investment
results.
You have certain rights, including the right to borrow or withdraw money from
the policy's cash value and the right to select the funds in which you will
invest your premiums.
You have the right to review the policy and decide whether you want to keep it.
If you decide not to keep the policy, you may return it to us or to your agent
during the "Right to Examine Policy Period." This period is sometimes referred
to as the "Free Look Period." It normally ends on the later of:
1. twenty days after you receive the policy or
2. forty-five days after you signed the application.
In some states the period may be longer. Your agent can tell you if this is the
case.
During the "Right to Examine Policy Period" we will hold any premiums you have
paid in the money market fund. If you return the policy before the end of the
free look period, we will cancel the policy and return any premiums you have
paid. (For policies issued in Kansas, the rules are different. Your agent can
provide you with the details.) (See Policy Rights--Right to Examine Policy.)
When the "Right to Examine Policy Period" ends, we will deduct any charges due
and transfer the rest of the money (your "net premium") into the investment
funds that you have selected. We will continue to transfer future net premiums
into the investments that you select as soon as we receive the premiums.
The policy is a "flexible premium" policy. This means that you may, within
limits described below, make premium payments at any time and in any amount you
choose. You do not have to make premium payments according to a fixed schedule,
although you may choose to do so.
There are limits on the amount that you may pay into the policy without
creating tax consequences. If you make a premium payment that exceeds the
limit, we will notify you and offer to refund the excess paid.
We will deduct certain expenses from your cash value. These expenses are
described below. In addition, your cash value may increase or decrease,
depending on the investment experience of the funds you select. Because
4
<PAGE>
it is possible for your cash value to decrease, you may have to pay additional
premiums in order to keep the policy in force.
As long as there is enough money in your cash value to pay the monthly charges,
your death benefit will always be at least the face amount of your policy,
minus any amount that you have borrowed from the policy. The face amount of
your policy means the amount of insurance that you have purchased. It is shown
on the specifications page of your policy
We will notify you if your cash value is not enough to pay the monthly charges.
If that happens, you will have 62 days to make a premium payment big enough to
bring your cash value up to the amount required to pay the charges. If you make
the premium payment, the policy will stay in force. If you don't, the policy
will lapse, or end with no value. (See Payment and Allocation of Premiums--
Policy Lapse and Reinstatement.)
Investing Your Cash Value
You may tell us to invest your cash value in either the general account or the
separate account, or you may split your cash value between them.
The General Account
The general account is an interest-bearing account. Money in the general
account is guaranteed to earn at least 4% annual interest, and it may earn
more. Paragon determines the current interest rate from time to time. We have
the right to limit the amount of money that you may put into the general
account.
The Separate Account
The separate account consists of divisions, which represent different types of
investments. Each division may either make money or lose money. Therefore if
you invest in a division of the separate account, you may either make money or
lose money, depending on the investment experience of that division. There is
no guaranteed rate of return in the separate account.
There are currently fourteen divisions, or investment options, available in the
separate account. These divisions represent funds run by various investment
companies. The investment companies hire advisers to operate or advise on the
day-to-day operation of the funds.
The following list shows the investment companies whose funds are available
under the policy, along with the managers or advisers and the divisions that
they oversee:
<TABLE>
<CAPTION>
Investment Company Investment Manager/Adviser
------------------ --------------------------
<S> <C>
Fidelity Investments Variable
Insurance Products Fund or Fidelity
Investments Variable Insurance
Products Fund II.................... Fidelity Management & Research Company
MFS Variable Insurance Trust......... Massachusetts Financial Services Company
Putnam Variable Trust................ Putnam Investment Management, Inc.
Scudder Variable Life Investment
Fund................................ Scudder, Kemper Investments
T. Rowe Price Equity Series, Inc. and
T. Rowe Price Fixed Income Series,
Inc................................. T. Rowe Price Associates, Inc.
</TABLE>
5
<PAGE>
These funds have different goals and strategies, which we have summarized in
the following table. You should review the prospectus of each fund, or seek
professional guidance in determining which fund(s) best meet your objectives.
<TABLE>
<CAPTION>
Investment Manager Fund Name Investment Type Objective
------------------ ----------------- -------------------- ------------------------
<C> <C> <C> <S>
Fidelity Management VIP Growth Capital Appreciation To achieve long-term
& Portfolio capital appreciation by
Research Company investing primarily in
common stocks.
Fidelity Management VIP Equity-Income Income To obtain reasonable
& Portfolio income by investing
Research Company primarily in income-
producing equity
securities. In choosing
these securities, the
fund will also consider
potential for capital
appreciation. The
Portfolio's goal is to
achieve a yield which
exceeds the composite
yield of the securities
comprising the S&P 500
Composite Stock Price
Index.
Fidelity Management VIP II Index 500 Long-Term To provide investment
& Research Company Portfolio Investment results that correspond
to the total return
(i.e., the combination
of capital change and
income)
of common stocks
publicly traded in the
United States as
represented by the
Standard & Poor's 500
Composite Stock Price
Index while keeping
transaction costs and
other expenses low. The
Portfolio is designed as
a long-term investment
option.
Fidelity Management VIP III Long-Term Capital To obtain long-term
& Research Company Contrafund Appreciation capital appreciation by
Portfolio investing in securities
of companies whose value
FMR believes is not
fully recognized by the
public.
Massachusetts MFS Emerging Long-Term Capital To provide long-term
Financial Services Growth Series Growth growth of capital.
Company Dividend and interest
income from portfolio
securities, if any, is
incidental to the
Series' investment
objective of long-term
growth of capital. The
Series' policy is to
invest primarily (i.e.,
at least 80%
of its assets under
normal circumstances) in
common stocks of small
and medium-sized
companies that are early
in their life cycle but
which have the potential
to become major
enterprises (emerging
growth companies).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Investment Manager Fund Name Investment Type Objective
------------------ --------------- -------------------- ------------------------
<C> <C> <C> <S>
Putnam Investment Putnam VT High Current Income and To attain high current
Management, Inc. Yield Fund Capital Growth income and, when
consistent with this
objective, a secondary
objective of capital
growth, by investing
primarily in high-
yielding, lower-rated
fixed income securities
(commonly known as "junk
bonds"),
constituting a portfolio
that Putnam Management
believes does not
involve undue risk to
income or principal. See
the special
considerations for
investments in high
yield securities
described in the Putnam
Variable Trust
prospectus.
Putnam Investment Putnam VT New Long-Term Capital To attain long-term
Management, Inc. Opportunities Appreciation capital appreciation by
Fund investing primarily in
common stocks of
companies in sectors of
the economy that Putnam
Management believes
possess above-average
long-term growth
potential.
Putnam Investment Putnam Current Income and To obtain current income
Management, Inc. VT Income Preservation of consistent with
Fund Capital preservation of capital
(Previously by investing primarily
named in securities issued by
Putnam VT U.S. or guaranteed by the
Government and U.S. Government, or its
High Quality agencies or
Bond instrumentalitites, and
Fund) in other debt
obligations rated at
least A by a nationally
recognized securities
rating agency such as
Standard & Poor's or
Moody's Investors
Service, Inc., or, if
not rated, determined by
Putnam Management to be
of comparable quality.
Putnam Investment Putnam VT Capital Appreciation To obtain capital
Management, Inc. Voyager Fund appreciation by
investing primarily in
common stocks of
companies that Putnam
Management believes have
potential for capital
appreciation that is
significantly greater
than that of market
averages.
Scudder, Kemper Money Market Current Income with To maintain the
Investments Portfolio Liquidity and stability of capital
Stability of Capital and, consistent
therewith, to maintain
the liquidity of capital
and to provide current
income. The Fund seeks
to maintain a constant
net asset value
of $1.00 per share,
although there can be no
assurance that this will
be achieved.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Investment Manager Fund Name Investment Type Objective
------------------ --------------- -------------------- ------------------------
<C> <C> <C> <S>
Scudder, Kemper International Long-Term Capital To obtain long-term
Investments Portfolio Appreciation growth of capital,
primarily through
diversified holding of
marketable foreign
equity investments. The
Fund invests in
companies, wherever
organized, that do
business outside the
United States. The Fund
intends to diversify
among several countries
and to have represented
in its holdings, in
substantial portions,
business activities in
not less than three
different countries. The
Fund does not intend to
concentrate investments
in any particular
industry.
T. Rowe Price New America Long-Term Capital To obtain long-term
Associates, Inc. Growth Appreciation capital growth of
Portfolio capital through
investment in common
stock of U.S. companies
which operate in the
service sector of the
economy.
T. Rowe Price Personal Highest Total Return To obtain the highest
Associates, Inc. Strategy Consistent with total return consistent
Balanced Capital Appreciation with an emphasis on both
Portfolio and Income capital appreciation and
income by investing in a
diversified portfolio,
typically consisting of
approximately 60%
stocks, 30% bonds, and
10% money market
securities.
T. Rowe Price Limited-Term High Current Income To obtain a high level
Associates, Inc. Bond with Modest Price of current income,
Portfolio Fluctuations consistent with modest
price fluctuations, by
investing primarily in
short term and
intermediate term
investment grade debt
securities.
</TABLE>
You may change the funds that you want to use for your future premiums by
notifying our Home Office.
You may transfer your cash value among the various funds, and you may withdraw
money, but there are certain rules. We don't charge you a transaction fee for
the first twelve transfers or withdrawals in a policy year, but we charge a $25
fee for each transfer or withdrawal after the first twelve. (A policy year is
measured beginning on the anniversary of the date that the policy was issued,
and ending on the day before the next anniversary.)
We have the right to change or eliminate transfers in the future, although we
don't currently intend to do so.
Charges and Deductions
There are certain costs that we charge you for issuing your policy and keeping
it in force. This section describes those charges--what they are and what they
cover.
Sales Charge
There is a sales charge of 2.25% of the premium paid on policies issued in the
state of Oregon. There is no sales charge on policies issued in any other
state.
8
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Tax Charge
The Federal government and many states and territories impose taxes or charges
on insurance premiums. We deduct from your premium payment the amount required
to pay these taxes and charges. We deduct 1.3% of each premium payment to pay
the Federal charge, and, except in Oregon, we deduct a premium tax charge of
2.25% of each premium payment to pay the state tax.
If the tax rates change, we may change the amount of the deduction to cover the
new charge. (See Charges and Deductions--Premium Expense Charges.)
If we are required by law to pay taxes based on the separate account, we may
charge an appropriate share to policies that invest in the separate account.
(See Federal Tax Matters.)
Monthly Policy Charge
We charge a monthly fee to cover your policy's administrative cost. This charge
is $6 for each month that your policy is in force. We will deduct the charge
from your cash value each month. If you surrender your policy during the first
policy year, we will deduct from the cash surrender value the monthly policy
fee for the months remaining in the first policy year.
Selection and Issue Expense Charge
This charge allows us to recover part of the costs of issuing your policy. We
determine the amount of the charge based on the size of your policy and on the
age, sex, and risk class of the persons insured under the policy.
This is an annual charge, which is currently 45 cents per $1,000 of Face
Amount, and is guaranteed never to exceed 90 cents per $1,000. We deduct one-
twelfth of this charge each month. This charge ends after the policy has been
in force for ten years. If you surrender your policy during the first policy
year, we will deduct from the cash surrender value the selection and issue
expense charge for the months remaining in the first policy year.
Cost of Insurance
Because this is a life insurance policy, it has a death benefit. We charge an
insurance cost each month to cover the risk that you will die and we will have
to pay the death benefit.
The amount of this charge varies with the age, sex, risk class of the persons
insured under the policy, and the amount of the death benefit at risk--if the
risk of death or the amount of the death benefit is greater, then the cost of
insurance is also greater. We deduct the cost of insurance from your cash value
each month.
Mortality and Expense Risk Charge
We make another charge to cover mortality and expense risks due to guaranteed
maximums under the Policy. We calculate this charge based on a percentage of
the net assets in each division of the separate account. Rather than deducting
the charge from the cash value, we apply the charge by adjusting the net rate
of return in the separate account. We guarantee that the charge will not exceed
the following amounts, shown on an annual percentage basis:
<TABLE>
<S> <C>
Policy years 1-10 .55% of net separate account assets
Policy years 11-20 .45% of net separate account assets
Policy years 21+ .35% of net separate account Assets
</TABLE>
(See Charges and Deductions--Separate Account Charges.)
Fund Expenses
We pay the operating expenses of the separate account. The funds pay for their
own operating expenses and investment fees. For a description of these charges,
see Charges and Deductions--Separate Account Charges.
9
<PAGE>
The following chart shows the operating expenses of the funds as reported for
the fiscal year ending December 31, 1998:
Annual Fund Operating Expenses
As a Percentage of Average Net Assets
<TABLE>
<CAPTION>
Investment
Advisory /
Management Other
Fund Fee Expenses Total
---- ---------- -------- -----
<S> <C> <C> <C>
Fidelity Investments Variable Insurance Products Fund
and
Fidelity Investments Variable Insurance Products
Fund II (1)
VIP Growth Portfolio............................... .59% .09% .68%
VIP Equity-Income Portfolio........................ .49% .09% .58%
VIP II Index 500 Portfolio......................... .24% .11% .35%
VIP II Contrafund Portfolio........................ .59% .11% .70%
MFS Variable Insurance Trust
MFS Emerging Growth Series......................... .75% .10% .85%
Putnam Variable Trust
Putnam VT High Yield Fund.......................... .64% .07% .71%
Putnam VT New Opportunities Fund................... .56% .05% .61%
Putnam VT Income Fund (Previously U.S. Government &
High Quality Bond Fund............................ .60% .07% .67%
Putnam VT Voyager Fund............................. .54% .04% .58%
Scudder Variable Life Investment Fund
Money Market Portfolio............................. .37% .07% .44%
International Portfolio............................ .87% .18% 1.05%
T. Rowe Price Equity Series, Inc. and
T. Rowe Price Fixed Income Series, Inc.
New America Growth Portfolio....................... .85% (2) .85%
Personal Strategy Balanced Portfolio............... .90% (2) .90%
Limited-Term Bond Portfolio........................ .70% (2) .70%
</TABLE>
- --------
(1) A portion of the brokerage commissions that certain funds pay was used to
reduce Funds' expenses. In addition, certain Funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances, were used to reduce custodian expenses. With
these reductions, the total operating expenses as a percentage of net
assets would have been: Fidelity Variable Insurance Products Fund--VIP
Growth Portfolio .66% and VIP Equity-Income Portfolio .57%; Fidelity
Variable Insurance Products Fund II--VIP II Index 500 Portfolio .28% and
VIP II Contrafund Portfolio .66%.
(2) T. Rowe Price Associates, Inc. does not provide separate Management Fees
and Other Expenses Fees. Rather, management fees include operating
expenses.
The expense information regarding the Funds was provided by those Funds. We
have not independently verified this information. We cannot guarantee that the
reimbursements provided by certain Funds will continue.
Premiums.
Within limits, you decide how much money you want to put into the policy. There
is a minimum premium that you have to pay to put the policy in force. That
amount is 1/12 of the "minimum initial annual premium amount" shown on the
specifications page of your policy.
After the policy is in force, you may pay any amount you want as long as the
cash value is always enough to cover the current month's expenses. If you
continue to pay at least 1/12 of the minimum initial annual premium
10
<PAGE>
each month (or prepay it), and if you don't withdraw or borrow cash from the
policy, we guarantee that the policy will not lapse during the first five
policy years, even if the cash value is not enough to cover the charges.
If you have borrowed or withdrawn money from your cash value, you can still
keep your no-lapse guarantee in force for the first five years. Here is how it
works. Each month, we look at the total amount of premium that you have paid
into the policy since it was issued. We then subtract the amount of money that
you have withdrawn or borrowed. If the amount left is at least equal to 1/12 of
the annual minimum premium, multiplied by the number of months the policy has
been in force, then your no-lapse guarantee still applies. If not, then we will
notify you that you have 62 days to make enough of a premium payment to restore
the no-lapse guarantee. If you do not make the payment, your policy could
lapse, or end with no value, depending on the investment experience of the
funds.
You can set up a schedule of payments, and we will send you reminders, but you
are not required to make the payments as long as the cash value covers the
current month's expenses. (See Payment and Allocation of Premiums.)
Death Benefit.
If both of the persons insured under the policy die while the policy is in
force, we will pay a death benefit to the beneficiary following the second
death. You can select one of three death benefits at the time the policy is
issued:
. Option A: The death benefit is the greater of the face amount of the
policy or an "applicable percentage" of the cash value.
. Option B: The death benefit is the greater of the face amount of the
policy plus the cash value, or an "applicable percentage" of the cash
value.
. Option C: The death benefit is the greater of the face amount of the
policy, or the cash value multiplied by an attained age factor.
As long as the policy remains in force and the younger person insured is less
than 100 years old, the minimum death benefit under any death benefit option
will be at least the current face amount.
We will increase the death benefit by the cost of insurance from the date of
the second death to the end of the month, and will reduce it by any outstanding
loans and interest. We will pay the death benefit according to the settlement
options available at the time of death. (See Policy Benefits--Death Benefit.)
The minimum face amount at issue is generally $250,000 under our current rules.
Subject to certain restrictions, you may change the face amount and the death
benefit option. In certain cases we may require evidence that the person
insured under the policy is still insurable. (See Change in Death Benefit
Option, and Change In Face Amount.)
You may include additional insurance benefits with your policy. These are
described under General Matters--Additional Insurance Benefits. If you elect
any additional benefits, we will deduct the charges for those benefits from
your Cash Value.
Cash Value.
Your Policy has a cash value that is the total amount credited to you in the
separate account, the loan account, and the general account. The cash value
increases by the amount of net premium payments, and decreases by partial
withdrawals and expense charges for the policy. It may either increase or
decrease based on the investment experience of the separate account divisions
that you have selected. (See Policy Benefits--Cash Value.)
There is no minimum guaranteed cash value.
11
<PAGE>
Policy Loans.
You may borrow against the cash value of your policy. The loan value is the
maximum amount that you may borrow. The loan value is:
the cash value on the date we receive the loan request;
plus interest on the loan balance to the next anniversary date, calculated
at the guaranteed general account interest rate;
minus interest on the new loan to the next policy anniversary;
minus any loans and interest already outstanding;
minus monthly deductions to the next policy anniversary.
When you borrow against the policy, we will take the money from the general
account and the divisions of the separate account in proportion to your
balances in each account.
Loan interest is due at each policy anniversary If you don't pay the loan
interest, we will add it to the amount of the loan.
You may repay all or part of the loan at any time. When you make a loan
payment, we will put the money back into the general account or the divisions
of the separate account in the same percentages used to make the loan.
When we pay out the proceeds of your policy, either as a death benefit or as a
policy surrender, we will deduct any outstanding loans and interest from the
amount we pay. (See Policy Rights--Loans.)
Loans taken from or secured by a policy may have Federal income tax
consequences. (See Federal Tax Matters.)
Surrender, Partial Withdrawals, and Pro-Rata Surrender.
You may surrender the policy at any time while it is in force. We will pay you
the cash surrender value of your policy. The cash surrender value is
the cash value,
minus any outstanding loans and unpaid loan interest,
minus any unpaid selection and issue expense charge due for the remainder
of the first policy year,
minus any unpaid monthly policy charge due for the remainder of the first
policy year.
After the first year you may request a partial withdrawal of your cash
surrender value. Normally, withdrawing a portion of your cash surrender value
will reduce your death benefit by the amount of the withdrawal. However, if you
have included the Anniversary Partial Withdrawal Rider on your policy, you may
withdraw a portion of your cash surrender value without reducing the death
benefit. Under this rider, there are limits on how much you can withdraw, and
the withdrawal must be at the policy anniversary. You can find more information
about the rider under General Matters--Additional Insurance Benefits.
You may also request a pro-rata surrender of the policy, which allows you to
surrender part of the policy and keep the rest in force. You can find more
information under Policy Rights--Surrender, Partial Withdrawals, and Pro-Rata
Surrender.
A surrender, partial withdrawal, or Pro-Rata Surrender may have Federal income
tax consequences. We suggest that you discuss your situation with a competent
tax adviser before taking one of these steps. (See Federal Tax Matters.)
12
<PAGE>
Illustrations of Death Benefits and Cash Surrender Values.
The death benefit and cash surrender value of your policy will depend on how
well your investments perform. In Appendix A we have illustrated some sample
policies. Depending on the rate of return, the values may increase or decrease.
In order to help you to understand the cost of the policy, we also show how
your premium would grow if you simply invested it at 5% interest, compounded
annually.
We will provide you with an illustration showing projected future cash values
if you request it in writing. We may charge a fee of up to $25 for preparing
the illustration.
Tax Consequences of the Policy.
Although the IRS has provided very limited guidance in this area, we believe it
is reasonable to conclude that the Policy qualifies as a life insurance
contract for Federal income tax purposes.
Assuming that the policy does qualify as a life insurance contract for Federal
income tax purposes, then we believe that the cash value should be subject to
the same tax treatment as the cash value of a conventional fixed-benefit
contract. This means that growth in the cash value will not be taxed until you
receive a distribution.
There are some actions that may trigger a tax. If you transfer ownership to
someone else, or if you surrender the policy or withdraw cash from it, you may
have to pay a tax. Similarly, if you let the policy lapse while there is an
outstanding loan, or if you exchange the policy for another policy, you may owe
a tax. (See Federal Tax Matters.)
If you pay too much in premium, your policy may become a "modified endowment
contract." If that happens, then some pre-death distributions of cash will be
taxable income. In general, if there is more cash value in the policy than what
you actually paid in premiums, you will be taxed on the excess in the year in
which you receive a distribution. You may withdraw the amount that you paid
into the policy without being taxed, but only after you have received the
excess as taxable income. In addition, any taxable distribution that you
receive before age 59 1/2 will generally be subject to an additional 10% tax.
On the other hand, if the policy is not a modified endowment contract, then
distributions are normally treated first as a return of your "cost basis," or
investment in the contract. In this case, you may generally withdraw up to the
amount of the premiums you paid with no tax consequences. After that, any
additional distributions are treated as taxable income. Finally, if your policy
is not a modified endowment contract, neither distributions nor loans are
subject to the 10% additional tax (See Federal Tax Matters.)
Please note that Paragon is neither a law firm nor a tax adviser, so we cannot
give you legal or tax advice. If you have specific legal or tax questions, we
suggest that you consult a qualified professional in these fields.
* * *
This Prospectus describes only those aspects of the Policy that relate to the
Separate Account, except where General Account matters are specifically
mentioned. For a brief summary of the aspects of the Policy relating to the
General Account, see The General Account.
13
<PAGE>
DEFINITIONS
Attained Age--The Issue Age of an Insured plus the number of completed Policy
Years.
Beneficiary--The person(s) named in the application or by later designation to
receive Policy proceeds in the event of the Last Insured's death. A Beneficiary
may be changed as set forth in the Policy and this Prospectus.
Cash Value--The total amount that a Policy provides for investment at any time.
It is equal to the total of the amounts credited to the Owner in the Separate
Account and the General Account, including the Loan Account.
Cash Surrender Value--The Cash Value of a Policy on the date of surrender, less
any Indebtedness, and less any unpaid selection and issue expense charges and
any unpaid monthly policy charges due for the remainder of the first Policy
Year.
Division--A subaccount of the Separate Account. Each Division invests
exclusively in the shares of a corresponding Fund of either Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II, MFS
Variable Insurance Trust, Putnam Variable Trust, Scudder Variable Life
Investment Fund,
T. Rowe Price Equity Series, Inc., or T. Rowe Price Fixed Income Series, Inc.
Effective Date--The date as of which insurance coverage begins under a policy.
Face Amount--The minimum death benefit under the Policy so long as the Policy
remains in force.
Fund--A separate investment portfolio of Fidelity Variable Insurance Products
Fund, Fidelity Variable Insurance Products Fund II, MFS Variable Insurance
Trust, Putnam Variable Trust, Scudder Variable Life Investment Fund, T. Rowe
Price Equity Series, Inc., or T. Rowe Price Fixed Income Series, Inc. Although
sometimes referred to elsewhere as "portfolios," they are referred to in this
prospectus as "Funds," except where "Portfolio" is part of their name.
General Account--The assets of the Company other than those allocated to the
Separate Account or any other separate account. The Loan Account is part of the
General Account.
Home Office--The service center of Paragon Life Insurance Company, the mailing
address of which is P.O. 66757, St. Louis, Missouri 63166-6757.
Indebtedness--The sum of all unpaid Policy Loans and accrued interest on loans.
Insured--The persons whose lives are insured under the Policy.
Investment Start Date--The date the initial premium is applied to the General
Account and/or the Divisions of the Separate Account. This date is the later of
the Issue Date or the date the initial premium is received at Paragon's Home
Office.
Issue Age--The age of each Insured at his or her nearest birthday as of the
date the Policy is issued.
Issue Date--The date from which Policy Anniversaries, Policy Years, and Policy
Months are measured.
Last Insured--The Insured whose death succeeds the death of all other Insureds
under the Policy.
Loan Account--The account of the Company to which amounts securing Policy Loans
are allocated. The Loan Account is part of Paragon's General Account.
Loan Subaccount--A Loan Subaccount exists for the General Account and for each
Division of the Separate Account. Any Cash Value transferred to the Loan
Account will be allocated to the appropriate Loan Subaccount to reflect the
origin of the Cash Value. At any point in time, the Loan Account will equal the
sum of all the Loan Subaccounts.
14
<PAGE>
Monthly Anniversary--The same date in each succeeding month as the Issue Date
except that whenever the Monthly Anniversary falls on a date other than a
Valuation Date, the Monthly Anniversary will be deemed the next Valuation Date.
If any Monthly Anniversary would be the 29th, 30th, or 31st day of a month that
does not have that number of days, then the Monthly Anniversary will be the
last day of that month.
Net Premium--The premium less the premium expense charges (consisting of the
sales charge, the premium tax charge, and the federal tax charge).
Owner--The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy--The flexible premium joint and last survivor variable life insurance
Policy offered by the Company and described in this Prospectus.
Policy Anniversary--The same date each year as the Issue Date.
Policy Month--A month beginning on the Monthly Anniversary.
Policy Year--A period beginning on a Policy Anniversary and ending on the day
immediately preceding the next Policy Anniversary.
Portfolio--see Fund.
Pro-Rata Surrender--A requested reduction of both the Face Amount and the Cash
Value by a given percentage.
SEC--The United States Securities and Exchange Commission.
Separate Account--Paragon Separate Account D, a separate investment account
established by the Company to receive and invest the Net Premiums paid under
the Policy, and certain other variable life policies, and allocated by the
Owner to provide variable benefits.
Target Premium--A premium calculated when a Policy is issued, based on the
Insureds' joint age, sex (except in unisex policies) and risk class. The target
premium is used to calculate the marketing allowance compensation under the
Policy. (See Charges and Deductions.)
Valuation Date--Each day that the New York Stock Exchange is open for trading
and the Home Office is open for business. The Home Office is not open for
business the day after Thanksgiving.
Valuation Period--The period between two successive Valuation Dates, commencing
at 4:00 p.m. (Eastern Standard Time) on a Valuation Date and ending 4:00 p.m.
on the next succeeding Valuation Date.
15
<PAGE>
THE COMPANY, THE SEPARATE ACCOUNT, AND THE FUNDS
The Company
Paragon Life Insurance Company (the "Company") is a stock life insurance
company incorporated under the laws of Missouri. The Company was organized in
1981 as General American Insurance Company, and on December 31, 1987 its name
was changed. No change in operations or ownership took place in connection with
the name change. The Company is principally engaged in writing individual and
group life insurance policies and annuity contracts. As of December 31, 1998,
it has assets in excess of $300 million. The Company is admitted to do business
in 49 states and the District of Columbia. The principal offices of the Company
are at 100 South Brentwood, St. Louis, Missouri 63105.
The Company is a wholly owned subsidiary of General American Life Insurance
Company ("General American"). General American was originally incorporated as a
stock company in 1933. In 1936, General American initiated a program to convert
to a mutual life insurance company. In 1997, General American's policyholders
approved a reorganization of the Company into a mutual holding company
structure under which General American became a stock company wholly owned by
GenAmerica Corporation, an intermediate stock holding company. GenAmerica is
wholly owned by General American Mutual Holding Company, a mutual holding
company organized under Missouri law. On January 28, 1999, the Board of General
American Mutual Holding Company instructed its management to develop a plan for
demutualization and a public offering of stock.
GenAmerica Corporation and Metropolitan Life Insurance Company (MetLife) have
announced a definitive agreement whereby MetLife will acquire GenAmerica and
its subsidiaries, including Paragon Life Insurance Company. The acquisition
will not affect any of the terms or conditions of your Policy or make MetLife a
party to your Policy. The transaction is expected to be completed in
approximately four to six months and is subject to regulatory approval and
certain other conditions.
Headquartered in New York City since 1868, MetLife is a leading provider of
insurance and financial services to a broad spectrum of individual and group
customers. MetLife with approximately $357.7 billion worth of assets under
management as of December 31, 1998, provides individual insurance and
investment products to approximately 9 million households in the United States.
MetLife also serves over 33 million people by providing group insurance and
investment products to corporations and other institutions.
General American agrees to guarantee that the Company will have sufficient
funds to meet all of its contractual obligations. In the event a policyholder
presents a legitimate claim for payment on a Paragon insurance policy, General
American will pay such claim directly to the policyholder if Paragon is unable
to make such a payment. This guarantee, which does not have a predetermined
termination date, can be modified or ended only as to policies not yet issued.
The guarantee agreement is binding on General American, its successor or
assignee and shall cease only if the guarantee is assigned to an organization
having a financial rating from Standard & Poor's equal to or better than
General American's rating. General American does not intend this guarantee to
be a guarantee with regard to the investment experience or cash values of the
Policy.
The Separate Account
Paragon's Separate Account D ("the Separate Account") was established by the
Company as a separate investment account on January 3, 1995 under Missouri law.
The Separate Account receives and invests the Net Premiums paid under this
Policy and allocated to it. In addition, the Separate Account currently
receives and invests net premiums for other classes of flexible premium
variable life insurance policies issued by the Company and might do so for
additional classes in the future.
The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 ("the 1940 Act") and meets the
definition of a "separate account" under Federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account or the Company by the SEC.
16
<PAGE>
The Separate Account currently is divided into fourteen Divisions. Divisions
invest in corresponding Funds from one of several open-end, diversified
management investment companies described below. Income and both realized and
unrealized gains or losses from the assets of each Division of the Separate
Account are credited to or charged against that Division without regard to
income, gains, or losses from any other Division of the Separate Account or
arising out of any other business the Company may conduct.
Although the assets of the Separate Account are the property of Paragon, the
assets in the Separate Account equal to the reserves and other liabilities of
the Separate Account are not chargeable with liabilities arising out of any
other business which the Company may conduct. The assets of the Separate
Account are available to cover the general liabilities of Paragon only to the
extent that the Separate Account's assets exceed its liabilities arising under
the Policies. From time to time, the Company may transfer to its General
Account any assets of the Separate Account that exceed the reserves and the
Policy liabilities of the Separate Account (which will always be at least equal
to the aggregate Policy value allocated to the Separate Account under the
Policies). Before making any such transfers, Paragon will consider any possible
adverse impact the transfer may have on the Separate Account.
The Funds
There is no assurance that any of the Funds will achieve its stated objective.
It is conceivable that in the future it may be disadvantageous for Funds to
offer shares to separate accounts of various insurance companies to serve as
the investment medium for their variable products, or for both variable life
and annuity separate accounts to invest simultaneously in a Fund. The Boards of
Trustees of each Fund, the respective Advisors of each Fund, and the Company
and any other insurance companies participating in the Funds are required to
monitor events to identify any material irreconcilable conflicts that may
possibly arise, and to determine what action, if any, should be taken in
response to those events or conflicts. A more detailed description of the
Funds, their investment policies, restrictions, risks, and charges is in the
prospectuses for each Fund, which must accompany or precede this Prospectus and
which should be read carefully.
The investment objectives and policies of certain Funds are similar to the
investment objectives and policies of other portfolios that may be managed by
the same investment adviser or manager. The investment results of the Funds,
however, may differ from the results of such other portfolios. There can be no
assurance, and no representation is made, that the investment results of any of
the Funds will be comparable to the investment results of any other portfolio,
even if the other portfolio has the same investment adviser or manager.
We have entered into or may enter into arrangements with Funds pursuant to
which we receive a fee based upon an annual percentage of the average net asset
amount invested by us on behalf of the Separate Account and other separate
accounts of the Company. These arrangements are entered into because of
administrative services we provide.
Fidelity Variable Insurance Products Fund
Variable Insurance Products Fund ("VIP") is an open-end, diversified management
investment company. Only the Funds described in this section of the prospectus
are currently available as investment choices of the Policies, even though
additional Funds may be described in the prospectus for VIP. Fidelity
Management & Research Company ("FMR") of Boston, Massachusetts is the manager
of the Funds.
The investment objectives and policies of each Fund are summarized below:
. Growth Portfolio
The investment objective seeks to achieve long-term capital appreciation
by investing primarily in common stocks.
. Equity-Income Portfolio
17
<PAGE>
The investment objective seeks reasonable income by investing primarily
in income-producing equity securities. In choosing these securities, the
Portfolio will also consider the potential for capital appreciation. The
Portfolio's goal is to achieve a yield which exceeds the composite yield
on the securities comprising the Standard & Poor's 500 Composite Stock
Price Index.
Fidelity Variable Insurance Products Fund II
Variable Insurance Products Fund II (VIP II) is an open-end diversified
management investment company. Only the Funds described in this section of the
prospectus are currently available as investment choices of the Policies even
though additional Funds may be described in the prospectus for VIP II. Fidelity
Management & Research Company of Boston, Massachusetts is the manager of the
Funds.
The investment objectives and policies of each Fund are summarized below:
. Index 500 Portfolio
The investment objective seeks to provide investment results that
correspond to the total return (i.e., the combination of capital change
and income) of common stocks publicly traded in the United States as
represented by the Standard & Poor's 500 Composite Stock Price Index,
while keeping transaction costs and other expenses low. The portfolio is
designed as a long-term investment option.
. Contrafund Portfolio
The investment objective seeks long-term capital appreciation by
investing in securities of companies whose value FMR believes is not
fully recognized by the public.
MFS Variable Insurance Trust
MFS Variable Insurance Trust ("MFS Trust") is an open-end diversified
management investment company. Only the Fund described in this section of the
prospectus is currently available as an investment choice of the Policies even
though additional Funds may be described in the prospectus for MFS Trust.
Massachusetts Financial Services Company ("MFS") provides investment advisory
services to MFS Trust for fees in accordance with the terms of the current
prospectus for the Fund.
The investment objective and policies of the Fund are summarized below:
. Emerging Growth Series The investment objective of this Fund is to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Series' investment
objective of long-term growth of capital. The Series' policy is to invest
primarily (i.e., at least 80% of its assets under normal circumstances)
in common stocks of small and medium sized companies that are early in
their life cycle but which have the potential to become major enterprises
(emerging growth companies).
Putnam Variable Trust
Putnam Variable Insurance Trust ("Putnam VT") is an open-end diversified
management investment company. Only the Funds described in this section of the
prospectus are currently available as investment choices of the Policies even
though additional Funds may be described in the prospectus for Putnam Variable
Trust. Putnam Investment Management, Inc. ("Putnam Management") provides
investment advisory services to Putnam Variable Trust for fees in accordance
with the terms of the current Fund prospectuses.
The investment objective and policies of the Funds are summarized below:
. Putnam VT High Yield Fund
This Fund seeks high current income and, when consistent with this
objective, a secondary objective of capital growth, by investing
primarily in high-yielding, lower-rated fixed income securities (commonly
known as "junk bonds"), constituting a diversified portfolio which Putnam
Management believes does not involve undue risk to income or principal.
See the special considerations for investments in high yield securities
described in the Putnam Variable Trust prospectus.
18
<PAGE>
. Putnam VT New Opportunities Fund
This Fund seeks long-term capital appreciation by investing principally
in common stocks of companies in sectors of the economy which Putnam
Management believes possess above-average long-term growth potential.
. Putnam VT Income Fund (formerly the Putnam VT U.S. Government and High
Quality Bond Fund)
This Fund seeks current income consistent with preservation of capital by
investing primarily in securities issued or guaranteed as to principal
and interest by the U.S. Government or by its agencies or
instrumentalities, and in other debt obligations rated at least A by a
nationally recognized securities rating agency such as Standard & Poor's
or Moody's Investors Service, Inc. or, if not rated, determined by Putnam
Management to be of comparable quality.
. Putnam VT Voyager Fund:
This Fund seeks capital appreciation by investing principally in common
stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market
averages.
Scudder Variable Life Investment Fund
Scudder Variable Life Investment Fund ("Scudder VLI") is a series-type mutual
fund registered with the SEC as an open-end, diversified management investment
company. Only the Money Market Portfolio and the Class A shares of the
International Portfolio described herein are currently available as investment
choices of the Policies even though other classes and other Funds may be
described in the prospectus for Scudder VLI. Scudder, Kemper Investments
("Scudder") provides investment advisory services to Scudder VLI whose terms
and fees are set forth in the Scudder VLI prospectus.
The investment objectives and policies of each Fund are summarized below:
. Money Market Portfolio
The investment objective of this Fund is to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of capital
and to provide current income. The Fund seeks to maintain a constant net
asset value of $1.00 per share, although there can be no assurance that
this will be achieved.
. International Portfolio
The investment objective of this Fund seeks long-term growth of capital,
primarily through diversified holdings of marketable foreign equity
investments. The Fund invests in companies, wherever organized, which do
business primarily outside the United States. The Fund intends to
diversify investments among several countries and to have represented in
its holdings, in substantial portions, business activities in not less
than three different countries. The Fund does not intend to concentrate
investments in any particular industry.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Series, Inc. (referred to as "TRP") is an open-end
management investment company. Only the Funds described in this section of the
prospectus are currently available as investment choices of the Policies even
though additional Funds may be described in the prospectus for TRP. T. Rowe
Price Associates, Inc. provides investment advisory services to TRP for fees in
accordance with the terms described in the current Fund prospectus.
The investment objective and policies of the Funds are summarized below:
.New America Growth Portfolio
The investment objective of this Fund is to seek long-term growth of
capital through investment in common stock of U.S. companies which
operate in the service sector of the economy.
19
<PAGE>
. Personal Strategy Balanced Portfolio
The investment objective of this Fund is to obtain the highest total
return consistent with an emphasis on both capital appreciation and
income by investing in a diversified portfolio, typically consisting of
approximately 60% stocks, 30% bonds, and 10% money market securities.
T. Rowe Price Fixed Income Series, Inc.
T. Rowe Price Fixed Income Series, Inc. (referred to as "TRP") is an open-end
management investment company. Only the Fund described in this section of the
prospectus is currently available as an investment choice of the Policies even
though additional Funds may be described in the prospectus for TRP. T. Rowe
Price Associates, Inc. provides investment advisory services to TRP for fees in
accordance with the terms described in the current Fund prospectus.
The investment objectives and policies of the Fund are summarized below:
. Limited-Term Bond Portfolio
The investment objective of this Fund is to obtain a high level of
current income consistent with modest price fluctuations by investing
primarily in short-term and intermediate-term investment-grade debt
securities.
Addition, Deletion, or Substitution of Investments
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from, or substitutions for the shares that are held by
the Separate Account or that the Separate Account may purchase. We reserve the
right to (1) eliminate the shares of any of the Funds and (2) substitute shares
of another Fund if the shares of a Fund are no longer available for investment
or further investment in any Fund becomes inappropriate in view of the purposes
of the Separate Account. We will not substitute any shares without notice to
the Owner and prior approval of the SEC, to the extent required by the 1940 Act
or other applicable law, as required. Nothing contained in this Prospectus
shall prevent the Separate Account from purchasing other securities for other
series or classes of policies, or from permitting a conversion between series
or classes of policies on the basis of requests made by Owners.
We also reserve the right to establish additional Divisions of the Separate
Account. Any new Division will be made available to existing Owners on a basis
to be determined by the Company. To the extent approved by the SEC, we may also
(1) eliminate or combine one or more Divisions, (2) substitute one Division for
another Division, or (3) transfer assets between Divisions if marketing, tax,
or investment conditions warrant.
We may make changes in the Policy by appropriate endorsement in the event of a
substitution or change. We will notify all Owners of any such changes.
If deemed by the Company to be in the best interests of persons having voting
rights under the Policy, and to the extent any necessary SEC approvals or Owner
votes are obtained, the Separate Account may be: (a) operated as a management
company under the 1940 Act; (b) de-registered under that Act in the event such
registration is no longer required; or (c) combined with other separate
accounts of the Company. To the extent permitted by applicable law, the Company
may also transfer the assets of the Separate Account associated with the Policy
to another separate account.
POLICY BENEFITS
Death Benefit
As long as the Policy remains in force (See Payment and Allocation of
Premiums--Policy Lapse and Reinstatement), the Company will, upon receipt at
its Home Office of proof of the Last Insured's death, pay the death benefit in
a lump sum. The amount of the death benefit payable will be determined at the
end of the Valuation Period during which the Last Insured's death occurred. The
death benefit will be paid to the surviving Beneficiary or Beneficiaries
specified in the application or as subsequently changed.
20
<PAGE>
The Policy provides three death benefit options: "Death Benefit Option A,"
"Death Benefit Option B," and "Death Benefit Option C." The death benefit under
all options will never be less than the current Face Amount of the Policy (less
Indebtedness) as long as the Policy remains in force. (See Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.) The current minimum
Face Amount is generally $250,000.
Death Benefit Option A. Under Death Benefit Option A, the death benefit until
the younger Insured reaches Attained Age 100 is the current Face Amount of the
Policy or, if greater, the applicable percentage of Cash Value. At the younger
Insured's Attained Age 100 and above, the death benefit is 101% of the Cash
Value. The applicable percentage is 250% for a younger Insured reaching
Attained Age 40 or below on the Policy Anniversary prior to the date of death.
For younger Insureds with an a Attained Age over 40 on that Policy Anniversary,
the percentage is lower and declines with age as shown in the Applicable
Percentage of Cash Value Table shown below. Accordingly, under Death Benefit
Option A the death benefit will remain level at the Face Amount unless the
applicable percentage of Cash Value exceeds the current Face Amount, in which
case the amount of the death benefit will vary as the Cash Value varies. (See
Illustrations of Death Benefits and Cash Values, Appendix A.)
Death Benefit Option B. Under Death Benefit Option B, the death benefit until
the younger Insured reaches Attained Age 100 is equal to the current Face
Amount plus the Cash Value of the Policy or, if greater, the applicable
percentage of the Cash Value. At the younger Insured's Attained Age 100 and
above, the death benefit is 101% of the Cash Value. The applicable percentage
is the same as under Death Benefit Option A: 250% for a younger Insured
Attained Age 40 or below on the Policy Anniversary prior to the date of death,
and for younger Insureds with an Attained Age over 40 on that Policy
Anniversary the percentage declines as shown in the Applicable Percentage of
Cash Value Table shown below. Accordingly, under Death Benefit Option B the
amount of the death benefit will always vary as the Cash Value varies (but will
never be less than the Face Amount). (See Illustrations of Death Benefits and
Cash Values, Appendix A.)
Applicable Percentage of Cash Value Table For Younger Insureds Less Than Age
100*
<TABLE>
<CAPTION>
Younger Insured Policy Account Multiple
Peron's Age Percentaqe
--------------- -----------------------
<S> <C>
40 or under............... 250%
45........................ 215%
50........................ 185%
55........................ 150%
60........................ 130%
65........................ 120%
70........................ 115%
78 to 90.................. 105%
95 to 99.................. 101%
</TABLE>
*For ages that are not shown on this table, the applicable percentage multiples
will decrease by a ratable portion for each full year.
Death Benefit Option C. Under Death Benefit Option C, the death benefit is
equal to the current Face Amount of the Policy or, if greater, the Cash Value
multiplied by the "Attained Age factor" for the younger Insured (a list of
sample Attained Age factors is shown in the Sample Attained Age Factor Table
below). At the younger Insured's Attained Age 100 and above, the death benefit
is 101% of the Cash Value. Accordingly, under Death Benefit Option C the death
benefit will remain level at the Face Amount unless the Cash Value multiplied
by the younger Insured's Attained Age factor exceeds the current Face Amount,
in which case the amount of the death benefit will vary as the Cash Value
varies. (See Illustrations of Death Benefits and Cash Values, Appendix A.)
21
<PAGE>
Death Benefit Option C Sample Attained Age Factor Table
Based on Male and Female Insureds Both Age 35 at Issue, Standard Smoker Rates
<TABLE>
<CAPTION>
Attained
Age Lives Factor
-------- ------------
<S> <C>
35 5.641840
40 4.640444
45 3.825569
50 3.166936
55 2.638797
60 2.220327
65 1.891312
70 1.640024
75 1.449651
80 1.314918
85 1.219345
90 1.152999
95 1.090450
100+ 1.010000
</TABLE>
Changes In Death Benefit Option. If the Policy was issued with either Death
Benefit Option A or Death Benefit Option B, the death benefit option may be
changed. A request for change must be made to the Company in writing. The
effective date of such a change will be the Monthly Anniversary on or following
the date the Company receives the change request. A change in death benefit
option may have Federal income tax consequences. (See Federal Tax Matters.)
A Death Benefit Option A Policy may be changed to have Death Benefit Option B.
The Face Amount will be decreased to equal the death benefit less the Cash
Value on the effective date of change. A Death Benefit Option B Policy may be
changed to have Death Benefit Option A. The Face Amount will be increased to
equal the death benefit on the effective date of change. A Policy issued under
Death Benefit Option C may not change to either Death Benefit Option A or Death
Benefit Option B for the entire lifetime of the Contract. Similarly, a Policy
issued under either Death Benefit Option A or B may not change to Death Benefit
Option C for the lifetime of the Policy.
Satisfactory evidence of insurability must be submitted to the Company in
connection with a request for a change from Death Benefit Option A to Death
Benefit Option B. A change may not be made if it would result in a Face Amount
of less than the minimum Face Amount.
A change in death benefit option will not in itself result in an immediate
change in the amount of a Policy's death benefit or Cash Value. (See Monthly
Deduction--Cost of Insurance.)
Reduction in Face Amount. Subject to certain limitations set forth below, an
Owner may decrease (but not increase) the Face Amount of a Policy once each
Policy Year, but not before the first Policy Anniversary. A written request is
required for a reduction in the Face Amount. A reduction in Face Amount may
affect the cost of insurance rate and the net amount at risk, both of which
affect an Owner's cost of insurance charge. (See Monthly Deduction--Cost of
Insurance.) A reduction in the Face Amount of a Policy may have Federal income
tax consequences. (See Federal Tax Matters.)
Any decrease in the Face Amount will become effective on the Monthly
Anniversary on or following receipt of the written request by the Company. The
amount of the requested decrease must be at least the amount shown on the
Policy's specifications page (generally $5,000) and the Face Amount remaining
in force after any requested decrease may not be less than minimum Face Amount.
If following a decrease in Face Amount, the Policy would not comply with the
maximum premium limitations required by Federal tax law (see Payment and
Allocation of Premiums), the decrease may be limited or Cash Value may be
returned to the Owner (at the Owner's election), to the extent necessary to
meet these requirements. (See Monthly Deduction--Cost of Insurance.)
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<PAGE>
Payment of the Policy Proceeds. The proceeds under the Policy will ordinarily
be paid in a lump sum within seven days after the Company receives all
documentation required for such a payment. Payment may, however, be postponed
in certain circumstances. (See General Matters--Postponement of Payment from
the Separate Account.) The death benefit will be increased by the amount of the
monthly cost of insurance for the portion of the month from the date of death
to the end of the month, and reduced by any payment due under the grace period
provision as of the date of the Last Insured's death and by any outstanding
Indebtedness. (See General Matters--Additional Insurance Benefits and Charges
and Deductions.) The Company will pay interest on the death benefit from the
date of the Last Insured's death to the date of payment. Interest will be at an
annual rate determined by the Company, but will never be less than the
guaranteed rate of 4%. Provisions for settlement of proceeds other than a lump
sum payment may only be made upon written agreement with the Company.
Cash Value
The Cash Value of the Policy is equal to the total of the amounts credited to
the Owner in the Separate Account, the Loan Account (securing Policy Loans),
and, in certain contracts, the General Account. The Policy's Cash Value in the
Separate Account will reflect the investment performance of the chosen
Divisions of the Separate Account as measured by each Division's Net Investment
Factor (defined below), the frequency and amount of Net Premiums paid,
transfers, partial withdrawals, loans and the charges assessed in connection
with the Policy. An Owner may at any time surrender the Policy and receive the
Policy's Cash Surrender Value. (See Policy Rights--Surrender, Partial
Withdrawals, and Pro-Rata Surrender.) The Policy's Cash Value in the Separate
Account equals the sum of the Policy's Cash Values in each Division. There is
no guaranteed minimum Cash Value.
Determination of Cash Value. For each Division of the Separate Account, the
Cash Value is determined on each Valuation Date. On the Investment Start Date,
the Cash Value in a Division will equal the portion of any Net Premium
allocated to the Division, reduced by the portion allocated to that Division of
the monthly deduction(s) due from the Issue Date through the Investment Start
Date. (See Payment and Allocation of Premiums.) Thereafter, on each Valuation
Date, the Cash Value in a Division of the Separate Account will equal:
(1) The Cash Value in the Division on the preceding Valuation Date,
multiplied by the Division's Net Investment Factor (defined below) for
the current Valuation Period; plus
(2) Any Net Premium payments received during the current Valuation Period
which are allocated to the Division; plus
(3) Any loan repayments allocated to the Division during the current
Valuation Period; plus
(4) Any amounts transferred to the Division from the General Account or
from another Division during the current Valuation Period; plus
(5) That portion of the interest credited on outstanding loans which is
allocated to the Division during the current Valuation Period; minus
(6) Any amounts transferred from the Division to the General Account, Loan
Account, or to another Division during the current Valuation Period
(including any transfer charges); minus
(7) Any partial withdrawals from the Division during the current Valuation
Period; minus
(8) Any withdrawal due to a Pro-Rata Surrender from the Division during the
current Valuation Period; minus
(9) If a Monthly Anniversary occurs during the current Valuation Period,
the portion of the monthly deduction allocated to the Division during
the current Valuation Period to cover the Policy Month which starts
during that Valuation Period (See Charges and Deductions.).
Net Investment Factor: The Net Investment Factor measures the investment
performance of a Division during a Valuation Period. The Net Investment Factor
for each Division for a Valuation period is calculated as follows:
(1) The value of the assets at the end of the preceding Valuation Period;
plus
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<PAGE>
(2) The investment income and capital gains, realized or unrealized,
credited to the assets in the Valuation Period for which the Net
Investment Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged against those
assets during the Valuation Period; minus
(4) Any amount charged against each Division for taxes, including any tax
or other economic burden resulting from the application of the tax laws
determined by the Company to be properly attributable to the Divisions
of the Separate Account, or any amount set aside during the Valuation
Period as a reserve for taxes attributable to the operation or
maintenance of each Division; minus
(5) A charge equal to a percentage of the average net assets for each day
in the Valuation Period. This charge, for mortality and expense risks,
is determined by the length of time the Policy has been in force. It
will not exceed the amounts shown in the following table:
<TABLE>
<CAPTION>
Policy Percentage of Effective
Years Avg. Net Assets Annual Rate
------ --------------- -----------
<S> <C> <C>
1-10 0.0015027 0.55%
11-20 0.0012301 0.45%
21+ 0.0009572 0.35%;
</TABLE>
divided by
(6) The value of the assets at the end of the preceding Valuation Period.
POLICY RIGHTS
Loans
Loan Privileges. The Owner may, by written request to the Company, borrow an
amount up to the Loan Value of the Policy, with the Policy serving as sole
security for such loan. A loan taken from, or secured by, a Policy may have
Federal income tax consequences. (See Federal Tax Matters.)
The Loan Value is the Cash Value of the Policy on the date the loan request is
received, less interest to the next loan interest due date, less anticipated
monthly deductions to the next loan interest due date, less any existing loan,
plus interest expected to be earned on the loan balance to the next loan
interest due date. Policy Loan interest is payable on each Policy Anniversary.
The minimum amount that may be borrowed is $500. The loan may be completely or
partially repaid at any time while the Insured is living. Any amount due to an
Owner under a Policy Loan ordinarily will be paid within seven days after
Paragon receives the loan request at its Home Office, although payments may be
postponed under certain circumstances. (See General Matters--Postponement of
Payments from the Separate Account.)
When a Policy Loan is made, Cash Value equal to the amount of the loan plus
interest due will be transferred to the Loan Account as security for the loan.
A Loan Subaccount exists within the Loan Account for the General Account and
each Division of the Separate Account. Amounts transferred to the Loan Account
to secure Indebtedness are allocated to the appropriate Loan Subaccount to
reflect its origin.
Unless the Owner requests a different allocation, amounts will be transferred
from the Divisions of the Separate Account and the General Account in the same
proportion that the Policy's Cash Value in each Division and the General
Account, if any, bears to the Policy's total Cash Value, less the Cash Value in
the Loan Account, at the end of the Valuation Period during which the request
for a Policy Loan is received.
The amount of the Cash Value in the Loan Account on any Valuation Date after
the Investment Start Date is:
(1) the Cash Value in the Loan account on the preceding Valuation date,
with interest; plus
(2) any amount transferred to the Loan Account from the General Account or
from a Division of the Separate Account on that day; minus
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<PAGE>
(3) any loan repayments made on that day; plus;
(4) if the Valuation Date is also a Policy Anniversary, the amount due to
cover any unpaid loan interest.
This will reduce the Policy's Cash Value in the General Account and in the
Separate Account. These transactions will not be considered transfers for
purposes of the limitations on transfers between Divisions or to or from the
General Account.
Cash Value in the Loan Account is expected to earn interest at a rate ("the
earnings rate") which is lower than the rate charged on the Policy Loan ("the
borrowing rate"). Cash Value in the Loan Account will accrue interest daily at
an annual earnings rate of 4%.
Interest credited on the Cash Value held in the Loan Account will be allocated
on Policy Anniversaries to the General Account and the Divisions of the
Separate Account in the same proportion that the Cash Value in each Loan
Subaccount bears to the Cash Value in the Loan Account. The interest credited
will also be transferred: (1) when a new loan is made; (2) when a loan is
partially or fully repaid; and (3) when an amount is needed to meet a monthly
deduction.
Interest Charged. The borrowing rate we charge for Policy Loan interest will be
based on the following schedule:
<TABLE>
<CAPTION>
For Loans Annual
Outstanding During Interest Rate
------------------ -------------
<S> <C>
Policy Years 1-10................... 4.50%
Policy Years 11-20.................. 4.25%
Policy Years 21+.................... 4.15%
</TABLE>
Paragon will inform the Owner of the current borrowing rate when a Policy Loan
is requested.
Policy Loan interest is due and payable annually on each Policy Anniversary. If
the Owner does not pay the interest when it is due, the unpaid loan interest
will be added to the outstanding Indebtedness as of the due date and will be
charged interest at the same rate as the rest of the Indebtedness. (See Effect
of Policy Loans below.) The amount of Policy Loan interest which is transferred
to the Loan Account will be deducted from the Divisions of the Separate Account
and from the General Account in the same proportion that the portion of the
Cash Value in each Division and in the General Account, respectively, bears to
the total Cash Value of the Policy minus the Cash Value in the Loan Account.
Effect of Policy Loans. Whether or not a Policy Loan is repaid, it will
permanently affect the Cash Value of a Policy, and may permanently affect the
amount of the death benefit. The collateral for the loan (the amount held in
the Loan Account) does not participate in the performance of the Separate
Account while the loan is outstanding. If the Loan Account earnings rate is
less than the investment performance of the selected Division(s), the Cash
Value of the Policy will be lower as a result of the Policy Loan. Conversely,
if the Loan Account earnings rate is higher than the investment performance of
the Division(s), the Cash Value may be higher.
In addition, if the Indebtedness (See Definitions) exceeds the Cash Value on
any Monthly Anniversary, the Policy will lapse, subject to a grace period. (See
Payment and Allocation of Premiums--Policy Lapse and Reinstatement.) A
sufficient payment must be made within the later of the grace period of 62 days
from the Monthly Anniversary immediately before the date Indebtedness exceeds
the Cash Value, or 31 days after notice that a Policy will terminate, or the
Policy will lapse and terminate without value. A lapsed Policy, however, may
later be reinstated subject to certain limitations. (See Payment and Allocation
of Premiums--Policy Lapse and Reinstatement.)
Any outstanding Indebtedness will be deducted from the proceeds payable upon
the death of the Last Insured or the surrender of the Policy. Upon a complete
surrender or lapse of any Policy, if the amount received plus the amount of
outstanding Indebtedness exceeds the total investment in the Policy, the excess
will generally be treated as ordinary income subject to tax. A Policy loan may
also have other tax consequences. (See Federal Tax Matters.)
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<PAGE>
Repayment of Indebtedness. A Policy Loan may be repaid in whole or in part at
any time prior to the death of the Last Insured and as long as a Policy is in
force. When a loan repayment is made, an amount securing the Indebtedness in
the Loan Account equal to the loan repayment will be transferred to the
Divisions of the Separate Account and the General Account in the same
proportion that the Cash Value in each Loan Subaccount bears to Cash Value in
the Loan Account. Amounts paid while a Policy Loan is outstanding will be
treated as premiums unless the Owner requests in writing that they be treated
as repayment of Indebtedness.
Surrender, Partial Withdrawals and Pro-Rata Surrender
At any time during the lifetime of either Insured and while a Policy is in
force, the Owner may surrender the Policy by sending a written request to the
Company. After the first Policy Year, an Owner may make a partial withdrawal by
sending a written request to the Company. The amount available for surrender is
the Cash Surrender Value at the end of the Valuation Period during which the
surrender request is received at the Company's Home Office. Amounts payable
from the Separate Account upon surrender, partial withdrawal, or a Pro-Rata
Surrender will ordinarily be paid within seven days of receipt of the written
request. (See General Matters--Postponement of Payments from the Separate
Account.)
Surrenders. To effect a surrender, either the Policy itself must be returned to
the Company along with the request, or the request must be accompanied by a
completed affidavit of loss, which is available from the Company. Upon
surrender, the Company will pay the Cash Surrender Value to the Owner in a
single sum. The Cash Surrender Value equals the Cash Value on the date of
surrender, less any Indebtedness, and less any unpaid selection and issue
expense charges and any unpaid monthly policy charges due for the remainder of
the first policy year.. The Company will determine the Cash Surrender Value as
of the date that an Owner's written request is received at the Company's Home
Office. If the request is received on a Monthly Anniversary, the monthly
deduction otherwise deductible will be included in the amount paid. Coverage
under a Policy will terminate as of the date of surrender. The Last Insured
must be living at the time of a surrender. A surrender may have Federal income
tax consequences. (See Federal Tax Matters.)
Partial Withdrawals. After the first Policy Year, an Owner may make partial
withdrawals from the Policy's Cash Surrender Value. There is no transaction
charge for the first twelve partial withdrawals or requested transfers in a
Policy Year. Paragon will impose a charge of $25 for each partial withdrawal or
requested transfer in excess of twelve in a Policy Year. A partial withdrawal
may have Federal income tax consequences. (See Federal Tax Matters.)
The minimum amount of a partial withdrawal request is the lesser of (a) $500
from a Division of the Separate Account, or (b) the Policy's Cash Value in a
Division. Partial withdrawals made during a Policy Year may not exceed the
following limits. The maximum amount that may be withdrawn from a Division of
the Separate Account is the Policy's Cash Value in that Division. The total
partial withdrawals and transfers from the General Account over the Policy Year
may not exceed a maximum amount equal to the greatest of the following: (1) 25%
of the Cash Surrender Value in the General Account at the beginning of the
Policy Year, multiplied by the withdrawal percentage limit shown in the policy,
or (2) the previous Policy Year's maximum amount.
The Owner may allocate the amount, subject to the above conditions, among the
Divisions of the Separate Account and the General Account. If no allocation is
specified, then the partial withdrawal will be allocated among the Divisions of
the Separate Account and the General Account in the same proportion that the
Policy's Cash Value in each Division and the General Account bears to the total
Cash Value of the Policy, less the Cash Value in the Loan Account, on the date
the request for the partial withdrawal is received. If the limitations on
withdrawals from the General Account will not permit this proportionate
allocation, the Owner will be requested to provide an alternate allocation.
(See The General Account.)
The death benefit will be affected by a partial withdrawal, unless Death
Benefit Option A or Option C is in effect and the withdrawal is made under the
terms of an anniversary partial withdrawal rider. (See General Matters--
Additional Insurance Benefits.) If Death Benefit Option A or Death Benefit
Option C is in effect and
26
<PAGE>
the death benefit equals the Face Amount, then a partial withdrawal will
decrease the Face Amount by an amount equal to the partial withdrawal. If the
death benefit is based on a percentage of the Cash Value, then a partial
withdrawal will decrease the Face Amount by an amount by which the partial
withdrawal exceeds the difference between the death benefit and the Face
Amount. If Death Option B is in effect, the Face Amount will not change.
The Face Amount remaining in force after a partial withdrawal may not be less
than the minimum Face Amount. Any request for a partial withdrawal that would
reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance charge is
calculated and the amount of pure insurance protection afforded under a Policy.
(See Monthly Deduction--Cost of Insurance.) The Company may change the minimum
amount required for a partial withdrawal or the number of times partial
withdrawals may be made.
Pro-Rata Surrender. After the first Policy Year, an Owner can make a Pro-Rata
Surrender of the Policy. The Pro-Rata Surrender will reduce the Face Amount and
the Cash Value by a percentage chosen by the Owner. This percentage must be any
whole number. A Pro-Rata Surrender may have Federal income tax consequences.
(See Federal Tax Matters.) The percentage will be applied to the Face Amount
and the Cash Value on the Monthly Anniversary on or following our receipt of
the request.
The Owner may allocate the amount of decrease in Cash Value among the Divisions
of the Separate Account and the General Account. If no allocation is specified,
then the decrease in Cash Value will be allocated among the Divisions of the
Separate Account and the General Account in the same proportion that the
Policy's Cash Value in each Division and the General Account bears to the total
Cash Value of the Policy, less the Cash Value in the Loan Account, on the date
the request for Pro-Rata Surrender is received.
A Pro-Rata Surrender can not be processed if it will reduce the Face Amount
below the minimum Face Amount of the Policy. No Pro-Rata Surrender will be
processed for more Cash Surrender Value than is available on the date of the
Pro-Rata Surrender. A cash payment will be made to the Owner for the amount of
Cash Value reduction.
Pro-Rata Surrenders may affect the way in which the cost of insurance charge is
calculated and the amount of the pure insurance protection afforded under the
Policy. (See Monthly Deduction--Cost of Insurance.)
Differences Between Partial Withdrawal and Pro-Rata Surrender. While partial
withdrawals and Pro-Rata Surrenders are each methods of reducing a Policy's
Cash Value, a Pro-Rata Surrender differs from a partial withdrawal in that a
partial withdrawal does not typically have a proportionate effect on a Policy's
death benefit by reducing the Policy's Face Amount, while a Pro-Rata Surrender
does. Assuming that a Policy's death benefit is not a percentage of the
Policy's Cash Value, a Pro-Rata Surrender will reduce the Policy's death
benefit in the same proportion that the Policy's Cash Value is reduced, while a
partial withdrawal will reduce the death benefit by one dollar for each dollar
of Cash Value withdrawn. Partial Withdrawals and Pro-Rata Surrenders will also
result in there being different cost of insurance charges subsequently
deducted. (See Monthly Deduction--Cost of Insurance; Surrender, Partial
Withdrawals and Pro-Rata Surrender--Partial Withdrawals; and Surrenders,
Partial Withdrawals, and Pro-Rata Surrenders--Pro-Rata Surrender.)
Transfers
Under Paragon's current practices, a Policy's Cash Value, except amounts
credited to the Loan Account, may be transferred among the Divisions of the
Separate Account and for certain contracts, between the General Account and the
Divisions. Transfers to and from the General Account are subject to
restrictions (See The General Account). Requests for transfers from or among
Divisions of the Separate Account may be made in writing or by telephone.
Transfers from or among the Divisions of the Separate Account must be in
amounts of
27
<PAGE>
at least $500 or, if smaller, the Policy's Cash Value in a Division. The first
twelve requested transfers or partial withdrawals per policy year will be
allowed free of charge. Thereafter, the Company will impose a charge of $25 for
each requested transfer or partial withdrawal. Paragon ordinarily will make
transfers and determine all values in connection with transfers as of the end
of the Valuation Period during which the transfer request is received.
All requests received on the same Valuation Date will be considered a single
transfer request. Each transfer must meet the minimum requirement of $500 or
the entire Cash Value in a Division, whichever is smaller. Where a single
transfer request calls for more than one transfer, and not all of the transfers
would meet the minimum requirements, Paragon will make those transfers that do
meet the requirements. Transfers resulting from Policy Loans will not be
counted for purposes of the limitations on the amount or frequency of transfers
allowed in each Policy Month or Policy Year.
Although Paragon currently intends to continue to permit transfers for the
foreseeable future, the Policy provides that the Company may at any time
revoke, modify, or limit the transfer privilege, including the minimum amount
transferable, the maximum General Account allocation percent, and the frequency
of such transfers.
Portfolio Rebalancing
Over time, the amounts in the General Account and the Divisions of the Separate
Account will accumulate at different rates as a result of different investment
returns. The Owner may direct that from time to time we automatically restore
the balance of the Cash Value in the General Account and in the Divisions of
the Separate Account to the percentages determined in advance. There are two
methods of rebalancing
available--periodic and variance.
Periodic Rebalancing. Under this option the Owner elects a frequency (monthly,
quarterly, semiannually or annually), measured from the Policy Anniversary. On
each date elected, we will rebalance the Funds by generating transfers to
reallocate the amounts according to the investment percentages elected.
Variance Rebalancing. Under this option the Owner elects a specific allocation
percentage for the General Account and each Division of the Separate Account.
For each such account, the allocation percentage (if not zero) must be a whole
percentage and must not be less than five percent (5%). The Owner also elects a
maximum variance percentage (5%, 10%, 15%, or 20% only), and can exclude
specific Funds from being rebalanced. On each Monthly Anniversary we will
review the current balances to determine whether any balance is outside of the
variance range (either above or below) as a percentage of the specified
allocation percentage for that fund. If any fund is outside of the variance
range, we will generate transfers to rebalance all of the specified funds back
to the predetermined percentages.
Owners should consider that portfolio rebalancing entails the transfer of Cash
Value from better performing portfolios to lesser performing portfolios.
Transfers resulting from portfolio rebalancing will not be counted against the
total number of transfers allowed in a Policy Year before a charge is applied.
The Owner may elect either form of portfolio rebalancing by specifying it on
the policy application, or may elect it later for an in-force Policy, or may
cancel it, by submitting a change form acceptable to Paragon under its
administrative rules.
Only one form of portfolio rebalancing may be elected at any one time, and
portfolio rebalancing may not be used in conjunction with dollar cost averaging
(see below).
Paragon does not currently charge for portfolio rebalancing. The Company
reserves the right to suspend portfolio rebalancing at any time on any class of
Policies on a nondiscriminatory basis, or to charge an administrative fee for
election changes in excess of a specified number in a Policy Year in accordance
with its administrative rules.
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<PAGE>
Dollar Cost Averaging
The Owner may direct the Company to transfer amounts on a monthly basis from
the Money Market Fund to any other Division of the Separate Account. This
service is intended to allow the Owner to utilize "dollar cost averaging"
("DCA"), a long-term investment technique which provides for regular, level
investments over time. The Company makes no guarantee that DCA will result in a
profit or protect against loss.
The following rules and restrictions apply to DCA transfers:
(1) The minimum DCA transfer amount is $100.
(2) A written election of the DCA service, on a form provided by the
Company, must be completed by the Owner and on file with the Company in
order to begin DCA transfers.
(3) In the written election of the DCA service, the Owner indicates how DCA
transfers are to be allocated among the Divisions of the Separate
Account. For any Division chosen to receive DCA transfers, the minimum
percentage that may be allocated to a Division is 5% of the DCA
transfer amount, and fractional percentages may not be used.
(4) DCA transfers can only be made from the Money Market Fund, and DCA
transfers will not be allowed to the General Account.
(5) The DCA transfers will not count against the Policy's normal transfer
restrictions. (See Policy Rights--Transfers.)
(6) The DCA transfer percentages may differ from the allocation percentages
the Owner specifies for the allocation of Net Premiums. (See Payment
and Allocation of Premiums--Allocation of Net Premiums and Cash
Values.)
(7) Once elected, DCA transfers from the Money Market Fund will be
processed monthly until either the value in the Money Market Fund is
completely depleted or the Owner instructs the Company in writing to
cancel the DCA service.
(8) Transfers as a result of a Policy Loan or repayment, or in exercise of
the conversion privilege, are not subject to the DCA rules and
restrictions. (The conversion right allows the Owner to transfer the
entire Cash Value into the General Account at any time during the first
two Policy Years, with no transfer charge or transfer limits. There is
no effect on the Policy's death benefit, Face Amount, net amount at
risk, risk class, or Issue Age. If the Owner elects to exercise this
right, all future Net Premiums are allocated to the General Account,
and no future transfers to the Separate Account are allowed.) The DCA
service terminates at the time the conversion privilege is exercised,
when any outstanding amount in any Division of the Separate Account is
immediately transferred to the General Account. (See The General
Account--Transfers, Surrenders, Partial Withdrawals and Policy Loans--
Conversion Right.)
(9) DCA transfers will not be made until the Right to Examine Policy period
has expired (See Policy Rights--Right to Examine Policy).
The Company reserves the right to assess a processing fee for the DCA service.
The Company reserves the right to discontinue offering DCA upon 30 days'
written notice to Owners. However, any such discontinuation will not affect DCA
services already commenced. The Company reserves the right to impose a minimum
total Cash Value, less outstanding Indebtedness, in order to qualify for DCA
service. Also, the Company reserves the right to change the minimum necessary
Cash Value and the minimum required DCA transfer amount.
Transfers made under Dollar Cost Averaging do not count against the total of
twelve requested transfers or partial withdrawals allowed without charge in a
Policy Year. There is currently no charge for exercising this option.
Right to Examine Policy
The Owner may cancel a Policy within 20 days after receiving it (30 days if the
Owner is a resident of California and is age 60 or older) or within 45 days
after the application was signed, whichever is later.
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<PAGE>
If a Policy is canceled within this time period, a refund will be paid. Where
required by state law, the refund will equal all premiums paid under the
Policy. Where required by state law, Paragon will refund an amount equal to the
greater of premiums paid or (1) plus (2), where (1) is the difference between
the premiums paid, including any policy fees or other charges, and the amounts
allocated to the Separate Account under the Policy and (2) is the value of the
amounts allocated to the Separate Account under the Policy on the date the
returned Policy is received by Paragon or its agent.
To cancel the Policy, the Owner should mail or deliver the Policy to either
Paragon or the agent who sold it. A refund of premiums paid by check may be
delayed until the Owner's check has cleared the bank upon which it was drawn.
(See General Matters--Postponement of Payments from the Separate Account.)
Death Benefit at Attained Age 100
If the Last Insured is living and the Policy is in force when the younger
Insured reaches Attained Age 100, the death benefit will be equal to 101% of
the Cash Value of the Policy unless the Lifetime Coverage Rider is in effect.
(See Additional Insurance Benefits.) At that point, no further premium payments
will be required or accepted, and no further monthly deductions will be taken
to cover the cost of insurance.
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
Individuals wishing to purchase a Policy must complete an application and
submit it to an authorized registered agent of Paragon or to Paragon's Home
Office. A Policy will generally be issued to Insureds of Issue Ages 0 through
90. (Issue age requirements vary for policies issued in Texas.) Paragon may, in
its sole discretion, issue Policies to individuals falling outside of those
Issue Ages. Acceptance of an application is subject to Paragon's underwriting
rules and the Company reserves the right to reject an application for any
reason.
The Issue Date is determined by Paragon in accordance with its standard
underwriting procedures for variable life insurance policies. The Issue Date is
used to determine Policy Anniversaries, Policy Years, and Policy Months.
Insurance coverages under a Policy will not take effect until the Policy has
been delivered and the initial premium has been paid during the lifetimes of
both Insureds and prior to any change in health as shown in the application.
Premiums
The initial premium is due on the Issue Date, and is to be paid to Paragon at
its Home Office. The Company currently requires that the initial premium for a
Policy be at least equal to one-twelfth ( 1/12) of the Minimum Premium for the
Policy. The Minimum Premium is the amount specified for each Policy based on
the requested initial Face Amount and the charges under the Policy which vary
according to the Issue Age, sex, underwriting risk class, and smoker status of
the Insured. (See Charges and Deductions.)
Following the initial premium, subject to the limitations described below,
premiums may be paid in any amount and at any interval. Premiums after the
first premium payment must be paid to Paragon at its Home Office. An Owner may
establish a schedule of planned premiums which will be billed by the Company at
regular intervals. Failure to pay planned premiums, however, will not itself
cause the Policy to lapse. (See Policy Lapse and Reinstatement.) Premium
receipts will be furnished upon request.
An Owner may make unscheduled premium payments at any time in any amount, or
skip planned premium payments, subject to the minimum and maximum premium
limitations described below.
If a Policy is in the intended Owner's possession but the initial premium has
not been paid, the Policy is not in force. The intended Owner is deemed to have
the Policy for inspection only.
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<PAGE>
Premium Limitations. Every premium payment must be at least $10. In no event
may the total of all premiums paid in any Policy Year exceed the current
maximum premium limitations for that Policy Year. Maximum premium limits for
the Policy Year will be shown in an Owner's annual report.
In general, for policies issued with Death Benefit Option A or Death Benefit
Option B, the maximum premium limit for a Policy Year is the largest amount of
premium that can be paid in that Policy Year such that the sum of the premiums
paid under the Policy will not at any time exceed the guideline premium
limitation needed to comply with the tax definition of life insurance. For
policies issued with Death Benefit Option C, the company reserves the right to
impose other restrictions upon the amount of premium that may be paid into the
Policy. If at any time a premium is paid which would result in total premiums
exceeding the current maximum premium limitations, the Company will only accept
that portion of the premium which will make total premiums equal the maximum.
Any part of the premium in excess of that amount will be returned or applied as
otherwise agreed, and no further premiums will be accepted until allowed under
the current maximum premium limitations.
In addition to the foregoing tax definitional limits on premiums, for purposes
of determining whether distributions (including loans) are a return of income
first, the Company monitors the Policy to detect whether the "seven pay limit"
has been exceeded. If the seven pay limit is exceeded, the Policy becomes a
"Modified Endowment." The Company has adopted administrative steps designed to
notify an Owner when it is believed that a premium payment will cause a Policy
to become a modified endowment contract. The Owner will be given a limited
amount of time to request that the premium be reversed in order to avoid the
Policy's being classified as a modified endowment contract. (See Federal Tax
Matters.)
If the Company receives a premium payment which would cause the death benefit
to increase by an amount that exceeds the Net Premium portion of the payment,
then the Company reserves the right to (1) refuse that premium payment, or (2)
require additional evidence of insurability before it accepts the premium.
Allocation of Net Premiums and Cash Value
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how Net Premiums are to be allocated among the Divisions of the
Separate Account, to the General Account (if available), or both. For each
Division chosen, the minimum percentage that may be allocated to a Division is
5% of the Net Premium, and fractional percentages may not be used. Certain
other restrictions apply to allocations made to the General Account (see
General Account). For policies issued with an allowable percentage to the
General Account of more than 5%, the minimum percentage is 5%, and fractional
percentages may not be used.
The allocation for future Net Premiums may be changed without charge at any
time by providing notice to the Company. Any change in allocation will take
effect immediately upon receipt by the Company of written notice. No charge is
imposed for changing the allocations of future premiums. The initial allocation
will be shown on the application which is attached to the Policy. The Company
may at any time modify the maximum percentage of future Net Premiums that may
be allocated to the General Account.
During the period from the Issue Date to the end of the Right to Examine Policy
Period (See Policy Rights--Right to Examine Policy), Net Premiums will
automatically be allocated to the Division that invests in the Money Market
Fund. When this period expires, the Policy's Cash Value in that Division will
be transferred to the Divisions of the Separate Account and to the General
Account (if available) in accordance with the allocation requested in the
application for the Policy, or any allocation instructions received subsequent
to receipt of the application. Net Premiums received after the Right to Examine
Policy Period will be allocated according to the allocation instructions most
recently received by the Company unless otherwise instructed for that
particular premium receipt.
The Right to Examine Policy Period generally expires 20 days after the Owner
receives the Policy (30 days if the Owner is a resident of California and is
age 60 or older) or 45 days after the application was signed, whichever is
later. For purposes of our allocation rules, the Owner is deemed to have
received the Policy five days after the Company mails the Policy to the Owner.
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<PAGE>
The Policy's Cash Value may also be transferred between Divisions of the
Separate Account, and, if the General Account is available under the Policy,
between those Divisions and the General Account. (See Policy Rights--
Transfers.)
The value of amounts allocated to Divisions of the Separate Account will vary
with the investment performance of the chosen Divisions and the Owner bears the
entire investment risk. This will affect the Policy's Cash Value, and may
affect the death benefit as well. Owners should periodically review their
allocations of Net Premiums and the Policy's Cash Value in light of market
conditions and their overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional whole life insurance policies, the failure to make a
premium payment following the initial premium will not itself cause a Policy to
lapse. If, during the first five Policy Years, the sum of all premiums paid on
the Policy, reduced by any partial withdrawals and any outstanding loan
balance, is greater than or equal to the sum of the No Lapse Monthly Premiums
for the elapsed months since the Issue Date, the Policy will not lapse as a
result of the Cash Value less any loans and loan interest due being
insufficient to pay the monthly deduction. Lapse will occur (except as
described above) when the Cash Surrender Value is insufficient to cover the
monthly deduction, and a grace period expires without a sufficient payment
being made.
The grace period, which is 62 days, begins on the Monthly Anniversary on which
the Cash Surrender Value becomes insufficient to meet the next monthly
deduction. The Company will notify the Owner at the beginning of the grace
period by mail addressed to the last known address on file with the Company.
The notice to the Owner will indicate the amount of additional premium that
must be paid. The amount of the premium required to keep the Policy in force
will be the amount to cover the outstanding monthly deductions and premium
expense charges. (See Charges and Deductions--Monthly Deduction.) If the
Company does not receive the required amount within the grace period, the
Policy will lapse and terminate without Cash Value.
If the Last Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit otherwise payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written application
any time within five years after the date of lapse and before the younger
Insured's Attained Age 100. Reinstatement is subject to the following
conditions:
1. Evidence of the insurability of the Insureds (or if one of the Insureds
was deceased when the Policy lapsed, evidence of the insurability of the
surviving Insured) satisfactory to the Company (including evidence of
insurability of any person covered by a rider to reinstate the rider).
2. Payment of a premium that, after the deduction of premium expense
charges, is large enough to cover: (a) the monthly deductions due at the
time of lapse, and (b) two times the monthly deduction due at the time
of reinstatement.
3. Payment or reinstatement of any Indebtedness. Any Indebtedness
reinstated will cause Cash Value of an equal amount also to be
reinstated. Any loan interest due and unpaid on the Policy Anniversary
prior to reinstatement must be repaid at the time of reinstatement. Any
loan paid at the time of reinstatement will cause an increase in Cash
Value equal to the amount to be reinstated.
The Policy cannot be reinstated if it has been surrendered.
The amount of Cash Value on the date of reinstatement will be equal to the
amount of any Policy Loan reinstated, increased by the Net Premiums paid at
reinstatement and any Policy Loan paid at the time of reinstatement.
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<PAGE>
If both Insureds were alive on the date the Policy lapsed, then both Insureds
must be alive on the date the Company approves the application for
reinstatement. If only one Insured was alive on the date the Policy lapsed,
then that Insured must be alive on the date the Company approves the request
for reinstatement. If any Insured who was alive on the date the Policy lapsed
is not then alive when the Company approves the request for reinstatement, such
approval is void and of no effect.
The effective date of reinstatement will be the date the Company approves the
application for reinstatement. There will be a full monthly deduction for the
Policy Month which includes that date. (See Charges and Deductions--Monthly
Deduction.)
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policy and any
additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in connection
with the Policy.
Premium Expense Charges
Prior to allocation of Net Premiums, premium payments will be reduced by
premium expense charges consisting of a sales charge (if applicable) and a
charge for premium taxes and federal taxes. The premium payment less the
premium expense charge equals the Net Premium.
Sales Charge. For policies issued in the state of Oregon, a sales charge of
2.25% of the premium paid will be deducted from each premium payment to
partially compensate the Company for expenses incurred in distributing the
Policy and any additional benefits provided by riders. There is no sales charge
in any other state.
To the extent that sales expenses are not recovered from the sales charge,
those expenses may be recovered from other sources, including the mortality and
expense risk charge described below.
Premium Tax Charge. Various states or other governing jurisdictions and their
subdivisions impose a tax on premiums received by insurance companies. Except
on policies issued in the state of Oregon, a deduction of 2.25% of the premium
paid is taken from each premium payment for these taxes. No state tax deduction
is taken on policies issued in Oregon. The deduction compensates the Company
for taxes imposed on the policy by the state or other governing jurisdiction
and any subdivisions thereof
Federal Tax Charge. This charge is designed to pass through the equivalent of
the federal tax consequences applicable to the policy. The charge is currently
1.3% of premium paid, and is guaranteed not to increase except to the extent of
any increases in the federal tax.
Monthly Deduction
Charges will be deducted monthly from the Cash Value of each Policy ("the
monthly deduction") to compensate the Company for (a) certain administrative
costs; (b) the cost of insurance; and (c) the cost of optional benefits added
by rider. The monthly deduction will be taken on the Investment Start Date and
on each Monthly Anniversary. It will be allocated among the General Account and
each Division of the Separate Account in the same proportion that a Policy's
Cash Value in the General Account and the Policy's Cash Value in each Division
bear to the total Cash Value of the Policy, less the Cash Value in the Loan
Account, on the date the deduction is taken. Because portions of the monthly
deduction, such as the cost of insurance, can vary from month to month, the
monthly deduction itself can vary in amount from month to month.
Selection and Issue Expense Charge. During the first ten Policy Years, the
Company generally assesses a charge to cover the costs associated with the
underwriting and issue of the policy. The annual charge is currently $0.45 (45
cents) per $1,000 of face amount for all Issue Ages, risk classes, and (except
on unisex
33
<PAGE>
Policies) sex of the Insureds, and is guaranteed never to exceed $0.90 per
$1,000. We deduct one-twelfth of this charge each month. For policies issued in
some states, the selection and issue expenses may be required to remain level
for longer than ten years, up to the life of the policy, to comply with state
insurance laws and regulations. You agent can tell you if this situation
applies to your state. On a current basis, as of the date of this prospectus,
the charges stop after ten Policy Years.
Monthly Policy Charge. The Company has responsibility for the administration of
the Policies and the Separate Account. Administrative expenses include premium
billing and collection, record keeping, processing death benefit claims, cash
surrenders, partial withdrawals, Policy changes, and reporting and overhead
costs, processing applications, and establishing Policy records. As
reimbursement for administrative expenses related to the maintenance of each
Policy and the Separate Account, the Company assesses a monthly administration
charge from each Policy. This charge is $6 for each Policy month, and is
guaranteed not to increase while the Policy is in force. If you surrender your
policy during the first policy year, we will deduct from the cash surrender
value the monthly policy fee for the months remaining in the first policy year.
The Company may administer the Policy itself, or may purchase administrative
services from such sources (including affiliates) as may be available. Such
services will be acquired on a basis which, in the Company's sole discretion,
affords the best services at the lowest cost. The Company reserves the right to
select a company to provide services which the Company deems, in its sole
discretion, is the best able to perform such services in a satisfactory manner
even though the costs for such services may be higher than would prevail
elsewhere.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the following Policy Month. The cost of insurance is determined
in a manner that reflects the anticipated mortality of both Insureds and the
fact that the death benefit is not payable until the death of the Last Insured.
Because the cost of insurance depends upon a number of variables, the cost will
vary for each Policy Month. The Company will determine the cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk (defined below) for each Policy Month.
The cost of insurance rates are determined at the beginning of each Policy
Year. The rates will be based on the Attained Age, duration, rate class, and
(except for unisex Policies) sex of the Insureds at issue. (See Unisex
Requirements Under Montana Law.) The cost of insurance rates generally increase
as the Insureds' Attained Age increases.
The rate class of an Insured also will affect the cost of insurance rate. For
the initial Face Amount, the Company will use the rate class on the Issue Date.
If the death benefit equals a percentage of Cash Value, an increase in Cash
Value will cause an automatic increase in the death benefit. The risk class for
such increase will be the same as that used for the initial Face Amount.
The Company currently places Insureds into a select standard risk class, a
standard rate class, or into risk classes involving a higher mortality risk.
Actual cost of insurance rates may change, and the actual monthly cost of
insurance rates will be determined by the Company based on its expectations as
to future mortality experience. However, the actual cost of insurance rates
will not be greater than the guaranteed cost of insurance rates set forth in
the Policy. For Policies which are not in a substandard risk class, the
guaranteed cost of insurance rates are equal to 100% of the rates set forth in
the male/female smoker/non-smoker 1980 CSO Mortality Tables. All Policies are
based on the age nearest birthday. Higher rates apply if either Insured is
determined to be in a substandard risk class.
In two otherwise identical Policies, an Insured in the select standard rate
class will have a lower cost of insurance than an Insured in a rate class
involving higher mortality risk. Each rate class is also divided into two
categories: smokers and nonsmokers. Nonsmoker Insureds will generally incur a
lower cost of insurance than similarly situated Insureds who smoke. (Insureds
under Attained Age 20 are automatically assigned to the non-smoker rate class.)
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<PAGE>
The net amount at risk for a Policy Month is (a) the death benefit at the
beginning of the Policy Month, adjusted by dividing the Face Amount by
1.0032737 (which reduces the net amount at risk, solely for purposes of
computing the cost of insurance, by taking into account assumed monthly
earnings at an annual rate of 4%), less (b) the Cash Value at the beginning of
the Policy Month. In calculating the cost of insurance charges, the cost of
insurance rate for a Face Amount is applied to the net amount at risk for that
Face Amount.
Additional Insurance Benefits. The monthly deduction will include charges for
any additional benefits provided by rider. (See General Matters--Additional
Insurance Benefits.)
Transaction Charges. There are no transaction charges for processing the first
twelve transfers or partial withdrawals in a policy year. There is a charge of
$25 for each transfer or partial withdrawal in excess of twelve.
Adjustment of Charges. The Policy is available for purchase by individuals,
corporations, and other institutions. For certain individuals and certain
corporate or other group or sponsored arrangements purchasing one or more
Policies, Paragon may waive or adjust the amount of the Sales Charge, monthly
administrative charge, or other charges where the expenses associated with the
sale of the Policy or Policies or the underwriting or other administrative
costs associated with the Policy or Policies warrant an adjustment.
Sales, underwriting, or other administrative expenses may be reduced for
reasons such as expected economies resulting from a corporate purchase or a
group or sponsored arrangement; from the amount of the initial premium payment
or payments; or from the amount of projected premium payments. Paragon will
determine in its discretion if, and in what amount, an adjustment is
appropriate. The Company may modify its criteria for qualification for
adjustment of charges as experience is gained, subject to the limitation that
such adjustments will not be unfairly discriminatory against the interests of
any Owner.
Separate Account Charges
Mortality and Expense Risk Charge. Paragon will deduct a daily charge from the
Separate Account. The amount of the deduction is determined as a percentage of
the average net assets of each Division of the Separate Account. The daily
deduction percentages, and the equivalent effective annual rate, are:
<TABLE>
<CAPTION>
Daily Charge Annual
Policy Years Factor Equivalent
------------ ------------ ----------
<S> <C> <C>
1-10 .0015027% 0.55%
11-20 .0012301% 0.45%
21+ .0009572% 0.35%
</TABLE>
This deduction is guaranteed not to increase while the Policy is in force.
Paragon may realize a profit from this charge. Any profit may be used to
finance distribution expenses.
The mortality risk assumed by Paragon is that Insureds may die sooner than
anticipated and that therefore the Company will pay an aggregate amount of
death benefits greater than anticipated. The expense risk assumed is that
expenses incurred in issuing and administering the Policy will exceed the
amounts realized from the administrative charges assessed against the Policy.
Fund Expenses. The value of the net assets of the Separate Account will reflect
the investment advisory fee and other expenses incurred by the underlying
investment companies. A summary of the annual Fund operating expenses in
provided on page 3 of this prospectus. See the prospectuses for the respective
Funds for a description of investment advisory fees and other expenses.
Taxes. No charges are currently made to the Separate Account for Federal,
state, or local taxes that the Company incurs which may be attributable to such
Separate Account or to the Policy. The Company may make such a charge for any
such taxes or economic burden resulting from the application of the tax laws
that it determines to be properly attributable to the Separate Account or to
the Policy. (See Federal Tax Matters.)
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<PAGE>
THE GENERAL ACCOUNT
Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933 and the
General Account has not been registered as an investment company under the 1940
Act. Accordingly, neither the General Account nor any interests therein are
subject to the provisions of these Acts and, as a result, the staff of the SEC
has not reviewed the disclosure in this Prospectus relating to the General
Account. The disclosure regarding the General Account may, however, be subject
to certain generally applicable provisions of the Federal securities laws
relating to the accuracy and completeness of statements made in prospectuses.
General Description
The General Account consists of all assets owned by Paragon other than those in
the Separate Account and other separate accounts. Subject to applicable law,
the Company has sole discretion over the investment of the assets of the
General Account.
At issue, Paragon will determine the maximum percentage of the non-borrowed
Cash Value that may be allocated, either initially or by transfer, to the
General Account. The ability to allocate Net Premiums or to transfer Cash Value
to the General Account may not be made available, in the Company's discretion,
under certain Policies. Further, the option may be limited with respect to some
Policies. The Company may, from time to time, adjust the extent to which
premiums or Cash Value may be allocated to the General Account (the "maximum
allocation percentage"). Such adjustments may not be uniform as to all
Policies. Paragon may at any time modify the General Account maximum allocation
percent. Subject to this maximum, an Owner may elect to allocate Net Premiums
to the General Account, the Separate Account, or both. Subject to this maximum,
the Owner may also transfer Cash Value from the Divisions of the Separate
Account to the General Account, or from the General Account to the Divisions of
the Separate Account. The allocation of Net Premiums or the transfer of Cash
Value to the General Account does not entitle an Owner to share in the
investment experience of the General Account. Instead, Paragon guarantees that
Cash Value allocated to the General Account will accrue interest at a rate of
at least 4%, compounded annually, independent of the actual investment
experience of the General Account.
The Loan Account is part of the General Account.
The Policy
This Prospectus describes a flexible premium joint and last survivor variable
life insurance policy. This Prospectus is generally intended to serve as a
disclosure document only for the aspects of the Policy relating to the Separate
Account. For complete details regarding the General Account, see the Policy
itself.
General Account Benefits
If the Owner allocates all Net Premiums only to the General Account and makes
no transfers, partial withdrawals, Pro-Rata Surrenders, or Policy Loans, the
entire investment risk will be borne by Paragon, and Paragon guarantees that it
will pay at least a minimum specified death benefit. The Owner may select Death
Benefit Option A, B or C under the Policy and may change the Policy's Face
Amount subject to satisfactory evidence of insurability.
General Account Cash Value
Net Premiums allocated to the General Account are credited to the Cash Value.
Paragon bears the full investment risk for these amounts and guarantees that
interest will be credited to each Owner's Cash Value in the General Account at
a rate of no less than 4% per year, compounded annually. Paragon may, at its
sole discretion, credit a higher rate of interest, although it is not obligated
to credit interest in excess of 4% per year, and might not do so. Any interest
credited on the Policy's Cash Value in the General Account in excess of the
guaranteed minimum rate of 4% per year will be determined in the sole
discretion of Paragon. The Policy Owner assumes the risk that interest credited
may not exceed the guaranteed minimum rate of 4% per year. If excess interest
is credited, a different rate of interest may be applied to the Cash Value in
the Loan Account. The Cash Value in the General Account will be calculated on
each Monthly Anniversary of the Policy.
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<PAGE>
Paragon guarantees that, on each Valuation Date, the Cash Value in the General
Account will be the amount of the Net Premiums allocated or Cash Value
transferred to the General Account, plus interest at the rate of 4% per year,
plus any excess interest which Paragon credits and any amounts transferred into
the General Account, less the sum of all Policy charges allocable to the
General Account and any amounts deducted from the General Account in connection
with partial withdrawals, Pro-Rata Surrenders or transfers to the Separate
Account.
Paragon may limit the percentage of the Policy's total Cash Value that may be
allocated to or transferred to the General Account. The total amount that may
be allocated to the General Account at any time may not exceed the product of:
(1) the Policy's total Cash Value in the General Account and the Divisions
of the Separate account, multiplied by
(2) the General Account maximum allocation percent.
The initial General Account maximum allocation percent is shown on the Policy's
specifications page. However, Paragon reserves the right to change the
allocation percent in the future.
Transfers, Surrenders, Partial Withdrawals and Policy Loans
After the first Policy Year, a portion of Cash Value may be withdrawn from the
General Account or transferred from the General Account to the Separate
Account. A partial withdrawal and any transfer must be at least $500 or, the
Policy's entire Cash Value in the General Account if less than $500. The total
amount of transfers and withdrawals in a Policy Year may not exceed a Maximum
Amount equal to the greater of:
(a) the Policy's Cash Surrender Value in the General Account at the
beginning of the Policy Year, multiplied by the withdrawal percentage
limit shown on the Policy's specifications page, or
(b) the previous Policy Year's General Account maximum withdrawal amount
The total amount available for withdrawal may not exceed the total Cash
Surrender Value of the Policy.
Transfers to the General Account are limited by the maximum allocation
percentage (described above) in effect for a Policy at the time a transfer
request is made.
Policy Loans may also be made from the Policy's Cash Value in the General
Account.
Loans and withdrawals from the General Account may have Federal income tax
consequences. (See Federal Tax Matters.)
There is no transaction charge for the first twelve partial withdrawals or
requested transfers in a Policy Year. Paragon will impose a charge of $25 for
each partial withdrawal or requested transfer in excess of twelve in a Policy
Year. The Company may revoke or modify the privilege of transferring amounts to
or from the General Account at any time.
Transfers, surrenders, partial withdrawals and Pro-Rata Surrenders payable from
the General Account and the payment of Policy Loans allocated to the General
Account may, subject to certain limitations, be delayed for up to six months.
However, if payment is deferred for 30 days or more, Paragon will pay interest
at the rate of 4% per year for the period of the deferment.
Conversion Right. While your policy is in force during the first two Policy
Years, you may transfer all of your Cash Value from the Divisions of the
Separate Account to the General Account.
If during the first two Policy Years you request in writing that we transfer
all of your Cash Value into the General Account, and you indicate that you are
exercising your conversion right, the transfer will not be subject to a
transaction charge or to transfer limits. At the time of the transfer there
will be no effect on the Policy's death benefit, Face Amount, net amount at
risk, risk class or Issue Age.
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<PAGE>
If you exercise your one-time conversion right, we will automatically allocate
all future Net Premiums to the General Account, and no future transfers to the
Separate Account will be allowed.
GENERAL MATTERS
Postponement of Payments from the Separate Account
The Company usually pays amounts payable on partial withdrawal, Pro-Rata
Surrender, surrender, or Policy Loan allocated to the Separate Account
Divisions within seven days after written notice is received. Payment of any
amount payable from the Divisions of the Separate Account upon surrender,
partial withdrawals, Pro-Rata Surrender, death of the Last Insured, or payments
of a Policy Loan and transfers, may be postponed whenever: (1) the New York
Stock Exchange is closed other than customary weekend and holiday closings, or
trading on the New York Stock Exchange is restricted as determined by the SEC;
(2) the SEC by order permits postponement for the protection of Owners; or (3)
an emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the Separate Account's net assets. The Company may defer
payment of the portion of any Policy Loan from the General Account for not more
than six months.
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until the Owner's check has cleared the bank upon which it was
drawn.
The Contract
The Policy, the attached application, any riders, endorsements, and any
application for reinstatement constitute the entire contract. All statements
made by the Insureds in the application and any supplemental applications can
be used to contest a claim or the validity of the Policy. Any change to the
Policy must be in writing and approved by the President, a Vice President, or
the Secretary of the Company. No agent has the authority to alter or modify any
of the terms, conditions, or agreements of the Policy or to waive any of its
provisions.
Control of Policy
The Insureds jointly are the Owner of the Policy unless another person or
entity is shown as the Owner in the application. Ownership may be changed,
however, as described below. The Owner is entitled to all rights provided by
the Policy. Any person whose rights of ownership depend upon some future event
does not possess any present rights of ownership. If there is more than one
Owner at a given time, all Owners must exercise the rights of ownership by
joint action. If the Owner dies, and the Owner is not one or both of the
Insureds, the Owner's interest in the Policy becomes the property of his or her
estate unless otherwise provided. Unless otherwise provided, the Policy is
jointly owned by all Owners named in the Policy or by the survivors of those
joint Owners. Unless otherwise stated in the Policy, the final Owner is the
estate of the last joint Owner to die. The Company may rely on the written
request of any trustee of a trust which is the Owner of the Policy, and the
Company is not responsible for the proper administration of any such trust.
Beneficiary
The Beneficiary(ies) is (are) the person(s) specified in the application or by
later designation. Unless otherwise stated in the Policy, the Beneficiary has
no rights in a Policy before the death of the Last Insured. If there is more
than one Beneficiary at the death of the Last Insured, each Beneficiary will
receive equal payments unless otherwise provided by the Owner. If no
Beneficiary is living at the death of the Last Insured, the proceeds will be
payable to the Owner or, if the Owner is not living, to the Owner's estate.
The Company permits the designation of various types of trusts as
Beneficiary(ies), including trusts for minor beneficiaries, trusts under a
will, and trusts under a separate written agreement. An Owner is also permitted
to designate several types of beneficiaries, including business beneficiaries.
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<PAGE>
Change of Owner or Beneficiary
The Owner may change the ownership and/or Beneficiary designation by written
request in a form acceptable to the Company at any time during the lifetime of
either Insured, subject to any restrictions stated in the Policy and this
Prospectus. The Company may require that the Policy be returned for endorsement
of any change. If acceptable to us, the change will take effect as of the date
the request is signed, whether or not the Last Insured is living when the
request is received at the Company's Home Office. The Company is not liable for
any payment made or action taken before the Company received the written
request for change. If the Owner is also a Beneficiary of the Policy at the
time of the Last Insured's death, the Owner may, within sixty days of the Last
Insured's death, designate another person to receive the Policy proceeds. Any
change will be subject to any assignment of the Policy or any other legal
restrictions.
Policy Changes
The Company reserves the right to limit the number of changes to a Policy to
one per Policy Year and to restrict changes in the first Policy Year.
Currently, only one change is permitted during any Policy Year and no change
may be made during the first Policy Year. For this purpose, changes include
decreases in Face Amount and changes in the death benefit option. No change
will be permitted, if as a result, the Policy would fail to satisfy the
definition of life insurance in Section 7702 of the Internal Revenue Code or
any applicable successor provision.
Conformity with Statutes
If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform to
such laws. In addition, the Company reserves the right to change the Policy if
it determines that a change is necessary to cause this Policy to comply with,
or give the Owner the benefit of any Federal or state statute, rule, or
regulation, including, but not limited to, requirements of the Internal Revenue
Code, or its regulations or published rulings.
Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment under it
will be subject to the claims of creditors or to any legal process.
Incontestability
The Policy is incontestable after it has been in force for two years from the
Issue Date during the lifetime of either Insured. An addition of a rider after
the Issue Date is incontestable after such addition has been in force for two
years from its effective date during the lifetime of either Insured. Any
reinstatement of a Policy is incontestable only after it has been in force
during the lifetime of either Insured for two years after the effective date of
the reinstatement.
Assignment
The Company will be bound by an assignment of a Policy only if: (a) the
assignment is in writing; (b) the original assignment instrument or a certified
copy thereof is filed with the Company at its Home Office; and (c) the Company
returns an acknowledged copy of the assignment instrument to the Owner. The
Company is not responsible for determining the validity of any assignment.
Payment of Policy proceeds is subject to the rights of any assignee of record.
If a claim is based on an assignment, the Company may require proof of the
interest of the claimant. A valid assignment will take precedence over the
claim of any Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the Policy. If
either Insured dies by suicide, while sane or insane, within two years from the
Issue Date (or within the maximum period permitted by the laws of
39
<PAGE>
the state in which the Policy was delivered, if less than two years), the
amount payable will be limited to premiums paid, less any partial withdrawals
and outstanding Indebtedness subject to certain limitations.
If the either Insured is a Missouri citizen when the Policy is issued, this
provision does not apply on the Issue Date of the Policy, unless that Insured
intended suicide when the Policy was applied for.
Misstatement of Age or Sex and Corrections
If the age or sex (except in unisex Policies) of the Insureds has been
misstated in the application, the amount of the death benefit will be that
which the most recent cost of insurance charge would have purchased for the
correct age and sex.
Any payment or Policy changes made by the Company in good faith, relying on its
records or evidence supplied with respect to such payment, will fully discharge
the Company's duty. The Company reserves the right to correct any errors in the
Policy.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to a Policy by rider. The descriptions below
are intended to be general; the terms of the Policy riders providing the
additional benefits may vary from state to state, and the Policy should be
consulted. The cost of any additional insurance benefits which require
additional charges will be deducted as part of the monthly deduction from the
Policy's Cash Value. (See Charges and Deductions--Monthly Deduction.) Certain
restrictions may apply and are described in the applicable rider. An insurance
agent authorized to sell the Policy can describe these extra benefits further.
Samples of the provisions are available from Paragon upon written request.
Anniversary Partial Withdrawal Rider. This rider allows the owner to withdraw
up to 15% of the Policy's Cash Surrender Value on any Policy Anniversary
without reducing the Face Amount.
Secondary Guarantee Rider. This rider guarantees that if, during the secondary
guarantee period, the sum of all premiums paid on the Policy, reduced by any
partial withdrawals and any outstanding loan balance, is greater than or equal
to the sum of the secondary guarantee premiums required since the Issue Date,
the Policy will not lapse as a result of a Cash Value less any loans and loan
interest due being insufficient to pay the monthly deduction.
The secondary guarantee period is the number of Policy Years until the younger
Insured reaches Attained Age 100.
Lifetime Coverage Rider. This rider provides the continuation of the Policy's
face amount beyond the younger Insured's Attained Age 100, provided the policy
remains in force to that date with a positive cash surrender value. If the
Policy is in force after the younger Insured's Attained Age 100, the death
benefit will be the greater of the face amount or 101% of the Cash Value. (See
Federal Tax Matters.)
Divorce Split Rider. This rider allows the Policy to be split into two separate
fixed policies in the event of the divorce of a married couple who are the
Insureds under the Policy. (See Federal Tax Matters.)
Tax Split Rider. This rider allows the Policy to be split into two separate
fixed policies in the event of significant changes in tax laws affecting the
Policy. (See Federal Tax Matters.)
Estate Preservation Term Rider. This rider provides joint level term insurance,
payable at the death of the Last Insured, for a period of four years from the
date of the rider. The cost of this rider is a charge per $1,000 of death
benefit provided by the rider. The charge is determined by the joint Issue Age,
risk classification, and sex of the Insureds. This charge is shown on the
Policy's specifications page. The rider terminates on the earliest of:
(a) our receipt of your written request to terminate the rider;
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<PAGE>
(b) a decrease in the Face Amount of the Policy;
(c) termination of the Policy; or
(d) the end of the fourth Policy Year.
Records and Reports
The Company will maintain all records relating to the Separate Account and will
mail to the Owner once each Policy Year, at the last known address of record, a
report which shows the current Policy values, premiums paid, deductions made
since the last report, and any outstanding Policy Loans. The Owner will also be
sent a periodic report for each Fund. Receipt of premium payments, transfers,
partial withdrawals, Pro-Rata Surrenders, Policy Loans, loan repayments,
changes in death benefit options, decreases in Face Amount, surrenders and
reinstatements will be confirmed promptly following each transaction.
An Owner may request in writing an illustration of future Cash Surrender Values
and death benefits. This illustration will be furnished by the Company for a
nominal fee which will not exceed $25.
DISTRIBUTION OF THE POLICIES
Walnut Street Securities, Inc. ("Walnut Street") acts as principal underwriter
of the Policies pursuant to an Underwriting Agreement with the Company. Walnut
Street is a wholly-owned subsidiary of GenAmerica Corporation. Walnut Street, a
Missouri corporation formed May 4, 1994, is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers. Walnut Street Securities' Internal
Revenue Service Employer Identification Number is 43-1333368. It is a Missouri
Corporation and was formed May 4, 1984.
Broker-dealers may receive a marketing allowance to assist in marketing the
product. This allowance may include an amount up to five thousand dollars per
Policy at issue, and an on-going annual percentage up to 0.15% of Cash Value to
reimburse the broker-dealer for expenses and due diligence efforts performed in
connection with marketing the product. This allowance will generally be
retained by the broker-dealer in order to offset its expenses. Generally, no
compensation will be paid by the Company, Walnut Street, or the broker-dealer
to the individual directly involved in the sale of the product.
FEDERAL TAX MATTERS
Introduction
The following summary provides a general description of the Federal income tax
considerations associated with the Policy and does not purport to be complete
or to cover all situations. This discussion is not intended as tax advice.
Counsel or other competent tax Advisors should be consulted for more complete
information. This discussion is based upon the Company's understanding of the
present Federal income tax laws as they are currently interpreted by the
Internal Revenue Service. No representation is made as to the likelihood of
continuation of the present Federal income tax laws or of the current
interpretations by the Internal Revenue Service.
Tax Status of the Policy
Section 7702 of the Internal Revenue Code of 1986, as amended (the "Code")
includes a definition of a life insurance contract for Federal tax purposes.
The Secretary of the Treasury (the "Treasury") issued proposed regulations
which specify what will be considered reasonable mortality charges under
Section 7702. Guidance as to how Section 7702 is to be applied is, however,
limited. If a Policy were determined not to be a life insurance contract for
purposes of Section 7702, such Policy would not provide most of the tax
advantages normally provided by a life insurance policy.
41
<PAGE>
While there is some uncertainty due to the limited guidance under Section 7702,
the Company believes that it is reasonable to conclude that a Policy should
meet the Section 7702 definition of a life insurance contract. If it is
subsequently determined that a Policy does not satisfy Section 7702, the
Company will take whatever steps are appropriate and necessary to attempt to
cause the Policy to comply with Section 7702, including possibly refunding any
premiums paid that exceed the limitations allowable under Section 7702
(together with interest or other earnings on any such premiums refunded as
required by law or the IRS). For these reasons, the Company reserves the right
to modify the Policy as necessary to attempt to qualify it as a life insurance
contract under Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Separate Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Separate Account, intends to
comply with the diversification requirements prescribed by the Treasury in
Regulation Section 1.817-5, which affect how assets may be invested. Although
Paragon does not control the Funds, it has entered into agreements, which
require these investment companies to be operated in compliance with the
requirements prescribed by the Treasury.
The IRS has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets, for federal income tax
purposes, if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. If
that were to be determined to be the case, income and gains from the separate
account assets would be includible in the variable contract owner's gross
income. The Treasury Department has also announced, in connection with the
issuance of regulations concerning diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor (i.e., the
Owner), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Policy are different in certain respects from
those described by the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For example, the Owner has
additional flexibility in allocating Premium payments and Policy Values. These
differences could result in an Owner being treated as the owner of a pro rata
portion of the assets of the Separate Account. In addition, the Company does
not know what standards will be set forth, if any, in the regulations or
rulings which the Treasury Department has stated it expects to issue. The
Company therefore reserves the right to modify the Policy as necessary to
attempt to prevent an Owner from being considered the owner of a pro rata share
of the assets of the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
l. Tax Treatment of Policy Benefits. In general, the Company believes that the
proceeds and Cash Value increases of a Policy should be treated in a manner
consistent with a fixed-benefit life insurance policy for Federal income tax
purposes. Thus, the death benefit under the Policy should be excludable from
the gross income of the Beneficiary under Section 101(a)(1) of the Code, unless
a transfer for value (generally a sale of the policy) has occurred.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding Policy
Loan, a partial withdrawal, or a surrender of the Policy. In addition, Federal
estate and state and local estate, inheritance, and other tax consequences of
ownership or receipt of Policy proceeds depend upon the circumstances of each
Owner or Beneficiary. A competent tax adviser should be consulted for further
information.
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<PAGE>
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a qualified tax
adviser regarding the tax attributes of the particular arrangement. In recent
years, moreover, Congress has adopted new rules relating to life insurance
owned by businesses. Any business contemplating the purchase of a new Policy or
a change in an existing Policy should consult a tax adviser.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy's Cash Value, including increments thereof, under the Policy until there
is a distribution. The tax consequences of distributions from, and Policy Loans
taken from or secured by, a Policy depend upon whether the Policy is classified
as a "modified endowment contract." However, upon a complete surrender or lapse
of any Policy, if the amount received plus the amount of outstanding
Indebtedness exceeds the total investment in the Policy, the excess will
generally be treated as ordinary income subject to tax.
2. Modified Endowment Contracts. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules for
determining whether a Policy is a modified endowment contract are extremely
complex. In general, however, a Policy will be a modified endowment contract if
the accumulated premiums paid at any time during the first seven Policy Years
exceed the sum of the net level premiums which would have been paid on or
before such time if the Policy provided for paid-up future benefits (based on
the lowest level of benefits in effect for the Policy) after the payment of
seven level annual premiums.
In addition, if a Policy is "materially changed" it may cause such Policy to be
treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally depends
upon the relationship among the death benefit at the time of such change, the
Cash Value at the time of the change and the additional premiums paid in the
seven Policy Years starting with the date on which the material change occurs.
Moreover, a life insurance contract received in exchange for a life insurance
contract classified as a modified endowment contract will also be treated as a
modified endowment contract. A reduction in a Policy's benefits may also cause
such Policy to become a modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a modified
endowment contract will depend upon the circumstances of each Policy. The
Company has, however, adopted administrative steps designed to protect an Owner
against the possibility that the Policy might become a modified endowment
contract. The Company believes the safeguards are adequate for most situations,
but it cannot provide complete assurance that a Policy will not be classified
as a modified endowment contract. At the time a premium is credited which would
cause the Policy to become a modified endowment contract, the Company will
notify the Owner that unless a refund of the excess premium is requested by the
Owner, the Policy will become a modified endowment contract. The Owner will
have 30 days after receiving such notification to request the refund. The
excess premium paid will be returned to the Owner upon receipt by the Company
of the refund request. The amount to be refunded will be deducted from the
Policy Cash Value in the Divisions of the Separate Account and in the General
Account in the same proportion as the premium payment was allocated to such
Divisions.
Accordingly, a prospective Owner should contact a competent tax adviser before
purchasing a Policy to determine the circumstances under which the Policy would
be a modified endowment contract. In addition, an Owner should contact a
competent tax adviser before paying any additional premiums or making any other
change to, including an exchange of, a Policy to determine whether such premium
or change would cause the Policy (or the new Policy in the case of an exchange)
to be treated as a modified endowment contract.
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<PAGE>
3. Distributions (other than Death Benefits) from Policies Classified as
Modified Endowment Contract. Policies classified as modified endowment
contracts will be subject to the following tax rules: First, all distributions,
including distributions upon surrender and benefits paid at maturity, from such
a Policy are treated as ordinary income subject to tax up to the amount equal
to the excess (if any) of the Cash Value immediately before the distribution
over the investment in the Policy (described below) at such time. Second,
Policy Loans taken from or secured by such a Policy, including collateral
assignments, as well as due but unpaid interest thereon, are treated as
distributions from such a Policy and taxed accordingly. Third, a
10 percent additional income tax is imposed on the portion of any distribution
from, or Policy Loan taken from or secured by, such a Policy that (a) is
included in income, except where the distribution or Policy Loan is made on or
after the Owner attains age 59, (b) is attributable to the Owner's becoming
disabled, or (c) is part of a series of substantially equal periodic payments
for the life (or life expectancy) of the Owner or the joint lives (or joint
life expectancies) of the Owner and the Owner's Beneficiary.
4. Distributions (other than Death Benefits) from Policies Not Classified as
Modified Endowment Contract. Distributions from Policies not classified as a
modified endowment contract are generally treated as first recovering the
investment in the Policy (described below) and then, only after the return of
all such investment in the Policy, as distributing taxable income. An exception
to this general rule occurs in the case of a decrease in the Policy's death
benefit (possibly including a partial withdrawal) or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Policy Loans from or secured by a Policy that is not a modified endowment
contract are generally not treated as distributions. Instead, such loans are
treated as indebtedness of the Owner. However, the treatment of Policy Loans
from or secured by a Policy that is not a modified endowment contract after the
tenth Policy Year is uncertain. You should consult a tax adviser as to such
consequences.
Upon a complete surrender or lapse of a Policy that is not a modified endowment
contract, if the amount received plus the amount of indebtedness exceeds the
total investment in the Policy, the excess will generally be treated as
ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are subject to the 10 percent additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes a
modified endowment contract, then any distribution made from the Policy within
two years prior to the date of such change in status may become taxable.
5. Policy Loan Interest. Generally, interest paid on any loan under a life
insurance Policy owned by an individual is not deductible. In addition,
interest on any loan under a life insurance Policy owned by a business taxpayer
on the life of any individual who is an officer of or is financially interested
in the business carried on by that taxpayer is deductible only under certain
very limited circumstances. An Owner should consult a competent tax adviser
before deducting any loan interest.
6. Interest Expense on Unrelated Indebtedness. Under provisions added to the
Code in 1997 for policies issued after June 8, 1997, if a business taxpayer
owns or is the beneficiary of a Policy on the life of any individual who is not
an officer, director, employee, or 20 percent owner of the business, and the
taxpayer also has debt unrelated to the Policy, a portion of the taxpayer's
unrelated interest expense deductions may be lost. No business taxpayer should
purchase or exchange a Policy on the life of any individual who is not an
officer, director, employee, or 20 percent owner of the business without first
consulting a competent tax Advisor.
7. Investment in the Policy. Investment in the Policy means (i) the aggregate
amount of any premiums or other consideration paid for a Policy, minus (ii) the
aggregate amount received under the Policy which is
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<PAGE>
excluded from gross income of the Owner (except that the amount of any Policy
Loan from, or secured by, a Policy that is a modified endowment contract, to
the extent such amount is excluded from gross income, will be disregarded),
plus (iii) the amount of any Policy Loan from, or secured by, a Policy that is
a modified endowment contract to the extent that such amount is included in the
gross income of the Owner.
8. Multiple Policies. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Owner during any calendar year are
treated as one modified endowment contract for purposes of determining the
amount includible in gross income under Section 72(e) of the Code.
9. Tax Treatment of Divorce Split. The Divorce Split Rider permits a Policy to
be split into two individual fixed policies. It is not clear whether exercising
the Divorce Split Rider will be treated as a taxable transaction or whether the
individual policies that result would be classified as modified endowment
contracts. A competent tax adviser should be consulted before exercising the
Divorce Split Rider.
10. Continuation Beyond Younger Insured's Attained Age 100. The tax
consequences of continuing the Policy beyond the younger Insured's Attained Age
100 are unclear. You should consult a tax adviser if you intend to keep the
Policy in force beyond the younger Insured's Attained Age 100.
11. Possible Tax Law Changes. Although the likelihood of legislative changes is
uncertain, there is always the possibility that the tax treatment of the Policy
could change by legislation or otherwise. It is possible that any legislative
change could be retroactive (that is, effective prior to the date of the
change). Consult a tax adviser with regard to legislative developments and
their effect on the Policy.
12. Possible Charge for Taxes. At the present time, the Company makes no charge
to the Separate Account for any Federal, state, or local taxes (as opposed to
Premium Tax Charges which are deducted from premium payments) that it incurs
which may be attributable to such Separate Account or to the Policies. The
Company, however, reserves the right in the future to make a charge for any
such tax or other economic burden resulting from the application of the tax
laws that it determines to be properly attributable to the Separate Account or
to the Policies.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
Paragon holds the assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from the Company's general
assets. The Company maintains records of all purchases and redemptions of Fund
shares by each of the Divisions. Additional protection for the assets of the
Separate Account is afforded by a blended executive risk insurance program,
including blanket fidelity coverage issued by CAN and Chubb Insurance Companies
with a limit of $25 million, covering all officers and employees of the Company
who have access to the assets of the Separate Account.
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance with
the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act or
any regulation thereunder should be amended or if the present interpretation
thereof should change, and as a result the Company determines that it is
permitted to vote shares of the Fund in its own right, it may elect to do so.
No voting privileges apply to the Policies with respect to Cash Value removed
from the Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be calculated
separately for each Division. Voting rights reflect the dollar value of the
total number of units of each Division of the Separate Account credited to the
Owner at the record date, rather than the number of units alone. Fractional
shares will be counted. The number of votes of the Fund which the Owner has the
right to instruct will be determined as of the date coincident with the date
established by that Fund for determining shareholders eligible. Voting
instructions will be solicited by written communications prior to such meeting
in accordance with procedures established by the mutual funds.
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<PAGE>
The company will vote shares of a Fund for which no timely instructions are
received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds which
are not attributable to Policies in the same proportion.
Each person having a voting interest in a Division will receive any proxy
material, reports, and other materials relating to the appropriate Fund.
Disregard of Voting Instructions. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment Advisory contract for a Fund. In addition, the Company
itself may disregard voting instructions in favor of changes initiated by an
Owner in the investment policy or the investment adviser or sub-adviser of a
Fund if the Company reasonably disapproves of such changes. A proposed change
would be disapproved only if the proposed change is contrary to state law or
prohibited by state regulatory authorities, or the Company determined that the
change would have an adverse effect on its General Account in that the proposed
investment policy for a Fund may result in overly speculative or unsound
investments. If the Company disregards voting instructions, a summary of that
action and the reasons for such action will be included in the next annual
report to Owners.
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws of
Missouri, and the Separate Account are subject to regulation by the Missouri
Department of Insurance. An annual statement is filed with the Director of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31 of the
preceding year. Periodically, the Director of Insurance examines the
liabilities and reserves of the Company and the Separate Account and certifies
their adequacy, and a full examination of the Company's operations is conducted
by the National Association of Insurance Commissioners at least once every
three years.
In addition, the Company is subject to the insurance laws and regulations of
other states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
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MANAGEMENT OF THE COMPANY
<TABLE>
<CAPTION>
Principal Occupation(s)
Name During Past Five Years
---- -----------------------
<C> <S>
Principal Officers
Carl H. Anderson # President and Chief Executive Officer,
6/86-present. Vice President, New
Ventures, General American, 6/86-present.
Matthew K. Duffy Vice President and Chief Financial
Officer, 7/96-present. Formerly Director
of Accounting, Prudential Insurance
Company of America, 3/87-6/96.
E. Thomas Hughes, Jr. # Treasurer, 12/94-present. Corporate
General American Life Insurance Co. Actuary and Treasurer, General American,
700 Market Street 10/94-present. Formerly Executive Vice
St. Louis, MO 63101 President, General American, 1/90-10/94.
Matthew P. McCauley # Vice President and General Counsel, 1984-
General American Life Insurance Co. present. Secretary, 1981-present. Vice
700 Market Street President and Associate General Counsel,
St. Louis, MO 63101 General American, 12/95-present
Craig K. Nordyke # Executive Vice President and Chief
Actuary, 11/96-present. Formerly Vice
President and Chief Actuary, 11/90-11/96;
Second Vice President and Chief Actuary,
5/87-8/90.
John R. Tremmel Vice President, Operations and System
Development, 1/99-present. Formerly Chief
Operating Officer, ISP Alliance, 4/98-
12/98; Vice President and General Manager
of National Operations Centers, Citicorp
Insurance Group, 9/86-12/95.
</TABLE>
All positions listed are with Paragon unless otherwise indicated.
The principal business address of each person listed is Paragon Life Insurance
Company, 100 South Brentwood, St. Louis, MO 63105 unless otherwise listed.
# Mr. Anderson, Mr. Hughes, Mr. McCauley and Mr. Nordyke are members of the
Board of Directors as well as Executive Officers of the Company.
<TABLE>
<S> <C>
Non-Officer Directors
Richard A. Liddy
General American Life Chairman, President and Chief Executive Officer, General
Insurance Co. American Life Insurance Company, 5/92-present. Formerly
700 Market Street President and Chief Operating Officer, General American,
St. Louis, MO 63101 5/88-5/92.
Leonard M. Rubenstein Chairman and Chief Executive Officer, Conning Corporation and
Conning Corporation Conning Asset Management Company, 1/97-present. Formerly
700 Market Street Executive Vice President--Investments, General American,
St. Louis, MO 63101 2/91-1/97.
Warren J. Winer Executive Vice President--Group, General American, 9/95-present.
General American Life Formerly Managing Director, William M. Mercer, 7/93-8/95;
Insurance Co. President, W. F. Corroon, 9/90-7/93.
13045 Tesson Ferry
Road
St. Louis, MO 63128
Bernard H. Wolzenski Executive Vice President--Individual, General
General American Life American, 11/91-present.
Insurance Co.
13045 Tesson Ferry
Road
St. Louis, MO 63128
A. Greig Woodring President and Chief Executive Officer, Reinsurance Group of
Reinsurance Group of America, 5/93-present.
America
660 Mason Ridge Center
Drive
Suite 300
St. Louis, MO 63141
</TABLE>
47
<PAGE>
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to aspects of Federal securities laws. All
matters of Missouri law pertaining to the Policy, including the validity of the
Policy and Paragon's right to issue the Policy under Missouri insurance law,
and all legal matters relating to General Americans resolution concerning
policies issued by Paragon have been passed upon by Matthew P. McCauley, Vice
President and General Counsel of Paragon.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. Paragon is not involved
in any litigation that is of material importance in relation to its total
assets or that relates to the Separate Account.
EXPERTS
The audited financial statements of Paragon have been included in this
Prospectus in reliance on the reports of KPMG LLP independent certified public
accountants, and on the authority of said firm as experts in accounting and
auditing.
Actuarial matters included in this Prospectus have been examined by Craig K.
Nordyke, FSA, MAAA, Executive Vice President and Chief Actuary of Paragon, as
stated in the opinion filed as an exhibit to the registration statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information set
forth in the registration statement and the amendments and exhibits to the
registration statement, to all of which reference is made for further
information concerning the Separate Account, the Company and the Policy offered
hereby. Statements contained in this Prospectus as to the contents of the
Policy and other legal instruments are summaries. For a complete statement of
the terms thereof reference is made to such instruments as filed.
Like all financial services providers, Paragon utilizes systems that may be
affected by the Year 2000 transition issues, and it relies on services
providers, including the Funds, that may also be affected. The Company has
developed, and is in the process of implementing, a Year 2000 transition plan,
and is confirming that its services providers are also so engaged. The
resources that are being devoted to this effort are substantial. It is
difficult to predict with precision whether the amount of resources ultimately
devoted, or the outcome of these efforts, will have any negative impact on the
Company. However, as of the date of this prospectus, we do not anticipate that
Policy Owners will experience negative effects on their investment, or on the
services provided in connection therewith, as a result of Year 2000 transition
implementation. Paragon currently anticipates that its systems will be Year
2000 compliant, but there can be no assurance that the Company will be
successful, or that interaction with other service providers will not impair
the Company's services at that time.
FINANCIAL STATEMENTS
The financial statements of Paragon which are included in this Prospectus
should be distinguished from the financial statements of the Separate Account,
and should be considered only as bearing on the ability of Paragon to meet its
obligations under the Policy. They should not be considered as bearing on the
investment performance of the assets held in the Separate Account.
48
<PAGE>
Interim financial statements for Paragon or the Separate Account are not part
of this prospectus. The Company does not prepare audited financial statements
more often than annually, and believes that any incremental benefit to
prospective Policy Owners that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. No Financial Statements of the Divisions of the
Separate Account used in these Policies are included in this prospectus
because, as of the date of this prospectus, those Divisions had not yet
commenced operations and had no assets, liabilities, income or expenses.
Paragon represents that there have been no adverse changes in the financial
condition or operations of Paragon or the Separate Account between the end of
the most recent fiscal year and the date of this prospectus.
49
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Paragon Life Insurance Company:
We have audited the accompanying balance sheets of Paragon Life Insurance
Company as of December 31, 1998 and 1997, and the related statements of
operations and comprehensive income, stockholder's equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Paragon Life Insurance Company
as of December 31, 1998 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1998, in conformity with generally accepted accounting principles.
February 3, 1999
F-1
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1998 and 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997
--------- -------
<S> <C> <C>
Assets
Fixed maturities, available for sale....................... $ 83,384 75,704
Policy loans............................................... 14,135 11,487
Cash and cash equivalents.................................. 7,439 5,733
--------- -------
Total cash and invested assets......................... 104,958 92,924
Reinsurance recoverables................................... 1,170 1,733
Deposits relating to reinsured policyholder account
balances.................................................. 6,688 6,416
Accrued investment income.................................. 1,545 1,377
Deferred policy acquisition costs.......................... 20,602 17,980
Fixed assets and leasehold improvements, net............... 4,504 2,609
Other assets............................................... 105 179
Separate account assets.................................... 168,222 118,051
--------- -------
Total assets........................................... $ 307,794 241,269
========= =======
Liabilities and Stockholder's Equity
Policyholder account balances.............................. 93,334 85,152
Policy and contract claims................................. 1,672 1,085
Federal income taxes payable............................... 281 163
Other liabilities and accrued expenses..................... 3,943 3,486
Payable to affiliates...................................... 2,062 1,620
Due to separate account.................................... 183 61
Deferred tax liability..................................... 5,591 4,394
Separate account liabilities............................... 168,222 118,051
--------- -------
Total liabilities...................................... $ 275,288 214,012
--------- -------
Stockholder's equity:
Common stock, par value $25; 100,000 shares authorized;
82,000 shares issued and outstanding.................... 2,050 2,050
Additional paid-in capital............................... 17,950 17,950
Accumulated other comprehensive income................... 2,809 1,958
Retained earnings........................................ 9,697 5,299
--------- -------
Total stockholder's equity............................. $ 32,506 27,257
--------- -------
Total liabilities and stockholder's equity............. $ 307,794 241,269
========= =======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Operations and Comprehensive Income
Years ended December 31, 1998, 1997 and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Revenues:
Policy contract charges............................... $20,437 16,417 13,719
Net investment income................................. 6,983 6,288 5,663
Commissions and expense allowances on reinsurance
ceded................................................ 124 10 114
Net realized investment gains......................... 53 69 72
------- ------ ------
Total revenues...................................... 27,597 22,784 19,568
======= ====== ======
Benefits and expenses:
Policy benefits....................................... 4,774 3,876 3,326
Interest credited to policyholder account balances.... 5,228 4,738 4,126
Commissions, net of capitalized costs................. 167 227 79
General and administration expenses, net of
capitalized costs.................................... 9,512 7,743 6,798
Amortization of deferred policy acquisition costs..... 1,150 424 285
------- ------ ------
Total benefits and expenses......................... 20,831 17,008 14,614
======= ====== ======
Income before federal income tax expense............ 6,766 5,775 4,954
Federal income tax expense.............................. 2,368 1,885 1,738
------- ------ ------
Net income.............................................. $ 4,398 3,890 3,216
Other comprehensive income (loss)....................... 851 1,636 (1,261)
------- ------ ------
Comprehensive income.................................... $ 5,249 5,526 1,955
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1998, 1997, and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
Accumulated
Additional other Retained Total
Common paid-in comprehensive earnings stockholder's
Stock capital income (deficit) equity
------ ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995................... $2,050 17,950 1,583 (1,807) 19,776
Net income............ -- -- -- 3,216 3,216
Other comprehensive
income............... -- -- (1,261) -- (1,261)
------ ------ ------ ------ ------
Balance at December 31,
1996................... $2,050 17,950 322 1,409 21,731
Net income............ -- -- -- 3,890 3,890
Other comprehensive
income............... -- -- 1,636 -- 1,636
------ ------ ------ ------ ------
Balance at December 31,
1997................... $2,050 17,950 1,958 5,299 27,257
Net income............ -- -- -- 4,398 4,398
Other comprehensive
income............... -- -- 851 -- 851
------ ------ ------ ------ ------
Balance at December 31,
1998................... $2,050 17,950 2,809 9,697 32,506
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
(in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 4,398 3,890 3,216
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Reinsurance recoverables..................... 563 (892) 407
Deposits relating to reinsured policyholder
account balances............................ (272) (342) (378)
Accrued investment income.................... (168) (79) (257)
Federal income tax payable................... 118 (648) 811
Other assets................................. (1,821) (1,280) (1,019)
Policy and contract claims................... 587 (23) 12
Other liabilities and accrued expenses....... 457 782 741
Payable to affiliates........................ 442 (669) 397
Due to separate account...................... 122 (34) (108)
Deferred tax expense........................... 740 732 615
Policy acquisition costs deferred.............. (3,808) (2,972) (2,447)
Amortization of deferred policy acquisition
costs......................................... 1,150 424 285
Interest credited to policyholder accounts..... 5,228 4,738 4,126
Net gain on sales and calls of fixed
maturities.................................... (53) (69) (72)
-------- ------- -------
Net cash provided by operating activities.......... 7,683 3,558 6,329
-------- ------- -------
Cash flows from investing activities:
Purchase of fixed maturities..................... (14,915) (12,557) (15,290)
Sale or maturity of fixed maturities............. 8,632 5,255 6,860
Increase in policy loans, net.................... (2,648) (1,923) (2,358)
-------- ------- -------
Net cash used in investing activities.............. (8,931) (9,225) (10,788)
-------- ------- -------
Cash flows from financing activities:
Net policyholder account deposits................ 2,954 2,294 6,509
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 1,706 (3,373) 2,050
Cash and cash equivalents at beginning of year..... 5,733 9,106 7,056
-------- ------- -------
Cash and cash equivalents at end of year........... $ 7,439 5,733 9,106
======== ======= =======
Income taxes paid.................................. $ (1,460) (1,801) (198)
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
Paragon Life Insurance Company (Paragon or the Company) is a wholly owned
subsidiary of General American Life Insurance Company (General American or the
Parent). Paragon markets universal life and variable universal life insurance
products through the sponsorship of major companies and organizations. Paragon
is licensed to do business in the District of Columbia and all states except
New York.
General American has guaranteed that Paragon will have sufficient funds to
meet all of its contractual obligations. In the event a policyholder presents a
legitimate claim for payment on a Paragon insurance policy, General American
will pay such claim directly to the policyholder if Paragon is unable to make
such payment. The guarantee agreement is binding on General American, its
successor or assignee and shall cease only if the guarantee is assigned to an
organization having a financial rating from Standard & Poor's equal to or
better than General American's rating.
The accompanying financial statements are prepared on the basis of generally
accepted accounting principles. The preparation of financial statements
requires the use of estimates by management which affect the amounts reflected
in the financial statements. Actual results could differ from those estimates.
Accounts that the Company deems to be sensitive to changes in estimates include
deferred policy acquisition costs and contract claims.
The significant accounting policies of the Company are as follows:
(a) Recognition of Policy Revenue and Related Expenses
Revenues for universal life products consist of policy charges for the cost
of insurance, administration and surrender charges during the period. Revenues
for variable universal life products also include policy charges for mortality
and expense risks assumed by Paragon. Policy benefits and expenses include
interest credited to policy account balances on universal life products and
death benefit payments made in excess of policy account balances.
Policy acquisition costs, such as commissions and certain costs of policy
issuance and underwriting, are deferred and amortized in relation to the
present value of expected gross profits over the estimated life of the
policies.
(b) Invested Assets
Investment securities are accounted for at fair value. At December 31, 1998
and 1997, fixed maturity securities are classified as available-for-sale and
are carried at fair value with the unrealized gain or loss, net of taxes, being
reflected as accumulated other comprehensive income, a separate component of
stockholder's equity. Policy loans are valued at aggregate unpaid balances.
Realized gains or losses on the sale of securities are determined on the
basis of specific identification and include the impact of any related
amortization of premiums or accretion of discounts which is generally computed
consistent with the interest method.
Amortization of the premium or discount on mortgage-backed securities is
recognized using a level-yield method which considers the estimated timing and
amount of prepayments of underlying mortgage loans. Actual prepayment
experience is periodically reviewed and effective yields are recalculated when
differences arise between the prepayments originally anticipated and the actual
prepayments received and currently anticipated. When such differences occur,
the net investment in the mortgage-backed security is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the security with a corresponding charge or credit to interest
income.
F-6
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
(c) Policyholder Account Balances
Policyholder account balances are equal to the policyholder account value
before deduction of any surrender charges. The policyholder account value
represents an accumulation of gross premium payments plus credited interest
less expense and mortality charges and withdrawals. These expense charges are
recognized in income as earned. Certain variable life policies allow
policyholders to exchange accumulated assets from the variable rate separate
accounts to a fixed-interest general account policy. The fixed-interest general
account guaranteed minimum crediting rates of 4% in 1998, 1997 and 1996. The
actual crediting rate was 6.5% in 1998 and 1997, and ranged from 6.5% to 7.0%
in 1996.
(d) Federal Income Taxes
The Company establishes deferred taxes under the asset and liability method,
and deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
The Company files its federal income tax return on a consolidated basis with
its Parent and other subsidiaries. In accordance with a tax allocation
agreement between Paragon and General American, taxes are computed as if
Paragon was filing its own income tax return, and tax expense (benefit) is paid
to, or received from, General American. Paragon recognizes a tax benefit to the
extent that its tax losses are utilized by other members of the General
American consolidated tax group.
(e) Reinsurance
Balances resulting from agreements which transfer funds relating to
policyholder account balances have been accounted for as deposits. Other
reinsurance activities are accounted for consistent with terms of the risk
transfer reinsurance contracts. Premiums for reinsurance ceded to other
companies have been reported as a reduction of policy contract charges. Amounts
applicable to reinsurance ceded for future policy benefits and claim
liabilities have been reported as assets for these items, and commissions and
expense allowances received in connection with reinsurance ceded have been
accounted for in income as earned. Reinsurance does not relieve the Company
from its primary responsibility to meet claim obligations.
(f) Deferred Policy Acquisition Costs
The costs of acquiring new business which vary with, and are primarily
related to, the production of new business have been deferred to the extent
that such costs are deemed recoverable from future gross profits. Such costs
include commissions, premium taxes, as well as certain costs of policy issuance
and underwriting. Deferred policy acquisition costs are adjusted for the impact
on estimated gross margins of net unrealized gains and losses on investment
securities. The estimates of expected gross margins are evaluated regularly and
are revised if actual experience or other evidence indicates that revision is
appropriate. Upon revision, total amortization recorded to date is adjusted by
a charge or credit to income.
(g) Separate Account Business
The assets and liabilities of the separate accounts represent segregated
funds administered and invested by the Company for purposes of funding variable
life insurance contracts for the exclusive benefit of variable life insurance
contract holders. The Company charges the separate accounts for risks it
assumes in issuing a policy and retains varying amounts of withdrawal charges
to cover expenses in the event of early withdrawals by contract holders. The
assets and liabilities of the separate account are carried at fair value.
F-7
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
(h) Fair Value of Financial Instruments
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Although fair value estimates are calculated using
assumptions that management believes are appropriate, changes in assumption
could significantly affect the estimates and such estimates should be used with
care. The following assumptions were used to estimate the fair value of each
class of financial instrument for which it was practicable to estimate fair
value:
Fixed maturities--Fixed maturities are valued using quoted market prices,
if available. If quoted market prices are not available, fair value is
estimated using quoted market prices of similar securities.
Policy loans--Policy loans are carried at their unpaid balances which
approximates fair value.
Separate account assets and liabilities--The separate account assets are
carried at fair value as determined by quoted market prices. Accordingly,
the carrying value of separate account liabilities is equal to their fair
value since it represents the contractholders' interest in the separate
account assets.
Cash and cash equivalents--The carrying amount is a reasonable estimate
of fair value.
(i) Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents represent
demand deposits and highly liquid short-term investments, which include U.S.
Treasury bills, commercial paper, and repurchase agreements with original or
remaining maturities of 90 days or less when purchased.
(j) Reclassifications
The Company has reclassified the presentation of certain prior period
information to conform to the 1998 presentation.
(2) Investments
The amortized cost and estimated fair value of fixed maturities at December
31, 1998 and 1997 are as follows (000's):
<TABLE>
<CAPTION>
1998
-----------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities........ $ 6,705 267 -- 6,972
Corporate securities............ 64,607 4,481 (208) 68,881
Mortgage-backed securities...... 6,854 192 (25) 7,021
Asset-backed securities......... 500 10 -- 510
------- ----- ---- ------
$78,666 4,950 (233) 83,384
======= ===== ==== ======
<CAPTION>
1997
-----------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities........ $ 4,472 131 -- 4,603
Corporate securities............ 56,973 3,098 (142) 59,929
Mortgage-backed securities...... 9,124 233 (48) 9,309
Asset-backed securities......... 1,762 101 -- 1,863
------- ----- ---- ------
$72,331 3,563 (190) 75,704
======= ===== ==== ======
</TABLE>
F-8
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
The amortized cost and estimated fair value of fixed maturities at December
31, 1998, by contractual maturity, are shown below (000's). Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
--------- ---------
<S> <C> <C>
Due in one year or less............................... $ 605 616
Due after one year through five years................. 20,733 21,528
Due after five years through ten years................ 12,600 13,338
Due after ten years through twenty years.............. 37,873 40,881
Mortgage-backed securities............................ 6,855 7,021
------- ------
$78,666 83,384
======= ======
</TABLE>
Proceeds from sales of fixed maturities during 1998, 1997 and 1996 were
$4,069,000, $1,328,585 and $4,129,254 respectively. Gross gains of $53,180,
$68,876 and $71,604 were realized on those sales in 1998, 1997 and 1996,
respectively.
The sources of net investment income follow (000s):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Fixed Maturities.................................... $5,603 4,941 4,626
Short-term investments.............................. 535 608 449
Policy loans and other.............................. 924 807 680
------ ----- -----
$7,062 6,356 5,755
Investment expenses................................. (79) (68) (92)
------ ----- -----
Net investment income........................... $6,983 6,288 5,663
====== ===== =====
</TABLE>
A summary of the components of the net unrealized appreciation (depreciation)
on invested assets carried at fair value is as follows (in 000's):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ----
<S> <C> <C> <C>
Unrealized appreciation (depreciation):
Fixed maturities available-for-sale.............. $ 4,717 3,373 513
Deferred policy acquisition costs................ (396) (361) (17)
Deferred income taxes.............................. (1,512) (1,054) (174)
------- ------ ----
Net unrealized appreciation (depreciation)......... $ 2,809 1,958 322
======= ====== ====
</TABLE>
The Company has fixed maturities on deposit with various state insurance
departments with an amortized cost of approximately $4,121,000 and $3,982,000
at December 31, 1998 and 1997, respectively.
(3) Reinsurance
The Company reinsures certain risks with other insurance companies above a
maximum retention amount (currently $50,000) to help reduce the loss on any
single policy.
F-9
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
Premiums and related reinsurance amounts for the years ended December 31,
1998, 1997 and 1996 as they relate to transactions with affiliates are
summarized as follows (000's):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Premiums for reinsurance ceded.................... $14,723 13,001 10,264
Policy benefits ceded............................. 17,071 14,070 6,274
Commissions and expenses ceded.................... 123 195 114
Reinsurance recoverables.......................... 1,109 1,661 774
</TABLE>
Ceded premiums and benefits to nonaffiliates for 1998, 1997 and 1996 were
insignificant.
(4) Deferred Policy Acquisition Costs
A summary of the policy acquisition costs deferred and amortized is as
follows (000's):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year.................... $17,980 15,776 13,006
Policy acquisition costs deferred............... 3,808 2,972 2,447
Policy acquisition costs amortized.............. (1,150) (424) (285)
Deferred policy acquisition costs relating to
change in unrealized (gain) loss on investments
available for sale............................. (36) (344) 608
------- ------ ------
Balance at end of year.......................... $20,602 17,980 15,776
======= ====== ======
</TABLE>
(5) Federal Income Taxes
The Company is taxed as a life insurance company. A summary of Federal income
tax expense is as follows (000s):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Current tax (benefit) expense.......................... $1,628 1,153 1,123
Deferred tax expense................................... 740 732 615
------ ----- -----
Federal income tax expense............................. $2,368 1,885 1,738
====== ===== =====
</TABLE>
A reconciliation of the Company's "expected" federal income tax expense,
computed by applying the federal U.S. corporate tax rate of 35% to income from
operations before federal income tax, is as follows (000s):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Computed "expected" tax expense....................... $2,368 2,022 1,734
Other, net............................................ 0 (137) 4
------ ----- -----
Federal income tax expense............................ $2,368 1,885 1,738
====== ===== =====
</TABLE>
F-10
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1998 and 1997
are presented below (000's):
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Deferred tax assets:
Unearned reinsurance allowances...................... $ 218 217 153
Policy and contract liabilities...................... 709 1,031 1,305
Tax capitalization of acquisition costs.............. 2,147 1,755 1,386
Other, net........................................... 58 76 69
------ ----- -----
Total deferred tax assets.......................... $3,132 3,079 2,913
====== ===== =====
Deferred tax liabilities:
Unrealized gain on investments....................... $1,512 1,054 174
Deferred policy acquisition costs.................... 7,211 6,419 5,520
------ ----- -----
Total gross deferred tax liabilities............... $8,723 7,473 5,694
------ ----- -----
Net deferred tax liabilities....................... $5,591 4,394 2,781
====== ===== =====
</TABLE>
The Company believes that a valuation allowance with respect to the
realization of the total gross deferred tax asset is not necessary. In
assessing the realization of deferred tax assets, the Company considers whether
it is more likely than not that the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. The Company files a consolidated tax return with its Parent.
Realization of the gross tax asset will not be dependent solely on the
Company's ability to generate its own taxable income. General American has a
proven history of earnings and it appears more likely than not that the
Company's gross deferred tax asset will ultimately be fully realized.
(6) Related-Party Transactions
Paragon purchases certain administrative services from General American.
Charges for services performed are based upon personnel and other costs
involved in providing such service. Charges for services during 1998, 1997 and
1996 were $1,513,433, $1,348,198 and $1,250,396, respectively. See Note 3 for
reinsurance transactions with affiliates.
(7) Pension Plan
Associates of Paragon participate in a non-contributory multi-employer
defined benefit pension plan jointly sponsored by Paragon and General American.
The benefits are based on years of service and compensation level. No pension
expense was recognized in 1998, 1997 or 1996 due to overfunding of the plan.
In addition, Paragon has adopted an associate incentive plan applicable to
full-time salaried associates with at least one year of service. Contributions
to the plan are determined annually by General American and are based on
salaries of eligible associates. Full vesting occurs after five years of
continuous service. Total expenses to the Company for the incentive plan were
$188,316, $198,972 and $80,434 for 1998, 1997 and 1996, respectively.
Paragon provides for certain health care and life insurance benefits for
retired employees. The Company accounts for these benefits in accordance with
SFAS No. 106--Employer's Accounting for Postretirement Benefits Other Than
Pensions. The amounts involved are not material.
F-11
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
(8) Statutory Financial Information
The Company is subject to financial statement filing requirements of the
State of Missouri Department of Insurance, its state of domicile, as well as
the states in which it transacts business. Such financial statements, generally
referred to as statutory financial statements, are prepared on a basis of
accounting which varies in some respects from generally accepted accounting
principles (GAAP). Statutory accounting principles include: (1) charging of
policy acquisition costs to income as incurred; (2) establishment of policy and
contract liabilities computed using required valuation standards which may vary
in methodology utilized; (3) nonprovision of deferred federal income taxes
resulting from temporary differences between financial reporting and tax bases
of assets and liabilities; (4) recognition of statutory liabilities for asset
impairments and yield stabilization on fixed maturity dispositions prior to
maturity with asset valuation reserves based on statutory determined formulae
and interest stabilization reserves designed to level yields over their
original purchase maturities; (5) valuation of investments in fixed maturities
at amortized cost; (6) net presentation of reinsurance balances; and (7)
recognition of deposits and withdrawals on universal life policies as revenues
and expenses.
The stockholder's equity (surplus) and net income (loss) of the Company at
December 31, 1998, 1997 and 1996, as determined using statutory accounting
practices, is summarized as follows (000's):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ------
<S> <C> <C> <C>
Statutory surplus as reported to regulatory
authorities...................................... $10,500 10,725 10,751
Net income (loss) as reported to regulatory
authorities...................................... $ 1,596 1,397 982
</TABLE>
(9) Dividend Restrictions
Dividend payments by Paragon are restricted by state insurance laws as to the
amount that may be paid without prior notice or approval of the Missouri
Department of Insurance. The maximum amount of dividends which can be paid
without prior approval of the insurance commissioner is limited to the maximum
of (1) 10% of statutory surplus or (2) net gain from operations. The maximum
dividend distribution that can be paid by Paragon during 1998 without prior
notice or approval is $1,596,000. Paragon did not pay dividends in 1998, 1997
or 1996.
(10) Risk-Based Capital
The insurance departments of various states, including the Company's
domiciliary state of Missouri, impose risk-based capital (RBC) requirements on
insurance enterprises. The RBC calculation serves as a benchmark for the
regulation of life insurance companies by state insurance regulators. The
requirements apply various weighted factors to financial balances or activity
levels based on their perceived degree of risk.
The RBC guidelines define specific capital levels where action by the Company
or regulators is required based on the ratio of a company's actual total
adjusted capital to control levels determined by the RBC formula. At December
31, 1998, the Company's actual total adjusted capital was in excess of minimum
levels which would require action by the Company or regulatory authorities
under the RBC formula.
F-12
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Concluded)
(11) Commitments and Contingencies
The Company leases certain of its facilities and equipment under
noncancellable leases the majority of which expires March 2001. The future
minimum lease obligations under the terms of the leases are summarized as
follows (000s):
<TABLE>
<S> <C>
Year ended December 31:
1999............................................................. $ 626
2000............................................................. 598
2001............................................................. 256
2002............................................................. 53
------
$1,533
======
</TABLE>
Rent expense totaled $489,999, $433,864 and $388,976 in 1998, 1997 and 1996,
respectively.
(12) Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income", effective for years beginning after December 15, 1997. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general-
purpose financial statements. The most significant items of comprehensive
income are net income and changes in unrealized gains and losses on securities.
The adoption of SFAS No. 130 does not affect results of operations or financial
position, but affects their presentation and disclosure. The Company has
adopted SFAS No. 130 as of January 1, 1998, and the following summaries present
the components of the Company's comprehensive income, other than net income,
for the periods ending December 31, 1998, 1997 and 1996 (000s):
<TABLE>
<CAPTION>
1998
-------------------------
Before- Tax Net-
Tax (Expense) of-Tax
Amount Benefit Amount
------- -------- ------
<S> <C> <C> <C>
Unrealized holding gains arising during
period....................................... $ 1,361 (476) 885
Less: reclassification adjustment for gains
realized in net income....................... (53) 19 (34)
------- ---- ------
Other comprehensive income.................... 1,308 (457) 851
------- ---- ------
<CAPTION>
1997
-------------------------
Before- Tax Net-
Tax (Expense) of-Tax
Amount Benefit Amount
------- -------- ------
<S> <C> <C> <C>
Unrealized holding gains arising during
period....................................... $ 2,585 (904) 1,681
Less: reclassification adjustment for gains
realized in net income....................... (69) 24 (45)
------- ---- ------
Other comprehensive income.................... 2,516 (880) 1,636
------- ---- ------
<CAPTION>
1996
-------------------------
Before- Tax Net-
Tax (Expense) of-Tax
Amount Benefit Amount
------- -------- ------
<S> <C> <C> <C>
Unrealized holding gains arising during
period....................................... $(1,868) 654 (1,214)
Less: reclassification adjustment for gains
realized in net income....................... (72) 25 (47)
------- ---- ------
Other comprehensive income (loss)............. (1,940) 679 (1,261)
------- ---- ------
</TABLE>
F-13
<PAGE>
APPENDIX A
Illustrations of Death Benefits and Cash Values
The following tables illustrate how the Cash Value and death benefit of a
Policy change with the investment experience of a Division of the Separate
Account. The tables show how the Cash Value and death benefit of a Policy
issued to Insureds of a given age and at a given premium would vary over time
if the investment return on the assets held in each Division of the Separate
Account were a uniform, gross, after-tax annual rate of 0%, 6%, or 12%. The
tables illustrate a Policy issued to a male and a female Insured, age 45, in a
select standard nonsmoker rate class. If either Insured falls into a smoker
rate class, the Cash Values and death and benefits would be lower than those
shown in the tables. In addition, the Cash Values and death benefits would be
different from those shown if the gross annual investment rates of return
averaged 0%, 6%, and 12% over a period of years, but fluctuated above and below
those averages for individual Policy Years.
The Cash Value column under the "Guaranteed" heading shows the accumulated
value of the Net Premiums paid at the stated interest rate, reflecting
deduction of all policy charges described in this prospectus at the guaranteed
maximum rate. The Cash value column under the "Current" heading shows the
accumulated value of the Net Premiums paid at the stated interest rate,
reflecting deduction of all policy charges as described in this prospectus at
the current rate. The illustrations of death benefits reflect the above
assumptions. The death benefits also vary between tables depending upon whether
Death Benefit Options A or C (Level Type) or Death Benefit Option B (Increasing
Type) are illustrated.
The amounts deducted from the Cash Value in the illustrations include the sales
charge, premium tax, federal tax charge, selection and issue expense charge,
monthly administrative charge, and cost of insurance. These charges are
described in the prospectus under Charges and Deductions.
The amounts shown for Cash Value and death benefit reflect charges that produce
an investment rate of return that is lower than the gross after-tax return on
the assets held in a Division of the Separate Account. The charges include a
charge for mortality and expense risk (equivalent to 0.55% for Policy Years 1-
10, 0.45% for Policy Years 11-20, and 0.35% thereafter), and an assumed 0.68%
charge for the investment Advisory fees and Fund administrative expenses
combined, based on the average Fund expense for all available investment Funds.
This average charge for the investment advisory fees and fund administrative
expenses reflects 1998 fee levels and takes into account expense reimbursement
arrangements to be in place for 1999 for some of the Funds. Without waivers or
reimbursements the average investment Advisory fee and Fund administrative
expense would be 0.69%. The actual investment advisory fee applicable to each
Division is shown in the respective Prospectuses of each Fund. After deduction
for these amounts, the illustrated gross annual investment rates of return of
0%, 6%, and 12% correspond to approximate initial net annual rates of -1.23%,
4.77%, and 10.77%, respectively. The Prospectuses for each Fund should be
consulted for details about the nature and extent of their expenses.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against the Separate Account (as opposed to Premium
Charges which are deducted from premium payments), since the Company is not
currently making any such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return of the
Divisions of the Separate Account would have to exceed 0%, 6%, and 12% by an
amount sufficient to cover the tax charges in order to produce the death
benefit and Cash Value illustration. (See Federal Tax Matters.)
The tables illustrate the Policy values that would result based upon the
investment rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Separate Account, if no Policy Loans have been
made. The tables are also based on the assumptions that the Owner has not
requested a decrease in the Face Amount, that no partial withdrawals have been
made, that no transfer charges were incurred, and that no optional riders have
been requested.
Upon request, the Company will provide a comparable illustration based upon the
proposed Insureds' age, sex, and rate class, the Face Amount or premium
requested, the proposed frequency of premium payments, and any available riders
requested.
A-1
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: A--LEVEL SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 0%
------------------------------------
CURRENT
CHARGES GUARANTEED CHARGES
(-1.23% NET) (-1.23% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ----- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,610 250,000 4,610 250,000
2 46 5,000 10,763 9,189 250,000 9,189 250,000
3 47 5,000 16,551 13,736 250,000 13,736 250,000
4 48 5,000 22,628 18,254 250,000 18,251 250,000
5 49 5,000 29,010 22,747 250,000 22,733 250,000
6 50 5,000 35,710 27,214 250,000 27,180 250,000
7 51 5,000 42,746 31,656 250,000 31,590 250,000
8 52 5,000 50,133 36,073 250,000 35,962 250,000
9 53 5,000 57,889 40,463 250,000 40,294 250,000
10 54 5,000 66,034 44,828 250,000 44,582 250,000
11 55 5,000 74,586 49,327 250,000 48,984 250,000
12 56 5,000 83,565 53,803 250,000 53,340 250,000
13 57 5,000 92,993 58,254 250,000 57,646 250,000
14 58 5,000 102,893 62,678 250,000 61,899 250,000
15 59 5,000 113,287 67,076 250,000 66,094 250,000
16 60 5,000 124,202 71,443 250,000 70,226 250,000
17 61 5,000 135,662 75,783 250,000 74,287 250,000
18 62 5,000 147,695 80,094 250,000 78,266 250,000
19 63 5,000 160,330 84,375 250,000 82,152 250,000
20 64 5,000 173,596 88,624 250,000 85,928 250,000
25 69 5,000 250,567 109,793 250,000 103,146 250,000
30 74 5,000 348,804 129,630 250,000 114,629 250,000
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-2
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: A--LEVEL SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 6%
------------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(4.77% NET) (4.77% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ----- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,893 250,000 4,893 250,000
2 46 5,000 10,763 10,047 250,000 10,047 250,000
3 47 5,000 16,551 15,476 250,000 15,476 250,000
4 48 5,000 22,628 21,195 250,000 21,193 250,000
5 49 5,000 29,010 27,227 250,000 27,213 250,000
6 50 5,000 35,710 33,586 250,000 33,551 250,000
7 51 5,000 42,746 40,292 250,000 40,223 250,000
8 52 5,000 50,133 47,362 250,000 47,245 250,000
9 53 5,000 57,889 54,817 250,000 54,635 250,000
10 54 5,000 66,034 62,676 250,000 62,410 250,000
11 55 5,000 74,586 71,145 250,000 70,773 250,000
12 56 5,000 83,565 80,081 250,000 79,578 250,000
13 57 5,000 92,993 89,510 250,000 88,850 250,000
14 58 5,000 102,893 99,458 250,000 98,614 250,000
15 59 5,000 113,287 109,954 250,000 108,897 250,000
16 60 5,000 124,202 121,027 250,000 119,727 250,000
17 61 5,000 135,662 132,711 250,000 131,134 250,000
18 62 5,000 147,695 145,042 250,000 143,152 250,000
19 63 5,000 160,330 158,055 250,000 155,815 250,000
20 64 5,000 173,596 171,790 250,000 169,165 250,000
25 69 5,000 250,567 253,943 294,574 249,063 288,913
30 74 5,000 348,804 361,855 387,185 353,259 377,988
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-3
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: A--LEVEL SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 12%
---------------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(10.77% NET) (10.77% NET)
AGE @ PREMIUM ------------------- -------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 5,176 250,000 5,176 250,000
2 46 5,000 10,763 10,940 250,000 10,940 250,000
3 47 5,000 16,551 17,357 250,000 17,357 250,000
4 48 5,000 22,628 24,504 250,000 24,501 250,000
5 49 5,000 29,010 32,469 250,000 32,454 250,000
6 50 5,000 35,710 41,346 250,000 41,309 250,000
7 51 5,000 42,746 51,239 250,000 51,166 250,000
8 52 5,000 50,133 62,264 250,000 62,141 250,000
9 53 5,000 57,889 74,551 250,000 74,359 250,000
10 54 5,000 66,034 88,245 250,000 87,964 250,000
11 55 5,000 74,586 103,718 250,000 103,325 250,000
12 56 5,000 83,565 120,977 250,000 120,449 250,000
13 57 5,000 92,993 140,230 250,000 139,545 250,000
14 58 5,000 102,893 161,706 250,000 160,845 250,000
15 59 5,000 113,287 185,665 250,000 184,614 250,000
16 60 5,000 124,202 212,391 276,108 211,133 274,473
17 61 5,000 135,662 242,199 310,014 240,685 308,077
18 62 5,000 147,695 275,443 347,058 273,614 344,754
19 63 5,000 160,330 312,520 387,524 310,299 384,771
20 64 5,000 173,596 353,870 431,722 351,164 428,420
25 69 5,000 250,567 646,825 750,317 639,178 741,446
30 74 5,000 348,804 1,154,054 1,234,838 1,133,664 1,213,021
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-4
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: B--INCREASING SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 0%
-----------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(-1.23% NET) (-1.23% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,610 254,610 4,610 254,610
2 46 5,000 10,763 9,188 259,188 9,188 259,188
3 47 5,000 16,551 13,735 263,735 13,735 263,735
4 48 5,000 22,628 18,251 268,251 18,248 268,248
5 49 5,000 29,010 22,742 272,742 22,727 272,727
6 50 5,000 35,710 27,207 277,207 27,169 277,169
7 51 5,000 42,746 31,647 281,647 31,572 281,572
8 52 5,000 50,133 36,059 286,059 35,933 285,933
9 53 5,000 57,889 40,445 290,445 40,249 290,249
10 54 5,000 66,034 44,804 294,804 44,514 294,514
11 55 5,000 74,586 49,297 299,297 48,886 298,886
12 56 5,000 83,565 53,764 303,764 53,200 303,200
13 57 5,000 92,993 58,205 308,205 57,452 307,452
14 58 5,000 102,893 62,615 312,615 61,634 311,634
15 59 5,000 113,287 66,994 316,994 65,738 315,738
16 60 5,000 124,202 71,338 321,338 69,754 319,754
17 61 5,000 135,662 75,649 325,649 73,666 323,666
18 62 5,000 147,695 79,924 329,924 77,458 327,458
19 63 5,000 160,330 84,160 334,160 81,103 331,103
20 64 5,000 173,596 88,356 338,356 84,575 334,575
25 69 5,000 250,567 108,967 358,967 98,693 348,693
30 74 5,000 348,804 127,088 377,088 101,809 351,809
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-5
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: B--INCREASING SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 6%
-----------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(4.77% NET) (4.77% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,893 254,893 4,893 254,893
2 46 5,000 10,763 10,047 260,047 10,047 260,047
3 47 5,000 16,551 15,474 265,474 15,474 265,474
4 48 5,000 22,628 21,192 271,192 21,189 271,189
5 49 5,000 29,010 27,221 277,221 27,205 277,205
6 50 5,000 35,710 33,578 283,578 33,537 283,537
7 51 5,000 42,746 40,280 290,280 40,199 290,199
8 52 5,000 50,133 47,344 297,344 47,205 297,205
9 53 5,000 57,889 54,791 304,791 54,571 304,571
10 54 5,000 66,034 62,641 312,641 62,312 312,312
11 55 5,000 74,586 71,098 321,098 70,624 320,624
12 56 5,000 83,565 80,019 330,019 79,359 329,359
13 57 5,000 92,993 89,428 339,428 88,534 338,534
14 58 5,000 102,893 99,348 349,348 98,166 348,166
15 59 5,000 113,287 109,808 359,808 108,272 358,272
16 60 5,000 124,202 120,833 370,833 118,866 368,866
17 61 5,000 135,662 132,455 382,455 129,961 379,961
18 62 5,000 147,695 144,705 394,705 141,565 391,565
19 63 5,000 160,330 157,615 407,615 153,680 403,680
20 64 5,000 173,596 171,219 421,219 166,305 416,305
25 69 5,000 250,567 251,934 501,934 237,992 487,992
30 74 5,000 348,804 355,756 605,756 320,123 570,123
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-6
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: B--INCREASING SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 12%
---------------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(10.77% NET) (10.77% NET)
AGE @ PREMIUM ------------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 5,176 255,176 5,176 255,176
2 46 5,000 10,763 10,939 260,939 10,939 260,939
3 47 5,000 16,551 17,355 267,355 17,355 267,355
4 48 5,000 22,628 24,500 274,500 24,497 274,497
5 49 5,000 29,010 32,462 282,462 32,445 282,445
6 50 5,000 35,710 41,335 291,335 41,291 291,291
7 51 5,000 42,746 51,222 301,222 51,135 301,135
8 52 5,000 50,133 62,239 312,239 62,087 312,087
9 53 5,000 57,889 74,515 324,515 74,269 324,269
10 54 5,000 66,034 88,193 338,193 87,819 337,819
11 55 5,000 74,586 103,646 353,646 103,098 353,098
12 56 5,000 83,565 120,877 370,877 120,103 370,103
13 57 5,000 92,993 140,092 390,092 139,025 389,025
14 58 5,000 102,893 161,515 411,515 160,079 410,079
15 59 5,000 113,287 185,402 435,402 183,502 433,502
16 60 5,000 124,202 212,030 462,030 209,555 459,555
17 61 5,000 135,662 241,720 491,720 238,528 488,528
18 62 5,000 147,695 274,821 524,821 270,738 520,738
19 63 5,000 160,330 311,725 561,725 306,532 556,532
20 64 5,000 173,596 352,868 602,868 346,293 596,293
25 69 5,000 250,567 643,954 893,954 624,058 874,058
30 74 5,000 348,804 1,146,254 1,396,254 1,092,180 1,342,180
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-7
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: C--NET SINGLE PREMIUM SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 0%
------------------------------------
CURRENT
CHARGES GUARANTEED CHARGES
(-1.23% NET) (-1.23% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,610 250,000 4,610 250,000
2 46 5,000 10,763 9,189 250,000 9,189 250,000
3 47 5,000 16,551 13,736 250,000 13,736 250,000
4 48 5,000 22,628 18,254 250,000 18,251 250,000
5 49 5,000 29,010 22,747 250,000 22,733 250,000
6 50 5,000 35,710 27,214 250,000 27,180 250,000
7 51 5,000 42,746 31,656 250,000 31,590 250,000
8 52 5,000 50,133 36,073 250,000 35,962 250,000
9 53 5,000 57,889 40,463 250,000 40,294 250,000
10 54 5,000 66,034 44,828 250,000 44,582 250,000
11 55 5,000 74,586 49,327 250,000 48,984 250,000
12 56 5,000 83,565 53,803 250,000 53,340 250,000
13 57 5,000 92,993 58,254 250,000 57,646 250,000
14 58 5,000 102,893 62,678 250,000 61,899 250,000
15 59 5,000 113,287 67,076 250,000 66,094 250,000
16 60 5,000 124,202 71,443 250,000 70,226 250,000
17 61 5,000 135,662 75,783 250,000 74,287 250,000
18 62 5,000 147,695 80,094 250,000 78,266 250,000
19 63 5,000 160,330 84,375 250,000 82,152 250,000
20 64 5,000 173,596 88,624 250,000 85,928 250,000
25 69 5,000 250,567 109,793 250,000 103,146 250,000
30 74 5,000 348,804 129,630 250,000 114,629 250,000
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-8
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: C--NET SINGLE PREMIUM SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 6%
---------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(4.77% NET) (4.77% NET)
AGE @ PREMIUM --------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 4,893 250,000 4,893 250,000
2 46 5,000 10,763 10,047 250,000 10,047 250,000
3 47 5,000 16,551 15,476 250,000 15,476 250,000
4 48 5,000 22,628 21,195 250,000 21,193 250,000
5 49 5,000 29,010 27,227 250,000 27,213 250,000
6 50 5,000 35,710 33,586 250,000 33,551 250,000
7 51 5,000 42,746 40,292 250,000 40,223 250,000
8 52 5,000 50,133 47,362 250,000 47,245 250,000
9 53 5,000 57,889 54,817 250,000 54,635 250,000
10 54 5,000 66,034 62,676 250,000 62,410 250,000
11 55 5,000 74,586 71,145 250,000 70,773 250,000
12 56 5,000 83,565 80,081 250,000 79,578 250,000
13 57 5,000 92,993 89,510 251,415 88,850 250,000
14 58 5,000 102,893 99,455 269,055 98,602 266,749
15 59 5,000 113,287 109,942 286,543 108,846 283,685
16 60 5,000 124,202 120,999 303,889 119,598 300,371
17 61 5,000 135,662 132,657 321,135 130,875 316,822
18 62 5,000 147,695 144,946 338,334 142,689 333,065
19 63 5,000 160,330 157,901 355,514 155,049 349,093
20 64 5,000 173,596 171,555 372,738 167,960 364,928
25 69 5,000 250,567 252,663 463,106 242,074 443,698
30 74 5,000 348,804 357,456 562,135 330,475 519,705
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-9
<PAGE>
PARAGON LIFE INSURANCE COMPANY
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE INSURANCE
CONTRACT FACE AMOUNT: $250,000 MALE AND FEMALE INSUREDS AGE 45
DEATH BENEFIT OPTION: C--NET SINGLE PREMIUM SELECT STANDARD, NONSMOKERS
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT D
HYPOTHETICAL GROSS ANNUAL RATE OF
RETURN: 12%
---------------------------------
CURRENT CHARGES GUARANTEED CHARGES
(10.77% NET) (10.77% NET)
AGE @ PREMIUM ------------------- ------------------
POLICY BEGINNING ANNUAL ACCUM @ CASH DEATH CASH DEATH
YEAR OF YEAR PREMIUM 5% VALUE BENEFIT VALUE BENEFIT
- ------ --------- ------- ------- --------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 45 5,000 5,250 5,176 250,000 5,176 250,000
2 46 5,000 10,763 10,940 250,000 10,940 250,000
3 47 5,000 16,551 17,357 250,000 17,357 250,000
4 48 5,000 22,628 24,504 250,000 24,501 250,000
5 49 5,000 29,010 32,469 250,000 32,454 250,000
6 50 5,000 35,710 41,346 250,000 41,309 250,000
7 51 5,000 42,746 51,239 250,000 51,166 250,000
8 52 5,000 50,133 62,264 250,000 62,141 250,000
9 53 5,000 57,889 74,551 250,000 74,359 250,000
10 54 5,000 66,034 88,243 277,763 87,957 276,862
11 55 5,000 74,586 103,709 314,218 103,287 312,938
12 56 5,000 83,565 120,953 352,809 120,339 351,016
13 57 5,000 92,993 140,179 393,734 139,299 391,263
14 58 5,000 102,893 161,609 437,202 160,374 433,858
15 59 5,000 113,287 185,497 483,462 183,786 479,002
16 60 5,000 124,202 212,118 532,734 209,782 526,868
17 61 5,000 135,662 241,786 585,316 238,628 577,671
18 62 5,000 147,695 274,848 641,549 270,610 631,658
19 63 5,000 160,330 311,687 701,763 306,033 689,034
20 64 5,000 173,596 352,732 766,380 345,224 750,069
25 69 5,000 250,567 642,205 1,177,098 613,994 1,125,389
30 74 5,000 348,804 1,137,261 1,788,457 1,046,273 1,645,370
</TABLE>
The amounts shown under "Current Charges" reflect investment results using
current mortality and expense risk charges, monthly policy charges, and cost of
insurance rates for the exact combination of premiums and benefits shown.
The amounts shown under "Guaranteed Charges" reflect investment results using
guaranteed mortality and expense risk charges, monthly policy charges, and cost
of insurance rates for the exact combination of premiums and benefits shown.
If no Cash Value or Death Benefit is shown, the Policy would lapse under the
assumptions used. Additional premium payments would be required to keep the
Policy in force.
The hypothetical investment rate of return shown is illustrative only, and
should not be deemed a representation of past or future results. Actual
investment results may be more or less than those shown and will depend on a
number of factors, including the investment allocation made by the Policy
Holder and the investment results for the Underlying Portfolios. The Cash Value
and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown over a period of years, but also
fluctuated above or below that average for individual Policy Years. No
representation can be made by Paragon, Walnut Street Securities, the Funds,
their various investment managers, or any representative thereof, that this
hypothetical rate of return can be achieved for any one year, or sustained over
any period of time.
Illustrated values shown above are as of the end of the Policy Years indicated
and assume any additional premiums shown are received on the Policy
Anniversaries.
A-10
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article III, Section 13 of the Bylaws of Paragon Life Insurance Company
provides: "The Corporation may indemnify any person who is made a party to any
civil or criminal suit, or made a subject of any administrative or investigative
proceeding by reason of the fact that he is or was a director, officer, or agent
of the Corporation. This indemnity may extend to expenses, including attorney's
fees, judgments, fine, and amounts paid in settlement. The indemnity shall not
be available to persons being sued by or upon the information of the Corporation
nor to persons who are being investigated by the Corporation. The indemnity
shall be discretionary with the Board of Directors and shall not be granted
until the Board of Directors has made a determination that the person who would
be indemnified acted in good faith and in a manner he reasonably believed to be
in the best interest of the Corporation. The Corporation shall have such other
and further powers of indemnification as are not inconsistent with the laws of
Missouri."
Insofar as indemnification for liability arising under the Securities Act
of l933,(the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the Charter and Articles of Incorporation
of the Company, the By-Laws of the Company, agreement, statute, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-1
<PAGE>
REPRESENTATION CONCERNING FEES AND CHARGES
Paragon Life Insurance Company (the "Company") hereby represents that the
fees and charges deducted under the terms of the policies described in this
Registration Statement are, in the aggregate, reasonable in relationship to the
services rendered, the expenses expected to be incurred, and the risks assumed
by the Company.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The Individual Flexible Premium Variable Life Prospectus consisting of 46
pages.
The undertaking to file reports required by Section 15(d)
of the Securities Exchange Act of 1934.
The undertaking pursuant to Rule 484.
Representations concerning fees and charges.
The signatures.
1. The following exhibits (which correspond in number to the numbers under
paragraph A of the instructions as to exhibits for Form N-8B-2):
(1) Resolution of the Board of Directors of the Company authorizing
establishment of the Separate Account 1
(2) Not applicable
(3) (a) Form of Underwriting Agreement 2
(b) Form of Selling Agreement 2
(c) Not applicable
(4) Not applicable
(5) Form of Individual Policy and Policy Riders 2
(6) (a) Amended Charter and Articles of Incorporation of the Company 2
(b) By-Laws of the Company 2
(7) Not applicable
(8) (a) Participation Agreement dated September 1, 1993 between Paragon
Life Insurance Company and the Variable Insurance Products Fund and
Fidelity Distributors Corporation 2
(b) Participation Agreement dated September 1, 1993 between Paragon
Life Insurance Company and the Variable Insurance Products Fund II
and Fidelity Distributors Corporation 2
(c) Participation Agreement dated October 12, 1995 by and among MFS
Variable Insurance Trust and Paragon Life Insurance Company and
Massachusetts Financial Services Company 2
(d) Participation Agreement dated October 30, 1995 among Putnam
Capital Manager Trust, Putnam Mutual Funds Corporation, and Paragon
Life Insurance Company 2
(e) Participation Agreement dated March 15, 1995 between Scudder
Variable Life Investment Fund, Scudder Investor Services, Inc., and
Paragon Life Insurance Company 2
II-3
<PAGE>
(f) Participation Agreement Dated August 1, 1996 between Paragon Life
Insurance Company and T. Rowe Price Investment Services, Inc. 3
(9) Not applicable
(10) Proposed Form of Application 2
(11) Memorandum describing the Company's issuance, transfer, and
redemption procedures for the Policies 4
2. Opinion of Matthew P. McCauley, Esquire, General Counsel of Paragon Life
Insurance Company, as to the legality of the securities being offered 2
3. Consent of Matthew P. McCauley, Esquire, General Counsel of Paragon Life
Insurance Company 2
4. Not applicable
5. Not applicable
6. Not applicable
7. Opinion and consent of Craig K. Nordyke, F.S.A., M.A.A.A., Executive Vice
President and Chief Actuary, as to actuarial matters pertaining to the
securities being registered 4
8. (a) Consent of KPMG LLP, Independent Certified Public Accountants 2
(b) Written consent of Sutherland Asbill & Brennan 2
9. Original powers of attorney authorizing Carl H. Anderson, Matther P.
McCauley, and Craig K. Nordyke, and each of them singly, to sign this
Registration Statement and Amendments thereto on behalf of the Board of
Directors of Paragon Life Insurance Company 1
* * *
1. Incorporated by reference to the initial Registration Statement of Form S-6
found in File No. 333-36515, filed with the Securities and Exchange
Commission on September 26, 1997.
2. Filed herewith.
3. Incorporated by reference to the Pre-Effective Amendment #1 on Form S-6
found in file No. 333-36515, filed with the Securities and Exchange
Commission on February 26, 1998.
4. Incorporated by reference to initial Registration Statement on Form S-6
found in File No. 333-80393, filed with the Securities and Exchange
Commission on June 10, 1999.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Paragon Life
Insurance Company and Separate Account D of Paragon Life Insurance Company have
duly caused this Registration Statement to be signed on their behalf by the
undersigned thereunto duly authorized, and the seal of Paragon Life Insurance
Company to be hereunto affixed and attested, all in the City of St. Louis, State
of Missouri, on the 1st day of September, 1999.
<TABLE>
<CAPTION>
<S> <C>
Separate Account D
of Paragon Life Insurance Company
(Name of Registrant)
(Seal) Paragon Life Insurance Company
(Name of Depositor)
Attest: /s/ Matthew P. McCauley By: /s/ Carl H. Anderson
-------------------------- --------------------------
Matthew P. McCauley Carl H. Anderson
Secretary President and Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Carl H. Anderson
- -------------------------- President and Director 9/1/99
Carl H. Anderson Chief Executive Officer
/s/ Matthew K. Duffy
- -------------------------- Vice President and Chief Financial Officer 9/1/99
Matthew K. Duffy (Principal Accounting Officer and Principal
Financial Officer)
Director
- --------------------------
Warren J. Winer*
Director
- --------------------------
Richard A. Liddy*
/s/ Matthew P. McCauley Vice President, General Counsel, Secretary 9/1/99
- -------------------------- and Director
Matthew P. McCauley
/s/ Craig K. Nordyke Director 9/1/99
- --------------------------
Craig K. Nordyke
Director
- --------------------------
Leonard M. Rubenstein*
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
Director and Treasurer
- ---------------------------------------------
E. Thomas Hughes, Jr.*
Director
- ---------------------------------------------
Bernard H. Wolzenski*
Director
- ---------------------------------------------
A. Greig Woodring*
By: /s/ Craig K. Nordyke
----------------------------------------- Director 9/1/99
Craig K. Nordyke
</TABLE>
*Original powers of attorney authorizing Matthew P. McCauley, Carl H. Anderson,
and Craig K. Nordyke, and each of them singly, to sign this Registration
Statement and Amendments thereto on behalf of the Board of Directors of Paragon
Life Insurance Company were filed with the Securities and Exchange Commission
with the initial S-6 Registration Statement.
II-6
<PAGE>
EXHIBIT INDEX
1. N/A
2. N/A
3. a Form of Underwriting Agreement
b Form of Selling Agreement
4. N/A
5. Form of Policy and Policy Riders
6. a Amended Charter and Articles of Incorporation of the Company
b By-Laws of the Company
7. N/A
8. a Participation Agreement dated September 1, 1993 between Paragon Life
Insurance Company and the Variable Insurance Products Fund and Fidelity
Distributors Corporation
b Participation Agreement dated September 1, 1993 between Paragon Life
Insurance Company and the Variable Insurance Products Fund II and
Fidelity Distributors Corporation
c Participation Agreement dated October 12, 1995 by and among MFS Variable
Insurance Trust and Paragon Life Insurance Company and Massachusetts
Financial Services Company
d Participation Agreement dated October 30, 1995 among Putnam Capital
Manager Trust, Putnam Mutual Funds Corporation, and Paragon Life
Insurance Company
e Participation Agreement dated March 15, 1995 between Scudder Variable
Life Investment Fund, Scudder Investor Services, Inc., and Paragon Life
Insurance Company
9. N/A
10. Proposed Form of Application
11. Opinion and consent of Matthew P. McCauley, Esquire, General Counsel of
Paragon Life Insurance Company, as to the legality of the securities being
offered
12. Consent of KPMG LLP, Independent Certified Public Accountants
13. Written consent of Sutherland Asbill & Brennan LLP
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
Separate Account D
This UNDERWRITING AGREEMENT made as of the _____ day of February 1993, by
and between Walnut Street Securities, Inc. (hereinafter "the Underwriter") and
Paragon Life Insurance Company (hereinafter "the Insurance Company"), on its own
behalf and on behalf of Paragon Life Insurance Company Separate Account D
(hereinafter "the Account"), a separate account of the Insurance Company;
WITNESSETH as follows:
WHEREAS, the Account was established under authority of a resolution of the
Insurance Company's Board of Directors on January 3, 1995, in order to set aside
and invest assets attributable to certain flexible premium variable life
contracts (hereinafter "Contracts") issued by the Insurance Company;
WHEREAS, the Insurance Company has registered the Account as a unit
investment trust under the Investment Company Act of 1940 (the "Investment
Company Act") and has registered the Contracts under the Securities Act of 1933;
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Insurance Company and the Account desire to have Contracts
sold and distributed through the Underwriter and the Underwriter is willing to
sell and distribute such Contracts under the terms stated herein;
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
1. The Insurance Company grants to the Underwriter the right to be, and the
Underwriter agrees to serve as distributor and principal underwriter of the
Contracts during the term of this Agreement. The Underwriter agrees to use its
best efforts to solicit applications for the Contracts at its own expense, and
otherwise to perform all duties and functions which are necessary and proper for
the distribution of the Contracts.
2. All premiums for Contracts shall be remitted promptly to the Insurance
Company in full together with appropriate application forms and any other
required documentation. Checks or money orders in payment of premiums shall be
drawn to the order of "Paragon Life Insurance Company".
3. The Underwriter agrees to offer the Contracts for sale in accordance with
the prospectus for them then in effect. The Underwriter is not authorized to
give any information or to make any representations concerning the Contracts
other than those contained in the current prospectus filed with the SEC or in
such sales literature as may be developed and authorized by the Insurance
Company in conjunction with the Underwriter.
4. On behalf of the Account, the Insurance Company shall furnish the
Underwriter with copies of all prospectuses, financial statements, and other
documents which the Underwriter reasonably requests for use in connection with
the distribution of the Contracts.
5. The Underwriter represents that it is duly registered as a broker-dealer
under the 1934 Act, and is a member in good standing of the NASD, and -- to the
extent necessary to offer the Contracts -- shall be duly registered or otherwise
qualified under the securities
<PAGE>
laws of any state or other jurisdiction. The Underwriter shall be responsible
for carrying out its sales and underwriting obligations hereunder in continued
compliance with the NASD Rules of Fair Practice, and applicable federal and
state securities laws and regulations. Without limiting the generality of the
foregoing, the Underwriter agrees that it shall be fully responsible for:
(a) ensuring that no person shall offer or sell the Contracts on its
behalf until such person is duly registered as a representative of the
Underwriter; duly licensed and appointed by the Insurance Company; and
appropriately licensed, registered, or otherwise qualified to offer and sell
such Contracts under the federal securities laws and any applicable securities
laws of each state or other jurisdiction in which the Insurance Company is
licensed to sell the Contracts and in which such persons shall offer or sell the
Contracts; and
(b) training, supervising, and controlling of all such persons for
purposes of complying on a continuous basis with the NASD Rules of Fair Practice
and with federal and state securities law requirements applicable in connection
with the offering and sale of the Contracts. In this connection, the Underwriter
shall:
(1) conduct such training (including the preparation and utilization
of training materials) as in the opinion of the Underwriter is necessary to
accomplish the purposes of this Agreement;
(2) establish and implement reasonable written procedures for
supervision of sales practices of agents, representatives, or brokers
selling the Contracts: and
(3) take reasonable steps to ensure that its associated persons
shall not
<PAGE>
make recommendations to an applicant to purchase and shall not sell a
Contract in the absence of reasonable grounds to believe that the purchase
of the Contract is suitable for such applicant.
6. Notwithstanding anything in this Agreement to the contrary, the Underwriter
is hereby authorized to enter into sales agreements with other independent
broker-dealers for the sale of the Contracts. All such sales agreements entered
into by the Underwriter shall provide that each independent broker-dealer will
assume full responsibility for continued compliance by itself and its associated
persons with the NASD Rules of Fair Practice and applicable federal and state
securities laws. All associated persons of such independent broker-dealers
soliciting applications for the Contracts shall be duly and appropriately
licensed or appointed by the Insurance Company for the sale of the Contracts
under the insurance laws of the applicable states or jurisdictions in which such
persons shall offer or sell the Contracts.
7. The Insurance Company shall apply for the proper insurance licenses in the
appropriate states or jurisdictions for persons associated with the Underwriter;
or with other independent broker-dealers which have entered into agreements with
the Underwriter for the sale of the Contracts and are designated to sell the
Contracts provided that the Insurance Company reserves the right to refuse to
appoint any proposed associated person as an agent or broker, and to terminate
an agent or broker once appointed.
8. The Insurance Company and the Underwriter shall cause to be maintained and
preserved for the periods prescribed such accounts, books, and other documents
as are required of them by the Investment Company Act, the 1934 Act, and any
other applicable laws and regulations. The books, accounts and records of the
Insurance Company, the Account, and the Underwriter as to all transactions
hereunder shall be maintained so as to
<PAGE>
disclose clearly and accurately the nature and details of the transactions. The
Insurance Company shall maintain such books and records of the Underwriter
pertaining to the sale of the Contracts and required by the 1934 Act as may be
mutually agreed upon from time to time by the Insurance Company and the
Underwriter; provided that such books and records shall be the property of the
Underwriter, and shall at all times be subject examination by the SEC and all
other regulatory bodies having jurisdiction. The Insurance Company shall be
responsible for sending all confirmations on customer regulations, as modified
by an exemption or other relief obtained by the Insurance Company. The
Underwriter shall cause the Insurance Company to be furnished with such reports
as the Insurance Company may reasonably request for the purpose of meeting its
reporting and recordkeeping obligations under the insurance laws of the State of
Missouri and any other states or jurisdictions.
9. Ownership and control of records shall not be affected by this Agreement.
10. Each party to this Agreement has the right to inspect, audit, and copy all
pertinent records of the other party pertaining to performance under this
Agreement.
11. Each party to this Agreement will keep any information obtained in the
course of its relationship to the other party in confidence and will not use
such information for its own benefit or disclose it except as authorized by the
other party or as required by regulatory authorities having jurisdiction.
12. The Insurance Company shall pay commissions as per Maximum Commission
Schedule to the Underwriter. The Underwriter shall have the responsibility for
paying (i) all commissions or other fees to associated persons of the
Underwriter which are due for the sale of the Contracts and (ii) any
compensation to other independent broker-dealers and their associated persons
due under the terms of any sales agreements between the Underwriter
<PAGE>
and such broker-dealers. Notwithstanding the preceding sentence, no associated
person or broker-dealer shall have an interest in any deductions or other fees
payable to the Underwriter as set forth herein.
13. The Insurance Company agrees to indemnify the Underwriter for any losses
incurred as a result of any action taken or omitted by the Underwriter, or any
of its officers, agents, or employees, in performing their responsibilities
under this Agreement in good faith and without willful misfeasance, gross
negligence, or reckless disregard of such obligations.
14. The Insurance Company undertakes to guarantee the performance of all of
Underwriter's obligations imposed by Section 27(f) of the Investment Company
Act, as amended, and Rule 27d-2 adopted by the SEC, to make refunds of the
premiums or charges to owners of Contracts required by Section 27(f) or the
conditions of any exemptions therefrom.
15. (a) This Agreement may be terminated by either party hereto upon 60 days'
written notice to the other party.
(b) This Agreement may be terminated upon written notice of one party to
the other party hereto in the event of bankruptcy or insolvency of
such party to which notice is given.
(c) This Agreement may be terminated at any time upon the mutual written
consent of the parties thereto.
(d) The Underwriter shall not assign or delegate its responsibilities
under this Agreement without the written consent of the Insurance
Company.
<PAGE>
Without limiting the generality of the foregoing, the term "assigned"
shall not include any transaction exempted from section 15(b)(2) of
the Investment Company Act.
(e) This Agreement may be terminated by either party without penalty.
(f) In the event either party to this Agreement fails to perform in a
satisfactory manner the other party may cancel this Agreement.
(g) Upon termination of this Agreement, all authorizations, rights, and
obligations shall cease except the obligation to settle accounts
hereunder, including payments (or premiums or contributions)
subsequently received for Contracts in effect at the time of
termination or issued pursuant to applications received by the
Insurance Company prior to termination.
(h) In the event this Agreement is ended for any reason each party agrees
to return all records belonging to the other party promptly and free
from all claims.
16. This Agreement shall be subject to the provisions of the Investment Company
Act and the 1934 Act and the rules, regulations, and rulings thereunder and of
the NASD, from time to time in effect, including such exemptions from the
Investment Company Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
17. Each party to this Agreement expressly reserves unto itself the ultimate
authority and responsibility for conduct of its business.
<PAGE>
18. Each party to this Agreement shall furnish to regulatory authorities having
jurisdiction such information as may be requested in order for such authorities
to ascertain that Insurance Company's variable life insurance operations are
being conducted in accordance with applicable laws and regulations.
19. Each party to this Agreement shall be liable for its own misconduct and
negligence.
20. Neither party to this Agreement shall attempt to immunize itself from
liability solely in reliance upon an opinion of that party's own counsel.
21. Neither party to this Agreement shall undertake any activity which might
conflict with its faithful discharge of the duties outlined in this Agreement.
22. The statutes of limitations contained in the laws applicable to this
Agreement shall govern.
23. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
24. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunder duly authorized and seals to be
affixed, as of the day and year first above written.
<PAGE>
WALNUT STREET SECURITIES, INC.
Attest:
by:
- ----------------------- --------------------
Secretary President
Attest: PARAGON LIFE INSURANCE COMPANY
by:
- ----------------------- --------------------
Secretary President
<PAGE>
SELLING AGREEMENT
This is an Agreement by and between Walnut Street Securities, Inc. (hereafter
referred to as "Company"), and ________________________________________________
(hereafter referred to as "Broker-dealer").
Premises
A. Company is a principal underwriter for variable life insurance contracts
(the "Contracts") issued by Paragon Life Insurance Company ("Paragon"),
which Contracts are registered as securities with the Securities and
Exchange Commission and are subject to the various regulations pertaining
to securities as well as to the laws governing insurance contracts.
B. Broker-dealer certifies that it is registered and in good standing as a
broker-dealer under the Securities Exchange Act of 1934 and is a member in
good standing of the National Association of Securities Dealers ("NASD"),
and desires to become authorized to sell the Contracts.
In consideration of and reliance on the premises and the covenants set forth
below, the parties hereto agree as follows:
1) Basic Engagement Company hereby agrees that the Broker-dealer is
authorized to sell the Contracts. Broker-dealer hereby agrees to conduct
all selling activities in respect of the Contracts in accordance with the
rules and regulations of the NASD and all applicable state and federal
laws, rules, and regulations.
2) Broker-dealer Duties
--------------------
a. Paragon will ensure the individuals conducting sales activities
relating to the Contracts are duly appointed insurance agents of
Paragon and entitled to sell the Contracts under insurance laws of any
jurisdiction in which the individual solicits sales.
b. Broker-dealer will ensure that sales of the Contracts do not occur in
jurisdictions where Paragon is not licensed to sell the Contract.
c. Broker-dealer will ensure that individuals conducting sales activities
relating to the Contracts possess the qualifications specified by the
NASD and federal laws and regulations.
d. Broker-dealer will supervise the sales practices of its agents and
hereby indemnifies and holds Company harmless from any damage or
expense caused by any breach of the Agreement or any misrepresentation
or omission in the connection of the offer or sales of any Contracts
by Broker-dealer and its agents in selling the Contracts.
<PAGE>
3) Suitability Broker-dealer will review all applications for the
Contracts to make certain that the purchases are suitable for the
prospective customer. Broker-dealer will promptly forward to Company all
applications for the Contracts which it deems suitable, together with any
purchase payments received, without making any deduction for compensation
of the selling agent or of the Broker dealer itself. Paragon and the
Company have the right to make their own determination concerning the
acceptability of any application for a Contract and to return any purchase
payment tendered in connection therewith.
4) Sales Materials The Contracts are described in prospectuses, and the
mutual fund into which premiums may be directed is described in a
prospectus. Broker-dealer will offer and sell the Contracts only in
accordance with the terms and conditions of the then current prospectuses
and will make no representations not made in the prospectuses or in any
other authorized supplemental sales materials approved by Company and
Paragon. Broker-dealer shall not use or permit use of advertising or sales
materials without obtaining the prior written approval of Paragon.
5) Independent Contractor Broker-dealer is performing the acts covered by
this Agreement in the capacity of independent contractor and not as an
agent or employee of Company or of Paragon. Neither Company nor Paragon
shall be liable for any obligation, act, or omission of Broker-dealer.
6) Compensation Broker-dealer shall be paid by Paragon (on behalf of
Company) compensation for the sale of Contracts under the conditions set
forth in the attached Compensation Schedule. Paragon has the right to
charge back any such compensation under the conditions stated in such
Schedule(s). Any Compensation Schedule can be changed by Company and
Paragon as of a specified date, provided such date is at least 10 days
after the date notice of the change is mailed to Broker-dealer's last known
address. Any such change will apply only to Contracts issued on or after
effective date of the change.
7) Effectiveness This Agreement shall take effect as of the date it is
signed by Company, which date is shown below. It shall continue in force
from year to year unless it is terminated. This Agreement may be
terminated for any reason by either party; such termination will become
effective 60 days after the mailing of a notice of termination to the other
parties' last known address. This Agreement may be terminated by Company
for cause (i.e., Broker-dealer's violation of any of the terms of this
Agreement); such termination will become effective upon the mailing of a
notice of termination to the Broker-dealer's last known address. Failure
of Company to terminate this Agreement upon knowledge of a cause shall not
constitute a waiver of the right to terminate at a later time for such
cause. This Agreement shall immediately terminate automatically if Broker-
dealer shall cease to be a member of the NASD or to possess the requisite
licenses and appointments, and Broker-dealer agrees to immediately notify
Company of such an occurrence. Broker-dealer may terminate this Agreement
at any time following 20 days written notice to Company at its last known
address.
2
<PAGE>
8) No Assignment Agreement may not be assigned by Broker-dealer except
with the written consent of Company.
9) Applicable Law This Agreement shall be construed in accordance with
the laws of Missouri.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in its
corporate name by one of its corporate officers, and the Broker-dealer has set
its hand to this Agreement as of the day and year written below.
WALNUT STREET SECURITIES, INC.
______________________________ ___________________________________
BROKER-DEALER COMPANY
SIGNATURE: SIGNATURE:
______________________________ ___________________________________
NAME: NAME:
______________________________ ___________________________________
TITLE: TITLE:
______________________________ ___________________________________
ADDRESS: ADDRESS:
______________________________ 400 SOUTH 4TH STREET, SUITE 1000
______________________________ ST. LOUIS, MISSOURI 63102
DATE:
______________________________ EFFECTIVE DATE:________________
3
<PAGE>
POLICY NUMBER:
16,000,001
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
INSUREDS:
John Doe
Jane Doe
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Non-Participating
Flexible Premiums are payable while this policy is in force and continue until
the younger Insured reaches Attained Age 100. If both Insureds die while this
policy is in force, we will pay the policy proceeds to the beneficiary upon the
Last Insured's death. We must receive proof of both Insureds' deaths. The policy
must also be surrendered to us after the Last Insured's death occurs. Any
payment will be subject to all of the provisions and conditions on this and the
following pages of this policy.
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE UNDER THE CONDITIONS DESCRIBED ON PAGES 4.01 AND 4.02.
THE POLICY'S CASH VALUE IN EACH INVESTMENT DIVISION OF THE SEPARATE ACCOUNT
IS BASED ON THE INVESTMENT EXPERIENCE OF THAT INVESTMENT DIVISION AND MAY
INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE
THE SEPARATE ACCOUNT PROVISION.
THE POLICY'S CASH VALUE IN THE GENERAL ACCOUNT WILL BE CREDITED WITH INTEREST AT
A MINIMUM GUARANTEED RATE AS SHOWN ON THE POLICY SPECIFICATIONS PAGE. WE MAY
CREDIT ADDITIONAL INTEREST IN EXCESS OF THE GUARANTEED RATE.
SEE THE GENERAL ACCOUNT CASH VALUE PROVISION.
RIGHT TO EXAMINE POLICY
Please read this policy. You may return this policy to us or to the agent
through whom it was purchased within 20 days from the date you receive it or
within 46 days after the application is signed, whichever period ends later. If
you return it within this period, the policy will be void from the beginning. We
will refund any premium paid.
This policy is a legal contract between the policyowner and Paragon Life
Insurance Company. PLEASE READ YOUR CONTRACT CAREFULLY. This cover sheet
provides only a brief outline of some of the important features of your policy.
This cover sheet is not the complete insurance contract and only the actual
policy provisions will control. The policy itself sets forth, in detail, the
rights and obligations of both you and your insurance company. It is, therefore,
important that you read your policy.
Executed on the Issue Date by Paragon Life Insurance Company. (1-877-334-8975)
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
<PAGE>
ALPHABETIC GUIDE TO YOUR CONTRACT
Page
3.07 Addition, Deletion or Substitution of Investments
4.04 Allocation of Net Premiums
3.04 Assignments
6.07 Basis of Computation
3.02 Beneficiary
6.05 Cash Surrender Value
6.02 Cash Values
4.02 Change in Contract Type
3.05 Change of Insured
3.04 Change of Owner or Beneficiary
3.05 Claims of Creditors
3.04 Conformity with Statutes
4.01 Death Benefit
3.01 Definitions
4.02 Face Amount Decreases
6.02 General Account Cash Value
6.03 General Account Interest Rate
4.04 Grace Period
3.05 Incontestability
7.01 Interest on Proceeds
3.01 Issue Date
6.04 Loan Account Cash Value
6.01 Loans
3.05 Misstatement of Age or Sex and Corrections
6.04 Monthly Cost of Insurance
6.05 Monthly Deduction
6.05 Monthly Policy Charge
6.03 Net Investment Factor
4.03 Net Premium
3.02 Owner
6.05 Partial Withdrawals
7.01 Payment of Policy Benefits
4.03 Payment of Premiums
4.02 Policy Changes
4.01 Policy Proceeds
6.07 Postponement of Payments or Transfers
4.05 Reinstatement
3.04 Requests for Changes and/or Information
6.03 Separate Account Cash Value
3.06 Separate Account Provisions
3.04 Statements in Application
3.05 Suicide Exclusion
6.05 Surrender
3.06 Transfers
Additional Benefit Riders, Modifications and Amendments, if any, and a Copy of
the Application are found following the final section.
<PAGE>
1. POLICY SPECIFICATIONS
GENERAL POLICY SPECIFICATIONS
POLICY NUMBER [16,000,001]
ISSUE DATE [JANUARY 1, 19991
FACE AMOUNT [$100,000]
CONTRACT TYPE [OPTION A]
INITIAL PREMIUM PAID [$974.37]
PLANNED ANNUAL PREMIUM [$974.37]
MINIMUM INITIAL ANNUAL PREMIUM AMOUNT [$974.37]
NO LAPSE ANNUAL PREMIUM [$199.20]
NO LAPSE PREMIUM DATE [JANUARY 1, 2004]
PREMIUM TAX CHARGE [2.25%]
FEDERAL TAX CHARGE [1.3%]
SEPARATE ACCOUNT [SEPARATE ACCOUNT D]
[INSURED] [AGE] SEX RISK CLASSIFICATION
[JOHN DOE] [35] [MALE] [STANDARD SMOKER]
[JOHN DOE] [35] [FEMALE] [STANDARD SMOKER]
BENEFITS - AS SPECIFIED IN POLICY
AND IN ANY RIDER
POLICY PLAN: JOIN AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE
FORM
NUMBERS
30042
30187
30188
30189
30324
30421
30624
30714
3083200 Anniversary partial Withdrawal Rider
3083300 Divorce Split Policy Option Rider
3083400 Split Policy Option Rider
3083500 Estate Preservation Term Rider
3083600 Lifetime Coverage Rider
3083700 Secondary Guarantee Rider
<PAGE>
2. POLICY SPECIFICATIONS
GENERAL ACCOUNT CASH VALUE
GUARANTEED INTEREST RATE [4%]
GENERAL ACCOUNT MAXIMUM
ALLOCATION PERCENT [100%]
GENERAL ACCOUNT MAXIMUM
WITHDRAWAL PERCENT LIMIT [25%]
MAXIMUM MONTHLY COST OF
INSURANCE FACTOR [1.00327371
MAXIMUM DAILY MORTALITY AND
EXPENSE RISK PERCENTAGE:
YEARS 1--10 [0.0015027%]
YEARS 11--20 [0.0012301%]
YEARS 21+ [0.0009572%]
MAXIMUM ANNUAL MORTALITY AND
EXPENSE RISK PERCENTAGE:
YEARS 1--10 [0.55%]
YEARS 11--20 [0.45%]
YEARS 21+ [0.35%]
MAXIMUM MONTHLY POLICY CHARGE:
1ST YEAR [$6.00]
YEARS 2+ [$6.00]
MAXIMUM SELECTION AND ISSUE
EXPENSE CHARGE RATE:
YEARS 1--10 [$0.0750]
YEARS 11+ [$0.00]
MINIMUM FACE AMOUNT [$100,000]
MINIMUM FACE AMOUNT DECREASE [$5,000]
MAXIMUM FEE FOR PROJECTION OF
BENEFITS AND VALUES [$25.00]
MAXIMUM TRANSFER CHARGE [$25.00]
GUARANTEED INTEREST RATE ON
PROCEEDS [4.0%]
7702 TABLE [1980 CSO MORTALITY TABLE
FOR A MALE SMOKER,
AND 1980 CSO MORTALITY TABLE
FOR A FEMALE SMOKER,
AGE NEAREST BIRTHDAY]
BASIS OF COMPUTATION [1980 CSO MORTALITY TABLE
OF MINIMUM CASH VALUES FOR A MALE SMOKER,
AND 1980 CSO MORTALITY TABLE
FOR A FEMALE SMOKER,
AGE NEAREST BIRTHDAY]
IF THE INITIAL PREMIUM PAID AND SUBSEQUENT PREMIUMS PROVE TO BE TOO LOW,
COVERAGE PROVIDED BY THIS POLICY MAY CEASE.
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
RATES PER $1,000
COVERAGE: JSFPVL INSUREDS: JOHN DOE
POLICY NUMBER: 16,000,001 JANE DOE
ISSUE DATE: JANUARY 1, 1999
POLICY YEAR RATE POLICY YEAR RATE
1 0.0004 34 1.3496
2 0.0014 35 1.5297
3 0.0026 36 1.7297
4 0.0041 37 1.9667
5 0.0060 38 2.2489
6 0.0084 39 2.5843
7 0.0115 40 2.9729
8 0.0152 41 3.4152
9 0.0197 42 3.8996
10 0.0250 43 4.4178
11 0.0314 44 4.9642
12 0.0388 45 5.5496
13 0.0475 46 6.1927
14 0.0576 47 6.9094
15 0.0695 48 7.7173
16 0.0835 49 8.6242
17 0.0999 50 9.6549
18 0.1193 51 10.7020
19 0.1426 52 11.8476
20 0.1699 53 12.9635
21 0.2012 54 14.2024
22 0.2369 55 15.3930
23 0.2763 56 16.7123
24 0.3198 57 18.1014
25 0.3680 58 19.6024
26 0.4228 59 21.3279
27 0.4878 60 23.4464
28 0.5645 61 26.5417
29 0.6588 62 31.3755
30 0.7685 63 39.6130
31 0.8955 64 54.6636
32 1.0346 65 83.3333
33 1.1884 66+ 0.0000
THESE RATES ARE FOR THE BASE POLICY AT ISSUE. THEY ARE BASED ON A
COMBINATION OF THE ULTIMATE 1980 COMMISSIONERS STANDARD ORDINARY MORTALITY
TABLE FOR A MALE SMOKER AND A FEMALE SMOKER.
<PAGE>
DEATH BENEFIT OPTION C ATTAINED AGE FACTORS
COVERAGE: JSFPVL INSUREDS: JOHN DOE
POLICY NUMBER: 16,000,001 JANE DOE
ISSUE DATE: JANUARY 1, 1999
ATTAINED ATTAINED
AGE * RATE AGE* RATE
35 5.64184 68 1.73259
36 5.42508 69 1.68510
37 5.21686 70 1.64002
38 5.01683 71 1.59723
39 4.82481 72 1.55674
40 4.64044 73 1.51862
41 4.46354 74 1.48292
42 4.29389 75 1.44965
43 4.13112 76 1.41875
44 3.97514 77 1.39005
45 3.82557 78 1.36333
46 3.68227 79 1.33835
47 3.54498 80 1.31492
48 3.41344 81 1.29295
49 3.28747 82 1.27239
50 3.16694 83 1.25326
51 3.05154 84 1.23556
52 2.94120 85 1.21935
53 2.83570 86 1.20433
54 2.73495 87 1.19047
55 2.63880 88 1.17738
56 2.54704 89 1.16503
57 2.45952 90 1.15300
58 2.37604 91 1.14119
59 2.29637 92 1.12932
60 2.22033 93 1.11709
61 2.14774 94 1.10423
62 2.07858 95 1.09045
63 2.01279 96 1.07580
64 1.95040 97 1.06037
65 1.89131 98 1.04422
66 1.83546 99 1.02648
67 1.78261 100+ 1.01000
* ATTAINED AGE IS THE YOUNGER INSURED'S ATTAINED AGE EVEN IF NO LONGER
LIVING.
30189
<PAGE>
1. DEFINITIONS IN THIS POLICY
We, Us and Our Paragon Life Insurance Company.
You and Your The owner of this policy. The owner may be someone other
than the Insureds. In the application the words "You" and
"Your" refer to the proposed Insured person(s).
Insureds The persons whose lives are insured under this policy. See
the Policy Specifications page.
Last Insured The Insured whose death succeeds the death of all other
Insureds under this policy.
Issue Age The age of each Insured as of his or her nearest birthday to
the Issue Date.
Attained Age The Issue Age for an Insured plus the number of completed
policy years, whether or not the Insured is living. This
includes any period during which this policy was lapsed.
Issue Date The effective date of the coverage under this policy which
is the Issue Date shown on the Policy Specifications page.
It is also the date from which policy anniversaries, policy
years, and policy months are measured.
Investment The date the first premium is applied to the General Account
Start Date and/or the Divisions of the Separate Account. This date will
be the later of:
. The Issue Date of the policy; or
. The date we receive the first premium at our Service
Center.
Monthly The same date in each succeeding month as the Issue Date
Anniversary except that whenever the Monthly Anniversary falls on a date
other than a Valuation Date, the Monthly Anniversary will be
deemed the next Valuation Date. If any Monthly Anniversary
would be the 29th, 30th, or 31st day of a month that does
not have that number of days, then the Monthly Anniversary
will be the last day of that month.
General Account The assets held by us, excluding any loans, other than those
allocated to the Divisions of the Separate Account.
Separate Account The Separate Account listed on the Policy Specifications
page, a separate investment account created by us to receive
and invest net premiums received for this policy or other
policies.
Loan Account The account to which we will transfer from the General
Account and the Divisions of the Separate Account the amount
of any policy loan.
Loan SubAccount A Loan SubAccount exists for the General Account and each
Division of the Separate Account. Any cash value transferred
to the Loan Account will be allocated to the appropriate
Loan SubAccount to reflect the origin of the cash value. At
any point in time, the Loan Account will equal the sum of
all the Loan SubAccounts.
Valuation Date Each day that the New York Stock Exchange is open for
trading, the Service Center is open for business and the SEC
has not restricted trading or declared an emergency.
SEC The United States Securities and Exchange Commission.
Service Center P.O. Box 66757, St. Louis, MO 63166-6757.
30324 3.01
(2/99)
<PAGE>
2. PERSONS WITH AN INTEREST IN THE POLICY
Owner The owner of this policy is as shown in the application or
in any supplemental agreement attached to this policy,
unless later changed as provided in this policy. If there is
more than one owner at a given time, all must exercise the
rights of ownership by joint action. Ownership may be
changed in accordance with the Change of Owner or
Beneficiary provision.
You, as owner, are entitled to exercise all ownership rights
provided by this policy, while it is in force. Any person
whose rights of ownership depend upon some future event will
not possess any present rights of ownership. If the owner is
a trustee(s), we may act in reliance upon the written
request of any trustee and we are not responsible for proper
administration of the trust. Unless otherwise provided, the
final owner will be the estate of the last owner to die.
Beneficiary The beneficiary to receive the proceeds in the event of the
Last Insured's death is as shown in the application or in
any supplemental agreement attached to this policy, unless
later changed as provided in the policy. You may change the
beneficiary in accordance with the Change of Owner or
Beneficiary provision. Unless otherwise stated, the
beneficiary has no rights in this policy before the death of
the Last Insured. If there is more than one beneficiary at
the death of the Last Insured, each will receive equal
payments unless otherwise provided. Unless you provide
otherwise, if a beneficiary dies prior to the Last Insured's
death, that beneficiary's share will be paid to the living
beneficiaries of that class. The deceased beneficiary's
share will be paid in the same proportion as the living
beneficiaries' shares. If there are no beneficiaries living
when the Last Insured dies, or at the end of any Common
Disaster period, the proceeds (commuted if required) will be
payable to you, if you are living, or to your estate.
Any payment we make will terminate our liability with
respect to such payment. If the Insureds designate specific
amounts to be paid to specific beneficiaries and the total
of those amounts is other than the amount of proceeds
payable, the proceeds payable will be adjusted and paid in
the same proportion as the specific amounts were to be paid.
Any term used in the masculine, feminine, singular or
plural, will include or be the opposite gender or number
where necessary.
If any beneficiary designation in the application includes
any of the following provisions, the terms of that provision
shown below will apply:
1. Per Stirpes. The share of a deceased beneficiary
will be paid to that beneficiary's surviving
children, equally.
2. Common Disaster. We will not make payment until
the stated number of days after the Last Insured's
death. If any beneficiary dies during this period,
or if the order of death of any beneficiary and
the Last Insured cannot be determined, we will pay
as though such beneficiary died first.
3. Trust for Minor Beneficiary. The original or
successor trustee for a minor beneficiary will
serve without bond and exercise all rights and
receive all proceeds for the minor beneficiary.
Such proceeds will be held in a separate trust and
used at the trustee's discretion for such minor's
education, support, care and general welfare. The
trust will terminate at the legal age of majority
or prior death of the minor beneficiary. Any funds
then held by the trustee will be paid in one sum
to such beneficiary or the beneficiary's estate.
The trust can be revoked by a change of
beneficiary under the policy. Payment to any
trustee will discharge us to the extent of such
payment.
30324 3.02
(2/99)
<PAGE>
4. Trust Under Will. When we receive at our Service Center:
a) Certified copies of the Last Will and Testament of the named
testator; and
b) The order admitting the Will to probate; and if such Will created a
trust capable of receiving proceeds;
then we will pay the proceeds to the trustee.
If, before we receive these documents, satisfactory proof is furnished
that:
a) the testator died intestate; or
b) the Will created no trust capable of receiving proceeds; or
c) the testator was not either Insured, but survived the Last Insured;
then we will pay the proceeds to you, unless otherwise provided.
If we pay under any of these conditions, we will be discharged to the
extent of such payment. We are not required to check into the validity,
general terms or proper administration of the trust. Such trustee
designation will not affect your rights under the policy, including the
right to change the beneficiary.
5. Trust Under Separate Written Agreement. When we receive at our Service
Center a written statement from the trustee named in the beneficiary
designation that:
a) the trust agreement is in force; and
b) the agreement permits the trustee to receive the proceeds;
then we will pay the proceeds to the trustee.
If, before we receive the trustee's statement, satisfactory proof is
furnished that:
a) the trust agreement is not in effect; or
b) the agreement does not permit the trustee to receive the proceeds;
then we will pay the proceeds to you, unless otherwise provided.
If we pay under any of these conditions, we will be discharged to the
extent of such payment. We are entitled to rely on any statements or
documents furnished to us by the trustee and are not required to check
into the validity, general terms or proper administration of the trust
agreement. Such trustee designation will not affect your rights under
the policy, including the right to change the beneficiary.
6. Irrevocable Beneficiary. You cannot change an irrevocable beneficiary
without the written consent of such beneficiary. Also, you cannot
exercise any other ownership rights without the consent of such
beneficiary, if the exercise of such rights will have the effect of
diminishing the rights and interest of the irrevocable beneficiary.
7. Creditor Beneficiary. Proceeds payable to any creditor beneficiary are
limited to its provable interest. The balance of any proceeds will be
paid to any other named beneficiary. If there is no other beneficiary
living, we will pay the proceeds to you, unless otherwise provided. You
cannot change a creditor beneficiary without the written consent of the
creditor or release of its interest. Also, you cannot exercise any other
ownership rights without the consent of such beneficiary, if the
exercise of such rights will have the effect of diminishing the rights
and interest of the creditor beneficiary.
3.03
<PAGE>
Change of During the lifetime of either Insured you may change the
Owner or ownership and beneficiary designations, subject to any
Beneficiary restrictions as stated in the Owner or Beneficiary
provisions. You must make the change in written form
satisfactory to us. If acceptable to us the change will take
effect as of the time you signed the request, whether or not
either Insured is living when we receive your request at our
Service Center. The change will be subject to any assignment
of this policy or other legal restrictions. It will also be
subject to any payment we made or action we took before we
received your written notice of the change. We have the
right to require the policy for endorsement before we accept
the change.
If you are also the beneficiary of the policy at the time of
the Last Insured's death, you may designate some other
person to receive the proceeds of the policy within 60 days
after the Last Insured's death.
Assignments We will not be bound by an assignment of the policy or of
any interest in it unless:
1. The assignment is made as a written instrument,
2. You file the original instrument or a certified copy
with us at our Service Center, and
3. We send you an acknowledged copy.
We are not responsible for determining the validity of any
assignment.
If a claim is based on an assignment, we may require proof
of interest of the claimant.
A valid assignment will take precedence over any claim of a
beneficiary.
Requests For Submit all requests for change and/or information in writing
Changes and/or to our Service Center.
Information
3. GENERAL PROVISIONS
The Contract We have issued this policy in consideration of the
application and payment of premiums. The policy, the
application for it, and any riders constitute the entire
contract and are attached to and made a part of the policy
when the insurance applied for is accepted. A copy of any
application for reinstatement will be sent to you for
attachment to this policy and will become part of the
contract of reinstatement and of this policy. The policy may
be changed by mutual agreement. Any change must be in
writing and approved by our President, Vice-President or
Secretary. Our agents have no authority to alter or modify
any terms, conditions, or agreements of this policy, or to
waive any of its provisions.
Conformity with If any provision in this policy is in conflict with the laws
Statutes of the state which govern this policy, the provision will be
deemed to be amended to conform with such laws. In addition,
we reserve the right to change this policy if we determine
that a change is necessary to cause this policy to comply
with, or give you the benefit of, any federal or state
statute, rule, or regulation, including, but not limited to,
requirements for life insurance contracts under the Internal
Revenue Code, or its regulations or published rulings.
Statements in All statements made by the Insureds or on their behalf, or
Application by the applicant, will be deemed representations and not
warranties, except in the case of fraud. Material
misstatements will not be used to void the policy or any
rider, or deny a claim unless made in the application for a
policy or a rider.
30324 3.04
(2/99)
<PAGE>
Claims of To the extent permitted by law, neither the policy nor any
Creditors payment under it will be subject to the claims of creditors
or to any legal process.
Conversion Rights While your policy is in force, you have a one time right
during the first two policy years to transfer all of your
cash value from the Divisions of the Separate Account to the
General Account.
If, at any time during the first two policy years, you
request in writing the transfer of the cash value held in
the Divisions of the Separate Account to the General Account
and you indicate that you are making this transfer in
exercise of your conversion rights, the transfer will not be
subject to a transfer charge or transfer limits, if any. At
the time of such transfer, there will not be any effect on
the policy's death benefit, face amount, net amount at risk,
rate class or Issue Age.
If you exercise your one time conversion right, we will
automatically allocate all future net premiums to the
General Account.
Misstatement of If there is a misstatement of age or sex for either Insured
Age or Sex and in the applications, the amount of the death benefit will be
Corrections that which would be purchased by the most recent monthly
cost of insurance charge at the correct age or sex.
If we make any payment or policy changes in good faith,
relying on our records, or evidence supplied to us, our duty
will be fully discharged. We reserve the right to correct
any errors in the policy.
Incontestability We cannot contest this policy after it has been in force
during the lifetime of either Insured for two years from its
Issue Date. We cannot contest any reinstatement of this
policy, with regard to material misstatements made
concerning such reinstatement, after it has been in force
during the lifetime of either Insured for a period of two
years from the date we approve the reinstatement. If only
one Insured was alive on the date we approved the request
for reinstatement, we can not contest any reinstatement of
this policy, with regard to material misstatements made
concerning such reinstatement, after it has been in force
during the lifetime of that Insured for a period of two
years from the date we approved the reinstatement. This
provision will not apply to any rider which contains its own
incontestability clause.
Suicide Exclusion If either Insured dies by suicide, while sane or insane,
within two years from the Issue Date (or within the maximum
period permitted by law of the state in which this policy
was delivered, if less than two years), the amount payable
will be limited to the amount of premiums paid, less any
outstanding policy loans with interest to the date of death,
and less any partial withdrawals.
Change of While this policy is in force, you may change one or both of
Insured the Insureds. To do this, you must meet the requirements
established by us. Any rider attached to this policy may be
continued only with our consent. We reserve the right to
charge a nominal fee for processing a change of Insured.
Annual Report Each year a report will be sent to you which shows the
current policy values, premiums paid and deductions made
since the last report, and any outstanding policy loans.
Projection of You may make a written request to us for a projection of
Benefits and illustrative future cash values and death benefits. If
Values requested more than once per policy year, this projection
will be furnished to you for a nominal fee. This fee will
not exceed the Maximum Fee for Projection of Benefits and
Values shown on the Policy Specifications page.
30324 3.05
(2/99)
<PAGE>
4. SEPARATE ACCOUNT PROVISIONS
Separate Account The variable benefits under this policy are provided
through investments in the Separate Account shown on the
Policy Specifications page. This account is used for
flexible premium variable life insurance policies and, if
permitted by law, may be used for other policies or
contracts as well.
We hold the assets of the Separate Account. These assets are
held separately from the assets held in the General Account.
Income, gains and losses---whether or not realized---from
assets allocated to the Separate Account will be credited to
or charged against the account without regard to our other
income, gains or losses.
The portion of the assets held by the Separate Account equal
to the reserves and other policy liabilities with respect to
the Separate Account will not be charged with liabilities
that arise from any other business we may conduct. We have
the right to transfer to our General Account any assets of
the Separate Account which are in excess of the reserves and
other policy liabilities of the Separate Account.
The Separate Account is registered with the Securities and
Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is also
subject to the laws of the State of Missouri, which regulate
the operations of insurance companies incorporated in
Missouri. The investment policy of the Separate Account will
not be changed without the approval of the Insurance
Commissioner of the State of Missouri. The approval process
is on file with the Insurance Commissioner of the state in
which this policy was delivered.
Divisions The Separate Account has several Divisions. Each Division
invests in a corresponding investment portfolio from one or
more registered investment companies.
Income, gains and losses---whether or not realized---from
the assets of each Division of the Separate Account are
credited to or charged against that Division without regard
to income, gains or losses in other Divisions of the
Separate Account or in the General Account.
We will value the assets of each Division of the Separate
Account at the end of each valuation period. A valuation
period is the period between two successive Valuation Dates.
A Valuation Date is any day that benefits vary and on which
the New York Stock Exchange and our Service Center are open
for business or any other day that may be required by any
applicable Securities and Exchange Commission Rules and
Regulations.
Transfers You may transfer amounts as follows:
. Between the General Account and the Divisions of
the Separate Account; or
. Among the Divisions of the Separate Account.
. The first 12 requested transfers and/or partial
withdrawals per policy year will be allowed free
of charge; thereafter we may impose a transfer
charge not to exceed the Maximum Transfer Charge
shown on the Policy Specifications page.
These transfers will be subject to the following conditions:
. We must receive a request for transfer in a form
acceptable to us.
. Transfers from or among the Divisions of the
Separate Account must be at least $500.00 or the
entire amount you have in a Division, if smaller.
<PAGE>
. Transfers and/or partial withdrawals from the General
Account to the Divisions of the Separate Account must be
at least $500.00. The maximum amount of all transfers and
partial withdrawals from the General Account in any
policy year will be the greater of (1) or (2):
1. The cash surrender value of the General Account
at the beginning of that policy year multiplied
by the General Account Maximum Withdrawal
Percent Limit, as shown on the Policy
Specifications page.
2. The previous year's General Account maximum
withdrawal amount.
. The General Account Cash Value immediately after any
transfer in to the General Account cannot exceed 1.,
below, multiplied by 2., below:
1. The General Account Cash Value plus the
Separate Account Cash Value.
2. The General Account Maximum Allocation Percent
as shown on the Policy Specifications page.
We may revoke or modify the transfer privilege at any
time, including the minimum amount transferable, the
General Account Maximum Allocation Percent, and the
transfer charge, if any.
Addition, Deletion We reserve the right, subject to compliance with applicable
or Substitution law, to make additions to, deletions from, or substitutions
of Investments for the shares of a fund that are held by the Separate
Account or that the Separate Account may purchase. We
reserve the right to eliminate the shares of any of the
funds of this policy and to substitute shares of another
fund of a registered investment company, if the shares or
funds are no longer available for investment or if in our
judgement, further investment in any fund should become
inappropriate in view of the purpose of the policy. We will
not substitute any shares attributable to the owner's
interest in a Division of the Separate Account without
notice to the owner and compliance with the Investment
Company Act of 1940. This will not prevent the Separate
Account from purchasing other securities for other series or
classes of policies, or from permitting conversion between
series or classes of policies or contracts on the basis of
requests made by owners.
We reserve the right to establish additional Divisions of
the Separate Account which would invest in shares of
registered investment companies and to make such Divisions
available to such class or series of policies as we deem
appropriate. We also reserve the right to eliminate or
combine existing Divisions of the Separate Account or to
transfer assets between Divisions.
If we consider it to be in the best interest of persons
having voting rights under the policies, the Separate
Account may be operated as a management company under the
Investment Company Act of 1940; it may be deregistered under
that Act in the event registration is no longer required; it
may be combined with other separate accounts; or its assets
may be transferred to other separate accounts.
<PAGE>
5. POLICY BENEFITS
Policy Proceeds The policy proceeds are:
1. The death benefit under the Contract Type then in
effect; plus
2. The monthly cost of insurance for the portion of
the policy month from the date of the Last
Insured's death to the end of the policy month of
that death; minus
3. Any payment due under the Grace Period provision as
of the date of the Last Insured's death; minus
4. Any loan and loan interest due.
Death Benefit Prior to the younger Insured's Attained Age 100, the death
benefit depends upon the Contract Type in effect on the date
of the Last Insured's death. The Contract Type in effect is
shown on the Policy Specifications page.
Option A Contract Type: The death benefit is the greater of:
1. The face amount; or
2. The applicable percentage of the cash value on the
date of the Last Insured's death as described in
Section 7702(d) of the Internal Revenue Code of
1986 or any applicable successor provision and
modified for ages 95 and above.
Option B Contract Type: The death benefit is the greater of:
1. The face amount plus the cash value on the date of
the Last Insured's death; or
2. The applicable percentage of the cash value on the
date of the Last Insured's death as described in
Section 7702(d) of the Internal Revenue Code of
1986 or any applicable successor provision and
modified for ages 95 and above.
Option C Contract Type: The death benefit is the greater of:
1. The face amount; or
2. The cash value on the date of the Last Insured's
death multiplied by the younger Insured's
applicable Attained Age factor as shown on the
policy's Death Benefit Option C Attained Age
Factors page.
Notwithstanding anything in this policy, the death benefit
will in no case be less than the amount necessary to cause
the policy to meet the requirements for the definition of
life insurance under the Internal Revenue Code of 1986 or
any applicable successor provision.
Applicable The percentages as currently described in Section 7702(d) of
Percentage: the Internal Revenue Code of 1986 and modified for ages 95
and above are as follows:
In the case in which the younger The applicable percentage
Insured's Attained Age as of the will decrease by a
beginning of the contract year is: ratable portion for
each full year:
More than: But not more than: From: To:
0 ............... 40 250 ........... 250
40 ............... 45 250 ........... 215
45 ............... 50 215 ........... 185
50 ............... 55 185 ........... 150
55 ............... 60 150 ........... 130
60 ............... 65 130 ........... 120
65 ............... 70 120 ........... 115
70 ............... 75 115 ........... 105
75 ............... 90 105 ........... 105
90 ............... 95 105 ........... 101
95 or 101
higher
<PAGE>
Continuation If this policy is in force beyond the younger Insured's
of the Policy Attained Age 100, the Death Benefit will be 101% of the
Beyond Attained policy's cash value.
Age 100
Please note: This policy may not qualify as life insurance
after the younger Insured's Attained Age 100 and may be
subject to tax consequences. Please consult a tax advisor
prior to continuing the policy beyond the younger Insured's
Attained Age 100. It is possible that insurance coverage may
not continue even if planned premiums are paid in a timely
manner.
Policy Changes You may request policy changes at any time unless we
specifically indicate otherwise. We limit the number of
changes to one per policy year, and we do not permit changes
in the first policy year. The types of changes allowed are
explained below.
No change will be permitted that would result in this policy
not satisfying the definition of life insurance under the
Internal Revenue Code of 1986 or any applicable successor
provision.
Face Amount The face amount may be decreased by sending us a written
Decreases request.
Any decrease in face amount will be subject to the following
conditions:
1. The decrease will become effective on the Monthly
Anniversary on or following our receipt of the
request.
2. The face amount remaining in force after any
requested decrease may not be less than the
Minimum Face Amount shown on the Policy
Specifications page.
3. Any decrease must be at least the Minimum Face
Amount Decrease as shown on the Policy
Specifications page.
We will amend your policy to show the effective date of the
decrease.
You may not increase the face amount of this policy.
Change in If the Contract Type in effect is Option A or Option B, you
Contract Type may change the Contract Type by sending us a written
request. The effective date of the change will be the
Monthly Anniversary on or following the date we receive your
request. On the effective date of this change the death
benefit payable does not change, but the face amount may
change.
If the Contract Type in effect is Option B, you may change
it to Option A. The face amount will be increased to equal
the death benefit on the effective date of change. The
Contract Type cannot be changed from Option B to Option C.
If the Contract Type in effect is Option A, you may change
it to Option B. Proof that the Insureds are insurable by our
standards on the date of the change must be submitted. The
face amount will be decreased to equal the death benefit
less the cash value on the effective date of change. This
change may not be made if it would result in a face amount
which is less than the Minimum Face Amount shown on the
Policy Specifications page. The Contract Type cannot be
changed from Option A to Option C.
If the Contract Type in effect is Option C, the Contract
Type cannot be changed.
<PAGE>
6. PREMIUMS AND GRACE PERIOD
Payment of Your first premium is due as of the Issue Date. While either
Premiums Insured is living, premiums after the first must be paid at
our Service Center. A premium receipt will be furnished upon
request. If this policy is in your possession and you have
not paid the first premium, it is not in force. It will be
considered that you have the policy for inspection only.
Premiums may be paid in any amount and at any interval
subject to the following conditions:
1. At the end of the first policy year, your total
premium payments for this policy must be greater
than or equal to the Minimum Initial Annual
Premium Amount as shown on the Policy
Specifications page.
2. Any subsequent premium payment must be at least
$10.00.
3. Total premiums paid in any policy year for
policies issued with the Option A or B Contract
Type may not exceed an amount that would cause the
policy to fail the definition of life insurance as
defined by Section 7702 of the Internal Revenue
Code of 1986, or any applicable successor
provision thereto. The maximum premium limit for
the following policy year will be shown on your
annual report.
On any date that we receive a premium which causes the Death
Benefit under any of the Contract Types to increase by an
amount that exceeds that premium received, we reserve the
right to refuse that premium payment. We may require
additional evidence of insurability before we accept the
premium.
Net Premium The net premium is:
1. The premium paid; minus
2. The premium paid multiplied by the Premium Tax
Charge as shown on the Policy Specifications page;
minus
3. The premium paid multiplied by the Federal Tax
Charge as shown on the Policy Specifications page.
Premium Tax A charge will be deducted for premium taxes from each
Charge premium submitted. The current charge, as a percent of the
premium, is shown on the Policy Specifications page. We
reserve the right to change the Premium Tax Charge due to
rate changes of the states or other governing jurisdictions.
We will amend your policy to show the current premium tax
rate, if changed.
Federal Tax A charge will be deducted for federal taxes from each
Charge premium submitted. The current charge, as a percent of the
premium, is shown on the Policy Specifications page. We
reserve the right to change the Federal Tax Charge to
reflect a change in the federal tax law. We will amend your
policy to show the current Federal Tax Charge, if changed.
<PAGE>
Allocation of You determine the allocation of net premiums among the
Net Premiums General Account and the Divisions of the Separate Account.
For any chosen allocation the minimum percentage that may be
allocated is 5% of the net premium. Percentages must be in
whole numbers. The General Account Cash Value immediately
after payment of the premium cannot exceed 1., below,
multiplied by 2., below:
1. The General Account Cash Value plus the Separate
Account Cash Value.
2. The General Account Maximum Allocation Percent as
shown on the Policy Specifications page.
The initial allocation is shown on the application, a copy
of which is attached. We may modify the General Account
Maximum Allocation Percent at any time.
For any premium received during the "right to examine
policy" period, we will initially allocate the net premium
to the Division that invests exclusively in shares of our
Money Market fund unless prohibited by state law. When this
period expires, cash value in that Division will be
transferred to the General Account and the Divisions of the
Separate Account according to the allocation percentages
shown on the application, a copy of which is attached. For
any premium received after the "right to examine policy"
period, the net premium will be allocated according to the
allocation percentages shown on the application page or your
most recent allocation instructions received by us.
Your Right You may change the allocation of future net premiums among
to Change the General Account and/or the Divisions of the Separate
Allocation Account subject to the conditions outlined in the Allocation
of the Net Premiums Provision. The change in allocation
percentages will take effect immediately upon our receipt of
your written request.
No-Lapse Period If, on a monthly anniversary day prior to the No Lapse
Premium Date, the sum of all premiums paid on this policy,
reduced by any partial withdrawals and any outstanding loan
balance, is greater than or equal to the sum of the No Lapse
Monthly Premiums for the elapsed months since the Issue
Date, this policy will not lapse as a result of a cash value
less any loans and loan interest due, being insufficient to
pay the monthly deduction. The No Lapse Premium Date and the
No Lapse Annual Premium are shown on the Policy
Specifications page. The No Lapse Monthly Premium is one
twelfth of the No Lapse Annual Premium.
Grace Period If, on a monthly anniversary day prior to the No Lapse
Premium Date:
1. The cash value less any loans and loan interest
due, is insufficient to cover the monthly
deduction; and
2. The sum of all premiums paid on this policy,
reduced by any partial withdrawals and any
outstanding loan balance, is less than the sum of
the No Lapse Monthly Premiums for the elapsed
months since the Issue Date;
then the grace period of 62 days will be allowed for the
payment of a premium sufficient to keep your policy in
force. The No Lapse Premium Date and the No Lapse Annual
Premium are shown on the Policy Specifications page.
A change in your policy's face amount, the addition or
deletion of a supplemental rider to this policy, or a change
in the premium class of the Insureds before the No Lapse
Premium Date shown on the Policy Specifications page may
result in a change in the No Lapse Monthly Premium. The No
Lapse Premium Date will not be changed.
---
If, on a monthly anniversary day on or after the No Lapse
Premium Date, the cash value less any loans and loan
interest due, is insufficient to cover the next monthly
deduction, a grace period of 62 days will be allowed for the
payment of a premium sufficient to pay the monthly
deduction. (Monthly deduction is defined in the Cash Values
section.)
<PAGE>
Notice of the amount of premium required to be paid to keep
this policy in force will be sent at the beginning of the
grace period to your last known address and to any assignee
on record. If we do not receive a premium large enough so
that the net premium covers the monthly deduction by the end
of the grace period, your policy will lapse at the end of
that 62 day period and it will then terminate without cash
surrender value. If the Last Insured dies during the grace
period, any past due monthly deductions will be deducted
from the death benefit.
Reinstatement You may reinstate your lapsed policy within 5 years after
the date of lapse. This must be done prior to the younger
Insured's Attained Age 100. The policy can not be reinstated
if it has been surrendered. To reinstate, you must submit
the following items:
1. A written request for reinstatement.
2. Proof satisfactory to us that both Insureds are
insurable by our standards, if both Insureds were
alive on the date the policy lapsed. If only one
Insured was alive on the date the policy lapsed,
you must submit proof satisfactory to us that that
Insured is insurable by our standards.
3. A net premium payment large enough to cover:
a. The monthly deductions due at the time of
lapse; and
b. Two times the monthly deduction due at the time
of reinstatement.
4. A payment to cover any Loan Interest due and
unpaid at the time of lapse.
Upon receipt of the above payments, we will deduct any
monthly deductions and loan interest due and unpaid at the
time of lapse. If both Insureds were alive on the date the
policy lapsed, both must be alive on the date we approve the
request for reinstatement. lf either Insured is not alive,
such approval is void and of no effect. If only one Insured
was alive on the date the policy lapsed, that Insured must
be alive on the date we approve the request for
reinstatement. If that Insured is not alive, such approval
is void and of no effect.
The reinstated policy will be in force from the date we
approve the reinstatement application. There will be a full
monthly deduction for the policy month which includes this
date. Any application for reinstatement becomes part of the
contract of reinstatement and of this policy.
Any loan may be paid or reinstated. Any loan reinstated will
cause a cash value of an equal amount to be reinstated.
Any loan repaid at the time of reinstatement will cause an
increase in cash value equal to the amount of the repaid
loan.
Following reinstatement, the No-Lapse Period provision will
again be applicable until the No-Lapse Premium Date, shown
on the Policy Specifications page, if sufficient premium is
paid so that, as of the effective date of reinstatement, the
sum of all premiums paid, reduced by any partial withdrawals
and any loans, is greater than the No-Lapse Monthly Premiums
multiplied by the number of elapsed months since the Issue
Date.
<PAGE>
7. LOANS
Upon written request to us, you may borrow an amount not in
excess of the loan value of your policy while it is in
force. The minimum amount of your net loan request at any
one time must be at least $500. Your policy will be the sole
security for such loan. We have the right to require your
policy for endorsement.
The loan value is the cash value of your policy at the date
of the loan request plus interest to the next policy
anniversary at the General Account Cash Value Guaranteed
Interest Rate, shown on the Policy Specifications page,
reduced by:
1. Any existing loans; and
2. Loan interest to the next loan interest due date;
and
3. Every monthly deduction due to the next loan
interest due date.
You may allocate the policy loan among the General Account
and the Divisions of the Separate Account. If you do not
specify the allocation, then the policy loan will be
allocated among the General Account and the Divisions of the
Separate Account in the same proportion that the cash value
in the General Account, and the cash value in each Division
bears to the total cash value of the policy, minus the cash
value in the Loan Account, on the date of the policy loan.
Cash value equal to the policy loan allocated to the General
Account and each Division of the Separate Account will be
transferred to the Loan Account, reducing the cash value
accordingly. Any cash value transferred to the Loan Account
will be allocated to the appropriate Loan SubAccount.
Loan Interest The accrued loan interest will be due the earliest of:
Due Date
1. The next policy anniversary date.
2. The date of termination of the policy.
3. The date the loan is repaid in full.
4. The date the loan plus loan interest accrued
exceeds the cash value.
Interest will be payable annually on each policy
anniversary. If you do not pay the interest when it is due
on a policy anniversary, an amount of cash value equal to
the loan interest will also be transferred to the Loan
Account. We will charge the same rate of interest on this
amount as on the policy loan. The amount transferred will be
deducted from the General Account and the Divisions of the
Separate Account in the same proportion that the cash value
in the General Account and the cash value in each Division
bears to the total cash value of the policy, minus the cash
value in the Loan Account.
Fixed Loan The fixed loan interest rate is 4.5% for policy years 1
Interest Rates through 10, 4.25% for policy years 11 through 20 and 4.15%
for policy years 21 and later. Loan interest is payable in
arrears.
Loan All funds received will be credited to your policy as a
Repayments premium unless clearly marked for loan repayment.
You may repay your loan in whole or in part at any time
before the death of the Last Insured while the policy is in
force. When a loan repayment is made, cash value securing
the debt in the Loan Account equal to the loan repayment
will be repaid to the General Account and the Divisions of
the Separate Account in the same proportion that the cash
value in the Loan Account bears to the cash value in each
Loan SubAccount. Unpaid loans and loan interest will be
deducted from any settlement of your policy.
<PAGE>
If you fail to make repayments when the total loan and loan
interest due would exceed the cash value, your policy will
terminate. We will allow you a grace period for such payment
of loans and loan interest due. In such event the policy
becomes void at the end of the grace period. We will mail
notice to your last known address, and that of any assignee
of record. This grace period will expire 62 days from the
Monthly Anniversary immediately before the date the total
loan and loan interest exceeds the cash value; or 31 days
after such notice has been mailed, if later.
8. CASH VALUES
Cash Value The cash value of your policy is equal to the total of:
. The cash value in the General Account; plus
. The cash value in the Divisions of the Separate
Account; plus
. The cash value in the Loan Account.
Cash Value If this policy is in force beyond the younger Insured's
After Attained Attained Age 100, the cash value of your policy will be
Age 100 determined in the same manner as described below; except no
deductions will be made for monthly cost of insurance
charges. Premiums can not be paid after the younger Insured
Attains Age 100.
General Account The cash value in the General Account as of the Investment
Cash Value Start Date is equal to:
. The portion of the initial net premium received
and allocated to the General Account; minus
. The portion of the monthly deductions due from the
Issue Date through the Investment Start Date
charged to the General Account.
The cash value in the General Account on any day after the
Investment Start Date is equal to:
. The cash value on the preceding Valuation Date,
with interest on such value at the current rate;
plus
. Any portion of net premium received and allocated
to the General Account on that day; plus
. Any amounts transferred to the General Account on
that day; plus
. Any loan repayments allocated to the General
Account on that day; plus
. That portion of any interest credited on
outstanding loans which is allocated to the
General Account on that day; minus
. Any amount transferred plus any transfer charge
from the General Account to the Divisions of the
Separate Account on that day; minus
. Any partial withdrawal plus any withdrawal
transaction charge made from the General Account
on that day; minus
. Any amount transferred from the General Account to
the Loan Account on that day; minus
. If that day is a Monthly Anniversary, any
withdrawal due to a pro rata surrender plus any
withdrawal transaction charge made from the
General Account on that day; minus
. If that day is a Monthly Anniversary, the portion
of the monthly deduction charged to the General
Account to cover the policy month which starts on
that day.
<PAGE>
General Account The interest credited to the General Account cash value for
Interest Rate a specific day will be at an effective annual rate not less
than the General Account cash value guaranteed interest rate
shown on the Policy Specifications page.
Separate Account The cash value in each Division of the Separate Account on
Cash Value the Investment Start Date is equal to:
. The portion of the initial net premium received
and allocated to the Division; minus
. The portion of the monthly deductions due from the
Issue Date through the Investment Start Date
charged to the Division.
The cash value in each Division of the Separate Account on
subsequent Valuation Dates is equal to:
. The cash value in the Division on the preceding
Valuation Date multiplied by that Division's net
investment factor for the current valuation
period; plus
. Any portion of net premium received and allocated
to the Division during the current valuation
period; plus
. Any amounts transferred to the Division from the
General Account or from another Division during
the current valuation period; plus
. Any loan repayments allocated to the Division
during the current valuation period; plus
. That portion of any interest credited on
outstanding loans which is allocated to the
Division during the current valuation period;
minus
. Any amounts transferred plus any transfer charge
from the Division during the current valuation
period; minus
. Any partial withdrawal plus any withdrawal
transaction charge from the Division during the
current valuation period; minus
. Any amount transferred from the Division to the
Loan Account during that valuation period; minus
. If a Monthly Anniversary occurs during the current
valuation period, any withdrawal due to a pro rata
surrender plus any withdrawal transaction charge
from the Division during the current valuation
period; minus
. If a Monthly Anniversary occurs during the current
valuation period, the portion of the monthly
deduction charged to the Division during the
current valuation period to cover the policy month
which starts during that valuation period .
Net Investment The Net Investment Factor measures the investment
Factor performance of a Division during a valuation period. The Net
Investment Factor for each Division for a valuation period
is calculated as follows:
. The value of the assets at the end of the
preceding valuation period; plus
. The investment income and capital gains---realized
or unrealized---credited to the assets in the
valuation period for which the net investment
factor is being determined; minus
. The capital losses---realized or
unrealized---charged against those assets during
the valuation period; minus
. Any amount charged against each Division for
taxes, including any tax or other economic burden
resulting from the application of tax laws that we
determine to be properly attributable to the
Divisions of the Separate Account, or any amount
we set aside during the valuation period as a
reserve for taxes attributable to the operation or
maintenance of each Division; minus
<PAGE>
. A charge not to exceed the daily investment
percentage shown on the Policy Specifications page
for each day in the valuation period. This
corresponds to an annual investment percentage of
the mortality and expense risk percentage shown on
the Policy Specifications page; divided by
. The value of the assets at the end of the
preceding valuation period.
Loan Account The cash value in the Loan Account as of the Investment
Cash Value Start Date is zero.
The cash value in the Loan Account on any day after the
Investment Start Date is equal to:
. The cash value in the Loan Account on the
preceding Valuation Date, with interest; plus
. Any amount transferred to the Loan Account from
the General Account on that day; plus
. Any amount transferred to the Loan Account from
the Divisions of the Separate Account on that day;
minus
. Any loan repayments on that day; plus
. If that day is a policy anniversary, an amount due
to cover the loan interest, if not paid by you.
Cash value held in the Loan Account for loan collateral will
earn interest daily at an annual rate of not less than the
General Account Cash Value Guaranteed Interest Rate shown on
the Policy Specifications page. Interest credited on the
cash value held in the Loan Account will be allocated at
least once a year to the General Account and the Divisions
of the Separate Account in the same proportion that the cash
value in each Loan SubAccount bears to the cash value in the
Loan Account.
Monthly Cost The monthly cost of insurance for the following month is
of insurance deducted on the monthly anniversary date. The monthly cost
is 1, below, multiplied by the difference between 2 and 3
below:
1. The monthly cost of insurance rate divided by
1,000.
2. An amount as follows:
Option A Contract Type: The greater of:
a. The face amount divided by the Monthly Cost
of Insurance Factor shown on the Policy
Specifications page: or
b. The cash value at the beginning of the policy
month multiplied by the applicable percentage
of the cash value as described in Section
7702(d) of the Internal Revenue Code of 1986
and modified for ages 95 and above.
Option B Contract Type: The greater of:
a. The face amount divided by the Monthly Cost
of Insurance Factor shown on the Policy
Specifications page plus the cash value at
the beginning of the policy month; or
b. The cash value at the beginning of the policy
month multiplied by the applicable percentage
of the cash value as described in Section
7702(d) of the Internal Revenue Code of 1986
and modified for ages 95 and above.
Option C Contract Type: The greater of:
a. The face amount divided by the Monthly Cost
of Insurance Factor shown on the Policy
Specifications page; or
b. The cash value at the beginning of the policy
month multiplied by the younger Insured's
attained age factor as shown on the policy's
Death Benefit Option C Attained Age Factors
page.
3. The cash value at the beginning of the policy
month, before the deduction of the monthly cost of
insurance.
<PAGE>
Monthly Cost At the beginning of each policy year, the monthly cost of
of Insurance insurance rate is determined. The monthly cost of insurance
Rates rate is based on the Attained Ages, risk classifications,
sexes and completed policy years from the Issue Date.
The monthly cost of insurance rates will never exceed the
rates shown on the Table of Guaranteed Monthly Cost of
Insurance Rates page. Any change in the cost of insurance
rates will apply to all persons of the same age, sex, and
classification whose face amounts have been in force for the
same length of time.
Selection and The selection and issue expense charge is a monthly charge
Issue Expense for the first 10 policy years. This charge equals the face
Charge amount times a selection and issue expense charge rate,
divided by 1,000. The selection and issue expense charge is
based on the Insureds' Issue Ages, sexes and risk
classifications on the Issue Date. The selection and issue
expense charge rate will never exceed the Maximum Selection
and issue Expense Charge Rate shown on the Policy
Specifications page.
Monthly Policy A policy charge will be deducted each policy month from the
Charge cash value. The amount of the monthly policy charge will
never exceed the amount shown on the Policy Specifications
page.
Monthly The monthly deduction is:
Deduction
1. The monthly cost of insurance; plus
2. The selection and issue expense charge multiplied
by the face amount divided by 1,000; plus
3. The monthly policy charge; plus
4. The monthly cost, if any, for any rider included
with this policy.
The monthly deduction for a policy month will be allocated
among the General Account and the Divisions of the Separate
Account in the same proportion that the cash value in the
General Account and the cash value in each Division bears to
the total cash value of the policy, minus the cash value in
Loan Account on the Monthly Anniversary.
Cash Surrender The cash surrender value of this policy is:
Value
1. The cash value at the time of surrender; minus
2. Any loan and loan interest accrued; minus
3. Any unpaid selection and issue expense charge due
for the remainder of the first policy year; minus
4. Any unpaid monthly policy charge due for the
remainder of the first policy year.
Surrender You may surrender your policy for its cash surrender value
at any time during the lifetime of either Insured. We will
determine the cash surrender value as of the date we receive
your written request at our home office. The cash surrender
value will not be reduced by any monthly deduction due on
that date for a subsequent policy month.
Partial After the first policy year, upon written request to us, you
Withdrawals can make a partial withdrawal of cash subject to the
conditions listed below. The first 12 requested partial
withdrawals or transfers per policy year will be allowed
free of charge; thereafter we may impose a transfer charge
not to exceed the Maximum Transfer Charge shown on the
Policy Specifications page.
No partial withdrawal will be processed which will result in
the face amount, excluding riders, being decreased below the
Minimum Face Amount shown on the Policy Specifications page.
<PAGE>
We reserve the right to change the minimum amount or the
number of times you may make a partial withdrawal. We also
may assess a transaction charge for a withdrawal.
If the Contract Type is Option A or Option C and the death
benefit equals the face amount, then a partial withdrawal
will decrease the face amount by an amount equal to the
partial withdrawal. If the death benefit equals a percentage
of the cash value then a partial withdrawal will decrease
the face amount by any amount by which the partial
withdrawal exceeds the difference between the death benefit
and the lace amount.
General Account The minimum amount of your partial withdrawal request at any
Partial one time must be at least $500 of your account.
Withdrawals
. The maximum amount of all partial withdrawals and
transfers from the General Account in a policy
year will be the greater of (1) or (2):
1. The cash surrender value of the General
Account at the beginning of that policy year
multiplied by the withdrawal percentage
limit, as shown on the Policy Specifications
page.
2. The previous year's General Account maximum
withdrawal amount.
Separate Account . The minimum amount of your partial withdrawal
Partial request at any one time must be the lesser of $500
Withdrawals of a Division or your entire balance in that
Division.
. The maximum amount of your partial withdrawal from
any one of the Divisions of the Separate Account
in a policy year will be the cash surrender value
of that Division.
Allocation You may allocate the partial withdrawal, subject to the
of Partial above conditions, among the General Account and the
Withdrawals Divisions of the Separate Account. If you do not specify the
allocation, then the partial withdrawal will be allocated
among the General Account and the Divisions of the Separate
Account in the same proportion that the cash value in the
General Account and the cash value in each Division bears to
the total cash value of the policy, minus the cash value in
the Loan Account on the date of the partial withdrawal. If
the General Account conditions will not allow this
proportionate allocation, we will request that you specify
an acceptable allocation.
Pro Rata After the first policy year, upon written request to us, you
Surrender can make a pro rata surrender of your policy. The pro rata
surrender can be any whole number percentage of your policy.
The pro rata surrender will reduce the face amount and the
cash value by the percentage chosen. The face amount
decrease will be subject to the following conditions:
1. The decrease will become effective on the monthly
anniversary on or following our receipt of the
request.
2. You may allocate the decrease in cash value due to
the pro rata surrender among the General Account
and the Divisions of the Separate Account. If you
do not specify the allocation, then the decrease
in cash value will be allocated among the General
Account and the Divisions of the Separate Account
in the same proportion that the cash value in the
General Account and the cash value in each
Division bears to the total cash value of the
policy, minus the cash value in the Loan Account
on the date of the pro rata surrender.
A pro rata surrender can not be processed if it will reduce
the face amount below the Minimum Face Amount shown on the
Policy Specifications page. No pro rata surrender will be
processed for more cash surrender value than is available on
the date of the pro rata surrender. A cash payment will be
made to you for the amount of the cash value reduction.
<PAGE>
Postponement We will usually pay any amounts payable on surrender,
of Payments partial withdrawal, or policy loan allocated to the
or Transfers Divisions of the Separate Account within seven days after
written notice is received. We will usually pay any death
benefit proceeds upon the Last Insured's death within seven
days after we receive due proof of claim. Payment of any
amount payable, from the Divisions of the Separate Account,
on surrender, partial withdrawal, policy loan or death may
be postponed whenever:
1. The New York Stock Exchange is closed (other than
customary weekend and holiday closing) or trading
on the New York Stock Exchange is restricted as
determined by the SEC;
2. The SEC, by order, permits postponement for the
protection of policy owners; or
3. An emergency exists as determined by the SEC, as a
result of which disposal of securities is not
reasonably practicable or it is not reasonably
practicable to determine the value of the net
assets of the Separate Account.
We may defer payment of the portion of any amount payable
from the General Account on surrender or partial withdrawal
for not more than six months. If we defer payment for 30
days or more, we will pay interest at the rate of 2 1/2% per
year for the period of deferment.
Transfers may also be postponed under the circumstances
listed above.
We may defer payment of the portion of any policy loan from
the General Account for not more than six months. No payment
from the General Account to pay premiums on this policy will
be deferred.
Continuation If all premium payments cease, the insurance provided under
of Insurance this policy, including benefits provided by any rider
attached to this policy, will continue in accordance with
the provisions of this policy for as long as the cash value
less any loans and loan interest accrued is sufficient to
cover the monthly deductions.
Basis of The minimum cash values are based on 1) the Minimum Cash
Computation Value Mortality Table shown on the Policy Specifications
page; and 2) for amounts allocated to the General Account,
compound interest at an annual rate of not less than the
General Account Cash Value Guaranteed Interest Rate shown on
the Policy Specifications page. There is no minimum cash
value guaranteed interest rate for amounts allocated to the
Divisions of the Separate Account.
Net single premiums are based on 1) the 7702 Table as shown
on the Policy Specifications page; and 2) the General
Account Cash Value Guaranteed Interest Rate as shown on the
Policy Specifications page.
All values are at least equal to those required by any
applicable law of the state that governs your policy. We
have filed a detailed statement of the method of calculating
cash values and reserves with the insurance supervisory
official of that state.
<PAGE>
9. PAYMENT OF POLICY BENEFITS
Payment A lump sum payment will be made as provided on the face
page.
Interest on We will pay interest on proceeds from the date of the Last
Proceeds Insured's death to the date of payment. Interest will be at
an annual rate determined by us, but never less than the
Guaranteed Interest Rate, shown on the Policy Specifications
page.
Extended Provisions for settlement of proceeds different from a lump
Provisions sum payment may only be made upon written agreement with us.
<PAGE>
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Non-Participating
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
<PAGE>
POLICY NUMBER:
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
16,000,001
INSUREDS:
John Doe
Jane Doe
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
(Unisex)
Non-Participating
Flexible Premiums are payable while this policy is in force and continue until
the younger Insured reaches Attained Age 100. If both Insureds die while this
policy is in force, we will pay the policy proceeds to the beneficiary upon the
Last Insured's death. We must receive proof of both Insureds' deaths. The policy
must also be surrendered to us after the Last Insured's death occurs. Any
payment will be subject to all of the provisions and conditions on this and the
following pages of this policy.
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE UNDER THE CONDITIONS DESCRIBED ON PAGES 4.01 AND 4.02.
THE POLICY'S CASH VALUE IN EACH INVESTMENT DIVISION OF THE SEPARATE ACCOUNT
IS BASED ON THE INVESTMENT EXPERIENCE OF THAT INVESTMENT DIVISION AND MAY
INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE
THE SEPARATE ACCOUNT PROVISION.
THE POLICY'S CASH VALUE IN THE GENERAL ACCOUNT WILL BE CREDITED WITH INTEREST AT
A MINIMUM GUARANTEED RATE AS SHOWN ON THE POLICY SPECIFICATIONS PAGE. WE MAY
CREDIT ADDITIONAL INTEREST IN EXCESS OF THE GUARANTEED RATE. SEE THE GENERAL
ACCOUNT CASH VALUE PROVISION.
RIGHT TO EXAMINE POLICY
Please read this policy. You may return this policy to us or to the agent
through whom it was purchased within 20 days from the date you receive it or
within 45 days after the application is signed, whichever period ends later. If
you return it within this period, the policy will be void from the beginning. We
will refund any premium paid.
This policy Is a legal contract between the policyowner and Paragon Life
Insurance Company. PLEASE READ YOUR CONTRACT CAREFULLY. This cover sheet
provides only a brief outline of some of the important features of your policy.
This cover sheet is not the complete insurance contract and only the actual
policy provisions will control. The policy itself sets forth, in detail, the
rights and obligations of both you and your insurance company. It is therefore,
important that you read your policy.
Executed on the Issue Date by Paragon Life insurance Company. [(1-877-334-8975)]
/s/ Matthew P.McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
<PAGE>
ALPHABETIC GUIDE TO YOUR CONTRACT
Page
3.07 Addition, Deletion or Substitution
of Investments
4.04 Allocation of Net Premiums
3.04 Assignments
6.07 Basis of Computation
3.02 Beneficiary
6.05 Cash Surrender Value
6.02 Cash Values
4.02 Change in Contract Type
3.05 Change of Insured
3.04 Change of Owner or Beneficiary
3.05 Claims of Creditors
3.04 Conformity with Statutes
4.01 Death Benefit
3.01 Definitions
4.02 Face Amount Decreases
6.02 General Account Cash Value
6.03 General Account Interest Rate
4.04 Grace Period
3.05 Incontestability
7.01 Interest on Proceeds
3.01 Issue Data
6.04 Loan Account Cash Value
6.01 Loans
3.05 Misstatement of Age and
Corrections
6.04 Monthly Cost of Insurance
6.05 Monthly Deduction
6.05 Monthly Policy Charge
6.03 Net Investment Factor
4.03 Net Premium
3.02 Owner
6.05 Partial Withdrawals
7.01 Payment of Policy Benefits
4.03 Payment of Premiums
4.02 Policy Changes
4.01 Policy Proceeds
6.07 Postponement of Payments
or Transfers
4.05 Reinstatement
3.04 Requests for Changes and/or
Information
6.03 Separate Account Cash Value
3.06 Separate Account Provisions
3.04 Statements in Application
3.05 Suicide Exclusion
6.05 Surrender
3.06 Transfers
Additional Benefit Riders, Modifications and Amendments, if any, and a Copy of
the Application are found following the final section.
<PAGE>
1. POLICY SPECIFICATIONS
GENERAL POLICY SPECIFICATIONS
POLICY NUMBER [17,000,001]
ISSUE DATE [JANUARY 1, 1999]
FACE AMOUNT [$100,000]
CONTRACT TYPE [OPTION A]
INITIAL PREMIUM PAID [$974.37]
PLANNED ANNUAL PREMIUM [$974.37]
MINIMUM INITIAL ANNUAL PREMIUM AMOUNT [$974.37]
NO LAPSE ANNUAL PREMIUM [$168.00]
NO LAPSE PREMIUM DATE [JANUARY 1, 2004]
PREMIUM TAX CHARGE [2.25%]
FEDERAL TAX CHARGE [1.3%]
SEPARATE ACCOUNT [SEPARATE ACCOUNT D]
INSURED AGE SEX RISK CLASSIFICATION
[JOHN DOE] [35] [MALE] [STANDARD SMOKER]
[JANE DOE] [35] [FEMALE] [STANDARD SMOKER]
BENEFITS - AS SPECIFIED IN POLICY
AND IN ANY RIDER
FORM
NUMBERS POLICY PLAN: JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE
30043 LIFE INSURANCE
30190
30191
30192
30325
30422
30625
30715
3083200 Anniversary Partial Withdrawal Rider
3083300 Divorce Split Policy Option Rider
3083400 Split Policy Option Rider
3083500 Estate Preservation Term Rider
3083600 Lifetime Coverage Rider
3083800 Secondary Guarantee Rider
<PAGE>
2. POLICY SPECIFICATIONS
GENERAL ACCOUNT CASH VALUE
GUARANTEED INTEREST RATE [4%]
GENERAL ACCOUNT MAXIMUM
ALLOCATION PERCENT [100%]
GENERAL ACCOUNT MAXIMUM
WITHDRAWAL PERCENT LIMIT [25%]
MAXIMUM MONTHLY COST OF
INSURANCE FACTOR [1.0032737]
MAXIMUM DAILY MORTALITY AND
EXPENSE RISK PERCENTAGE:
YEARS 1-10 [0.0015027%]
YEARS 11-20 [0.0012301%]
YEARS 21+ [0.0009572%]
MAXIMUM ANNUAL MORTALITY AND
EXPENSE RISK PERCENTAGE:
YEARS 1-10 [0.55%]
YEARS 11-20 [0.45%]
YEARS 21+ [0.35%]
MAXIMUM MONTHLY POLICY CHARGE:
1st YEAR [$6.00]
YEARS 2+ [$6.00]
MAXIMUM SELECTION AND ISSUE
EXPENSE CHARGE RATE:
YEARS 1-10 [$0.0750]
YEARS 11+ [$0.00]
MINIMUM FACE AMOUNT [$100,000]
MINIMUM FACE AMOUNT DECREASE [$5,000]
MAXIMUM FEE FOR PROJECTION OF
BENEFITS AND VALUES [$25.00]
MAXIMUM TRANSFER CHARGE [$25.00]
GUARANTEED INTEREST RATE ON
PROCEEDS [4.0%]
7702 TABLE [1980 CSO MORTALITY TABLE A
FOR A SMOKER,
AND 1980 CSO MORTALITY TABLE G
FOR A SMOKER,
AGE NEAREST BIRTHDAY]
BASIS OF COMPUTATION [1980 CSO MORTALITY TABLE A
OF MINIMUM CASH VALUES FOR A SMOKER,
AND 1980 CSO MORTALITY TABLE G
FOR A SMOKER,
AGE NEAREST BIRTHDAY]
IF THE INITIAL PREMIUM PAID AND SUBSEQUENT PREMIUMS PROVE TO BE TOO LOW,
COVERAGE PROVIDED BY THIS POLICY MAY CEASE.
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
RATES PER $1,000
COVERAGE: JSFPVL INSUREDS: JOHN DOE
POLICY NUMBER: 17,000,001 JANE DOE
ISSUE DATE: JANUARY 1, 1999
POLICY YEAR RATE POLICY YEAR RATE
1 0.0004 34 1.3496
2 0.0014 35 1.5297
3 0.0026 36 1.7297
4 0.0041 37 1.9667
5 0.0060 38 2.2489
6 0.0084 39 2.5843
7 0.0115 40 2.9729
8 0.0152 41 3.4152
9 0.0197 42 3.8996
10 0.0250 43 4.4178
11 0.0314 44 4.9642
12 0.0388 45 5.5496
13 0.0475 46 6.1927
14 0.0576 47 6.9094
15 0.0695 48 7.7173
16 0.0835 49 8.6242
17 0.0999 50 9.6549
18 0.1193 51 10.7020
19 0.1426 52 11.8476
20 0.1699 53 12.9635
21 0.2012 54 14.2024
22 0.2369 55 15.3930
23 0.2763 56 16.7123
24 0.3198 57 18.1014
25 0.3680 58 19.6024
26 0.4228 59 21.3279
27 0.4878 60 23.4464
28 0.5645 61 26.5417
29 0.6588 62 31.3755
30 0.7685 63 39.6130
31 0.8955 64 54.6636
32 1.0346 65 83.3333
33 1.1884 66+ 0.0000
THESE RATES ARE FOR THE BASE POLICY AT ISSUE. THEY ARE BASED ON A
COMBINATION OF THE ULTIMATE 1980 COMMISSIONERS STANDARD ORDINARY MORTALITY
TABLE A, SMOKER AND TABLE G, SMOKER.
<PAGE>
DEATH BENEFIT OPTION C ATTAINED AGE FACTORS
COVERAGE: JSFPVL INSUREDS: JOHN DOE
POLICY NUMBER: 17,000,001 JANE DOE
ISSUE DATE: JANUARY 1, 1999
ATTAINED ATTAINED
AGE* RATE AGE* RATE
35 5.64184 68 1.73259
36 5.42508 69 1.68510
37 5.21686 70 1.64002
38 5.01683 71 1.59723
39 4.82481 72 1.55674
40 4.64044 73 1.51862
41 4.46354 74 1.48292
42 4.29389 75 1.44965
43 4.13112 76 1.41875
44 3.97514 77 1.39005
45 3.82557 78 1.36333
46 3.68227 79 1.33835
47 3.54498 80 1.31492
48 3.41344 81 1.29295
49 3.28747 82 1.27239
50 3.16694 83 1.25326
51 3.05154 84 1.23556
52 2.94120 85 1.21935
53 2.83570 86 1.20433
54 2.73495 87 1.19047
55 2.63880 88 1.17738
56 2.54704 89 1.16503
57 2.45952 90 1.15300
58 2.37604 91 1.14119
59 2.29637 92 1.12932
60 2.22033 93 1.11709
61 2.14774 94 1.10423
62 2.07858 95 1.09045
63 2.01279 96 1.07580
64 1.95040 97 1.06037
65 1.89131 98 1.04422
66 1.83546 99 1.02648
67 1.78261 100+ 1.01000
* ATTAINED AGE IS THE YOUNGER INSURED'S ATTAINED AGE EVEN IF NO LONGER
LIVING.
<PAGE>
1. DEFINITIONS IN THIS POLICY
We, Us and Our Paragon Life Insurance Company.
You and Your The owner of this policy. The owner may be someone other
than the Insureds.
In the application the words "You" and "Your" refer to the
proposed Insured person(s).
Insureds The persons whose lives are insured under this policy. See
the Policy Specifications page.
Last Insured The Insured whose death succeeds the death of all other
Insureds under this policy.
Issue Age The age of each Insured as of his or her nearest birthday to
the Issue Date.
Attained Age The Issue Age for an Insured plus the number of completed
policy years, whether or not the Insured is living. This
includes any period during which this policy was lapsed.
Issue Date The effective date of the coverage under this policy which
is the Issue Date shown on the Policy Specifications page.
It is also the date from which policy anniversaries, policy
years, and policy months are measured.
Investment The date the first premium is applied to the General Account
Start Date and/or the Divisions of the Separate Account. This date will
be the later of:
. The Issue Date of the policy; or
. The date we receive the first premium at our
Service Center.
Monthly The same date in each succeeding month as the Issue Date
Anniversary except that whenever the Monthly Anniversary falls on a date
other than a Valuation Date, the Monthly Anniversary will be
deemed the next Valuation Date. If any Monthly Anniversary
would be the 29th, 30th, or 31st day of a month that does
not have that number of days, then the Monthly Anniversary
will be the last day of that month.
General Account The assets held by us, excluding any loans, other than those
allocated to the Divisions of the Separate Account.
Separate Account The Separate Account listed on the Policy Specifications
page, a separate investment account created by us to receive
and invest net premiums received for this policy or other
policies.
Loan Account The account to which we will transfer from the General
Account and the Divisions of the Separate Account the amount
of any policy loan.
Loan SubAccount A Loan SubAccount exists for the General Account and each
Division of the Separate Account. Any cash value transferred
to the Loan Account will be allocated to the appropriate
Loan SubAccount to reflect the origin of the cash value. At
any point in time, the Loan Account will equal the sum of
all the Loan SubAccounts.
Valuation Date Each day that the New York Stock Exchange is open for
trading, the Service Center is open for business and the SEC
has not restricted trading or declared an emergency.
SEC The United States Securities and Exchange Commission.
Service Center P.O. Box 66757, St. Louis, MO 63166-6757.
<PAGE>
2. PERSONS WITH AN INTEREST IN THE POLICY
Owner The owner of this policy is as shown in the application or
in any supplemental agreement attached to this policy,
unless later changed as provided in this policy. If there is
more than one owner at a given time, all must exercise the
rights of ownership by joint action. Ownership may be
changed in accordance with the Change of Owner or
Beneficiary provision.
You, as owner, are entitled to exercise all ownership rights
provided by this policy, while it is in force. Any person
whose rights of ownership depend upon some future event will
not possess any present rights of ownership. If the owner is
a trustee(s), we may act in reliance upon the written
request of any trustee and we are not responsible for proper
administration of the trust. Unless otherwise provided, the
final owner will be the estate of the last owner to die.
Beneficiary The beneficiary to receive the proceeds in the event of the
Last Insured's death is as shown in the application or in
any supplemental agreement attached to this policy, unless
later changed as provided in the policy. You may change the
beneficiary in accordance with the Change of Owner or
Beneficiary provision. Unless otherwise stated, the
beneficiary has no rights in this policy before the death of
the Last Insured. If there is more than one beneficiary at
the death of the Last Insured, each will receive equal
payments unless otherwise provided. Unless you provide
otherwise, if a beneficiary dies prior to the Last Insured's
death, that beneficiary's share will be paid to the living
beneficiaries of that class. The deceased beneficiary's
share will be paid in the same proportion as the living
beneficiaries' shares. If there are no beneficiaries living
when the Last Insured dies, or at the end of any Common
Disaster period, the proceeds (commuted if required) will be
payable to you, if you are living, or to your estate.
Any payment we make will terminate our liability with
respect to such payment. If the Insureds designate specific
amounts to be paid to specific beneficiaries and the total
of those amounts is other than the amount of proceeds
payable, the proceeds payable will be adjusted and paid in
the same proportion as the specific amounts were to be paid.
Any term used in the masculine, feminine, singular or
plural, will include or be the opposite gender or number
where necessary.
If any beneficiary designation in the application includes
any of the following provisions, the terms of that provision
shown below will apply:
1. Per Stirpes. The share of a deceased beneficiary
will be paid to that beneficiary's surviving
children, equally.
2. Common Disaster. We will not make payment until
the stated number of days after the Last Insured's
death. If any beneficiary dies during this period,
or if the order of death of any beneficiary and
the Last Insured cannot be determined, we will pay
as though such beneficiary died first.
3. Trust for Minor Beneficiary. The original or
successor trustee for a minor beneficiary will
serve without bond and exercise all rights and
receive all proceeds for the minor beneficiary.
Such proceeds will be held in a separate trust and
used at the trustee's discretion for such minor's
education, support, care and general welfare. The
trust will terminate at the legal age of majority
or prior death of the minor beneficiary. Any funds
then held by the trustee will be paid in one sum
to such beneficiary or the beneficiary's estate.
The trust can be revoked by a change of
beneficiary under the policy. Payment to any
trustee will discharge us to the extent of such
payment.
<PAGE>
4. Trust Under Will. When we receive at our Service Center:
a) Certified copies of the Last Will and Testament of
the named testator; and
b) The order admitting the Will to probate; and if
such Will created a trust capable of receiving
proceeds;
then we will pay the proceeds to the trustee.
If, before we receive these documents, satisfactory proof is
furnished that:
a) the testator died intestate; or
b) the Will created no trust capable of receiving
proceeds; or
c) the testator was not either Insured, but survived
the Last Insured;
then we will pay the proceeds to you, unless otherwise
provided.
If we pay under any of these conditions, we will be
discharged to the extent of such payment. We are not
required to check into the validity, general terms or proper
administration of the trust. Such trustee designation will
not affect your rights under the policy, including the right
to change the beneficiary.
5. Trust Under Separate Written Agreement. When we receive at
our Service Center a written statement from the trustee
named in the beneficiary designation that:
a) the trust agreement is in force; and
b) the agreement permits the trustee to receive the
proceeds;
then we will pay the proceeds to the trustee.
If, before we receive the trustee's statement, satisfactory
proof is furnished that:
a) the trust agreement is not in effect; or
b) the agreement does not permit the trustee to
receive the proceeds;
then we will pay the proceeds to you, unless otherwise
provided.
If we pay under any of these conditions, we will be
discharged to the extent of such payment. We are entitled to
rely on any statements or documents furnished to us by the
trustee and are not required to check into the validity,
general terms or proper administration of the trust
agreement. Such trustee designation will not affect your
rights under the policy, including the right to change the
beneficiary.
6. Irrevocable Beneficiary. You cannot change an irrevocable
beneficiary without the written consent of such beneficiary.
Also, you cannot exercise any other ownership rights without
the consent of such beneficiary, if the exercise of such
rights will have the effect of diminishing the rights and
interest of the irrevocable beneficiary.
7. Creditor Beneficiary. Proceeds payable to any creditor
beneficiary are limited to its provable interest. The
balance of any proceeds will be paid to any other named
beneficiary. If there is no other beneficiary living, we
will pay the proceeds to you, unless otherwise provided. You
cannot change a creditor beneficiary without the written
consent of the creditor or release of its interest. Also,
you cannot exercise any other ownership rights without the
consent of such beneficiary, if the exercise of such rights
will have the effect of diminishing the rights and interest
of the creditor beneficiary.
<PAGE>
Change of During the lifetime of either Insured you may change the
Owner or ownership and beneficiary designations, subject to any
Beneficiary restrictions as stated in the Owner or Beneficiary
provisions. You must make the change in written form
satisfactory to us. If acceptable to us the change will take
effect as of the time you signed the request, whether or not
either Insured is living when we receive your request at our
Service Center. The change will be subject to any assignment
of this policy or other legal restrictions. It will also be
subject to any payment we made or action we took before we
received your written notice of the change. We have the
right to require the policy for endorsement before we accept
the change.
If you are also the beneficiary of the policy at the time of
the Last Insured's death, you may designate some other
person to receive the proceeds of the policy within 60 days
after the Last Insured's death.
Assignments We will not be bound by an assignment of the policy or of
any interest in it unless:
1. The assignment is made as a written instrument,
2. You file the original instrument or a certified
copy with us at our Service Center, and
3. We send you an acknowledged copy.
We are not responsible for determining the validity of any
assignment.
If a claim is based on an assignment, we may require proof
of interest of the claimant. A valid assignment will take
precedence over any claim of a beneficiary.
This assignment provision will not apply when this contract
is sold in a tax qualified plan. No assignment will be
permitted in such cases.
Requests For Submit all requests for change and/or information in writing
Changes and/or to our Service Center.
Information
3. GENERAL PROVISIONS
The Contract We have issued this policy in consideration of the
application and payment of premiums. The policy, the
application for it, and any riders constitute the entire
contract and are attached to and made a part of the policy
when the insurance applied for is accepted. A copy of any
application for reinstatement will be sent to you for
attachment to this policy and will become part of the
contract of reinstatement and of this policy. The policy may
be changed by mutual agreement. Any change must be in
writing and approved by our President, Vice-President or
Secretary. Our agents have no authority to alter or modify
any terms, conditions, or agreements of this policy, or to
waive any of its provisions.
Conformity with If any provision in this policy is in conflict with the laws
Statutes of the state which govern this policy, the provision will be
deemed to be amended to conform with such laws. In addition,
we reserve the right to change this policy if we determine
that a change is necessary to cause this policy to comply
with, or give you the benefit of, any federal or state
statute, rule, or regulation, including, but not limited to,
requirements for life insurance contracts under the Internal
Revenue Code, or its regulations or published rulings.
Statements in All statements made by the Insureds or on their behalf, or
Application by the applicant, will be deemed representations and not
warranties, except in the case of fraud. Material
misstatements will not be used to void the policy or any
rider, or deny a claim unless made in the application for a
policy or a rider.
<PAGE>
Claims of To the extent permitted by law, neither the policy nor any
Creditors payment under it will be subject to the claims of creditors
or to any legal process.
Conversion Rights While your policy is in force, you have a one time right
during the first two policy years to transfer all of your
cash value from the Divisions of the Separate Account to the
General Account.
If, at any time during the first two policy years, you
request in writing the transfer of the cash value held in
the Divisions of the Separate Account to the General Account
and you indicate that you are making this transfer in
exercise of your conversion rights, the transfer will not be
subject to a transfer charge or transfer limits, if any. At
the time of such transfer, there will not be any effect on
the policy's death benefit, face amount, net amount at risk,
rate class or Issue Age.
If you exercise your one time conversion right, we will
automatically allocate all future net premiums to the
General Account.
Misstatement If there is a misstatement of age for either Insured in the
of Age and applications, the amount of the death benefit will be that
Corrections which would be purchased by the most recent monthly cost of
insurance charge at the correct age.
If we make any payment or policy changes in good faith,
relying on our records, or evidence supplied to us, our
duty will be fully discharged. We reserve the right to
correct any errors in the policy.
Incontestability We cannot contest this policy after it has been in force
during the lifetime of either Insured for two years from its
Issue Date. We cannot contest any reinstatement of this
policy, with regard to material misstatements made
concerning such reinstatement, after it has been in force
during the lifetime of either Insured for a period of two
years from the date we approve the reinstatement. If only
one Insured was alive on the date we approved the request
for reinstatement, we can not contest any reinstatement of
this policy, with regard to material misstatements made
concerning such reinstatement, after it has been in force
during the lifetime of that Insured for a period of two
years from the date we approved the reinstatement. This
provision will not apply to any rider which contains its own
incontestability clause.
Suicide Exclusion If either Insured dies by suicide, while sane or insane,
within two years from the Issue Date (or within the maximum
period permitted by law of the state in which this policy
was delivered, if less than two years), the amount payable
will be limited to the amount of premiums paid, less any
outstanding policy loans with interest to the date of death,
and less any partial withdrawals.
Change of While this policy is in force, you may change one or both of
Insured the Insureds. To do this, you must meet the requirements
established by us. Any rider attached to this policy may be
continued only with our consent. We reserve the right to
charge a nominal fee for processing a change of Insured.
Annual Report Each year a report will be sent to you which shows the
current policy values, premiums paid and deductions made
since the last report, and any outstanding policy loans.
Projection of You may make a written request to us for a projection of
Benefits and illustrative future cash values and death benefits. If
Values requested more than once per policy year, this projection
will be furnished to you for a nominal fee. This fee will
not exceed the Maximum Fee for Projection of Benefits and
Values shown on the Policy Specifications page.
<PAGE>
4. SEPARATE ACCOUNT PROVISIONS
Separate Account The variable benefits under this policy are provided
through investments in the Separate Account shown on the
Policy Specifications page. This account is used for
flexible premium variable life insurance policies and, if
permitted by law, may be used for other policies or
contracts as well.
We hold the assets of the Separate Account. These assets are
held separately from the assets held in the General Account.
Income, gains and losses---whether or not realized---from
assets allocated to the Separate Account will be credited to
or charged against the account without regard to our other
income, gains or losses.
The portion of the assets held by the Separate Account equal
to the reserves and other policy liabilities with respect to
the Separate Account will not be charged with liabilities
that arise from any other business we may conduct. We have
the right to transfer to our General Account any assets of
the Separate Account which are in excess of the reserves and
other policy liabilities of the Separate Account.
The Separate Account is registered with the Securities and
Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The Separate Account is also
subject to the laws of the State of Missouri, which regulate
the operations of insurance companies incorporated in
Missouri. The investment policy of the Separate Account will
not be changed without the approval of the Insurance
Commissioner of the State of Missouri. The approval process
is on file with the insurance Commissioner of the state in
which this policy was delivered.
Divisions The Separate Account has several Divisions. Each Division
invests in a corresponding investment portfolio from one or
more registered investment companies.
Income, gains and losses---whether or not realized---from
the assets of each Division of the Separate Account are
credited to or charged against that Division without regard
to income, gains or losses in other Divisions of the
Separate Account or in the General Account.
We will value the assets of each Division of the Separate
Account at the end of each valuation period. A valuation
period is the period between two successive Valuation Dates.
A Valuation Date is any day that benefits vary and on which
the New York Stock Exchange and our Service Center are open
for business or any other day that may be required by any
applicable Securities and Exchange Commission Rules and
Regulations.
Transfers You may transfer amounts as follows:
. Between the General Account and the Divisions of
the Separate Account; or
. Among the Divisions of the Separate Account.
. The first 12 requested transfers and/or partial
withdrawals per policy year will be allowed free
of charge; thereafter we may impose a transfer
charge not to exceed the Maximum Transfer Charge
shown on the Policy Specifications page.
These transfers will be subject to the following conditions:
. We must receive a request for transfer in a form
acceptable to us.
. Transfers from or among the Divisions of the
Separate Account must be at least $500.00 or the
entire amount you have in a Division, if smaller.
<PAGE>
. Transfers and/or partial withdrawals from the
General Account to the Divisions of the Separate
Account must be at least $500.00. The maximum
amount of all transfers and partial withdrawals
from the General Account in any policy year will
be the greater of (1) or (2):
1. The cash surrender value of the General
Account at the beginning of that policy
year multiplied by the General Account
Maximum Withdrawal Percent Limit, as
shown on the Policy Specifications page.
2. The previous year's General Account
maximum withdrawal amount.
. The General Account Cash Value immediately after
any transfer in to the General Account cannot
exceed 1., below, multiplied by 2., below:
1. The General Account Cash Value plus the
Separate Account Cash Value.
2. The General Account Maximum Allocation
Percent as shown on the Policy
Specifications page.
We may revoke or modify the transfer privilege at any time,
including the minimum amount transferable, the General
Account Maximum Allocation Percent, and the transfer charge,
if any.
Addition, Deletion We reserve the right, subject to compliance with applicable
or Substitution law, to make additions to, deletions from, or substitutions
of Investments for the shares of a fund that are held by the Separate
Account or that the Separate Account may purchase. We
reserve the right to eliminate the shares of any of the
funds of this policy and to substitute shares of another
fund of a registered investment company, if the shares or
funds are no longer available for investment or if in our
judgement, further investment in any fund should become
inappropriate in view of the purpose of the policy. We will
not substitute any shares attributable to the owner's
interest in a Division of the Separate Account without
notice to the owner and compliance with the Investment
Company Act of 1940. This will not prevent the Separate
Account from purchasing other securities for other series or
classes of policies, or from permitting conversion between
series or classes of policies or contracts on the basis of
requests made by owners.
We reserve the right to establish additional Divisions of
the Separate Account which would invest in shares of
registered investment companies and to make such Divisions
available to such class or series of policies as we deem
appropriate. We also reserve the right to eliminate or
combine existing Divisions of the Separate Account or to
transfer assets between Divisions.
If we consider it to be in the best interest of persons
having voting rights under the policies, the Separate
Account may be operated as a management company under the
Investment Company Act of 1940; it may be deregistered under
that Act in the event registration is no longer required; it
may be combined with other separate accounts; or its assets
may be transferred to other separate accounts.
<PAGE>
5. POLICY BENEFITS
Policy Proceeds The policy proceeds are:
1. The death benefit under the Contract Type then in
effect; plus
2. The monthly cost of insurance for the portion of the
policy month from the date of the Last Insured's death
to the end of the policy month of that death; minus
3. Any payment due under the Grace Period provision as of
the date of the Last Insured's death; minus
4. Any loan and loan interest due.
Death Benefit Prior to the younger Insured's Attained Age 100, the death
benefit depends upon the Contract Type in effect on the date
of the Last Insured's death. The Contract Type in effect is
shown on the Policy Specifications page.
Option A Contract Type: The death benefit is the greater of:
1. The face amount; or
2. The applicable percentage of the cash value on the date
of the Last Insured's death as described in Section
7702(d) of the Internal Revenue Code of 1986 or any
applicable successor provision and modified for ages 95
and above.
Option B Contract Type: The death benefit is the greater of:
1. The face amount plus the cash value on the date of the
Last Insured's death; or
2. The applicable percentage of the cash value on the date
of the Last Insured's death as described in Section
7702(d) of the Internal Revenue Code of 1986 or any
applicable successor provision and modified for ages 95
and above.
Option C Contract Type: The death benefit is the greater of:
1. The face amount; or
2. The cash value on the date of the Last Insured's death
multiplied by the younger Insured's applicable Attained
Age factor as shown on the policy's Death Benefit Option
C Attained Age Factors page.
Notwithstanding anything in this policy, the death benefit
will in no case be less than the amount necessary to cause
the policy to meet the requirements for the definition of
life insurance under the Internal Revenue Code of 1986 or
any applicable successor provision.
Applicable The percentages as currently described in Section 7702(d) of
Percentage: the Internal Revenue Code of 1986 and modified for ages 95
and above are as follows:
In the case in which the
younger Insured's Attained The applicable percentage
Age as of the beginning of will decrease by a ratable
the contract year is: portion for each full year:
But not
More than: more than: From: To:
0 ................... 40 250 ................... 250
40 ................... 45 250 ................... 215
45 ................... 50 215 ................... 185
50 ................... 55 185 ................... 150
55 ................... 60 150 ................... 130
60 ................... 65 130 ................... 120
65 ................... 70 120 ................... 115
70 ................... 75 115 ................... 105
75 ................... 90 105 ................... 105
90 ................... 95 105 ................... 101
95 or 101
higher
<PAGE>
Continuation If this policy is in force beyond the younger Insured's
of the Policy Attained Age 100, the Death Benefit will be 101% of the
Beyond Attained policy's cash value.
Age 100
Please note: This policy may not qualify as life insurance
after the younger Insured's Attained Age 100 and may be
subject to tax consequences. Please consult a tax advisor
prior to continuing the policy beyond the younger Insured's
Attained Age 100. It is possible that insurance coverage may
not continue even if planned premiums are paid in a timely
manner.
Policy Changes You may request policy changes at any time unless we
specifically indicate otherwise. We limit the number of
changes to one per policy year, and we do not permit changes
in the first policy year. The types of changes allowed are
explained below.
No change will be permitted that would result in this policy
not satisfying the definition of life insurance under the
Internal Revenue Code of 1986 or any applicable successor
provision.
Face Amount The face amount may be decreased by sending us a written
Decreases request.
Any decrease in face amount will be subject to the following
conditions:
1. The decrease will become effective on the Monthly
Anniversary on or following our receipt of the request.
2. The face amount remaining in force after any requested
decrease may not be less than the Minimum Face Amount
shown on the Policy Specifications page.
3. Any decrease must be at least the Minimum Face Amount
Decrease as shown on the Policy Specifications page.
We will amend your policy to show the effective date of the
decrease.
You may not increase the face amount of this policy.
Change in If the Contract Type in effect is Option A or Option B, you
Contract Type may change the Contract Type by sending us a written
request. The effective date of the change will be the
Monthly Anniversary on or following the date we receive your
request. On the effective date of this change the death
benefit payable does not change, but the face amount may
change.
If the Contract Type in effect is Option B, you may change
it to Option A. The face amount will be increased to equal
the death benefit on the effective date of change. The
Contract Type cannot be changed from Option B to Option C.
If the Contract Type in effect is Option A, you may change
it to Option B. Proof that the Insureds are insurable by our
standards on the date of the change must be submitted. The
face amount will be decreased to equal the death benefit
less the cash value on the effective date of change. This
change may not be made if it would result in a face amount
which is less than the Minimum Face Amount shown on the
Policy Specifications page. The Contract Type cannot be
changed from Option A to Option C.
If the Contract Type in effect is Option C, the Contract
Type cannot be changed.
<PAGE>
6. PREMIUMS AND GRACE PERIOD
Payment of Your first premium is due as of the Issue Date. While either
Premiums Insured is living, premiums after the first must be paid at
our Service Center. A premium receipt will be furnished upon
request. If this policy is in your possession and you have
not paid the first premium, it is not in force. It will be
considered that you have the policy for inspection only.
Premiums may be paid in any amount and at any interval
subject to the following conditions:
1. At the end of the first policy year, your total premium
payments for this policy must be greater than or equal
to the Minimum Initial Annual Premium Amount as shown on
the Policy Specifications page.
2. Any subsequent premium payment must be at least $10.00.
3. Total premiums paid in any policy year for policies
issued with the Option A or B Contract Type may not
exceed an amount that would cause the policy to fail the
definition of life insurance as defined by Section 7702
of the Internal Revenue Code of 1986, or any applicable
successor provision thereto. The maximum premium limit
for the following policy year will be shown on your
annual report.
On any date that we receive a premium which causes the Death
Benefit under any of the Contract Types to increase by an
amount that exceeds that premium received, we reserve the
right to refuse that premium payment. We may require
additional evidence of insurability before we accept the
premium.
Net Premium The net premium is:
1. The premium paid; minus
2. The premium paid multiplied by the Premium Tax Charge as
shown on the Policy Specifications page; minus
3. The premium paid multiplied by the Federal Tax Charge as
shown on the Policy Specifications page.
Premium Tax A charge will be deducted for premium taxes from each
Charge premium submitted. The current charge, as a percent of the
premium, is shown on the Policy Specifications page. We
reserve the right to change the Premium Tax Charge due to
rate changes of the governing jurisdiction. We will amend
your policy to show the current premium tax rate, if
changed.
Federal Tax A charge will be deducted for federal taxes from each
Charge premium submitted. The current charge, as a percent of the
premium, is shown on the Policy Specifications page. We
reserve the right to change the Federal Tax Charge to
reflect a change in the federal tax law. We will amend your
policy to show the current Federal Tax Charge, if changed.
<PAGE>
Allocation of You determine the allocation of net premiums among the
Net Premiums General Account and the Divisions of the Separate Account.
For any chosen allocation the minimum percentage that may be
allocated is 5% of the net premium. Percentages must be in
whole numbers. The General Account Cash Value immediately
after payment of the premium cannot exceed 1., below,
multiplied by 2., below:
1. The General Account Cash Value plus the Separate Account
Cash Value.
2. The General Account Maximum Allocation Percent as shown
on the Policy Specifications page.
The initial allocation is shown on the application, a copy
of which is attached. We may modify the General Account
Maximum Allocation Percent at any time.
For any premium received during the "right to examine
policy" period, we will initially allocate the net premium
to the Division that invests exclusively in shares of our
Money Market fund unless prohibited by state law. When this
period expires, cash value in that Division will be
transferred to the General Account and the Divisions of the
Separate Account according to the allocation percentages
shown on the application, a copy of which is attached. For
any premium received after the "right to examine policy"
period, the net premium will be allocated according to the
allocation percentages shown on the application page or your
most recent allocation instructions received by us.
Your Right You may change the allocation of future net premiums among
to Change the General Account and/or the Divisions of the Separate
Allocation Account subject to the conditions outlined in the Allocation
of the Net Premiums Provision. The change in allocation
percentages will take effect immediately upon our receipt of
your written request.
No-Lapse Period If, on a monthly anniversary day prior to the No Lapse
Premium Date, the sum of all premiums paid on this policy,
reduced by any partial withdrawals and any outstanding loan
balance, is greater than or equal to the sum of the No Lapse
Monthly Premiums for the elapsed months since the Issue
Date, this policy will not lapse as a result of a cash value
less any loans and loan interest due, being insufficient to
pay the monthly deduction. The No Lapse Premium Date and the
No Lapse Annual Premium are shown on the Policy
Specifications page. The No Lapse Monthly Premium is one
twelfth of the No Lapse Annual Premium.
Grace Period If, on a monthly anniversary day prior to the No Lapse
Premium Date:
1. The cash value less any loans and loan interest due, is
insufficient to cover the monthly deduction; and
2. The sum of all premiums paid on this policy, reduced by
any partial withdrawals and any outstanding loan
balance, is less than the sum of the No Lapse Monthly
Premiums for the elapsed months since the Issue Date;
then the grace period of 62 days will be allowed for the
payment of a premium sufficient to keep your policy in
force. The No Lapse Premium Date and the No Lapse Annual
Premium are shown on the Policy Specifications page.
A change in your policy's face amount, the addition or
deletion of a supplemental rider to this policy, or a change
in the premium class of the Insureds before the No Lapse
Premium Date shown on the Policy Specifications page may
result in a change in the No Lapse Monthly Premium. The No
Lapse Premium Date will not be changed.
---
It, on a monthly anniversary day on or after the No Lapse
Premium Date, the cash value less any loans and loan
interest due, is insufficient to cover the next monthly
deduction, a grace period of 62 days will be allowed for the
payment of a premium sufficient to pay the monthly
deduction. (Monthly deduction is defined in the Cash Values
section.)
<PAGE>
Notice of the amount of premium required to be paid to keep
this policy in force will be sent at the beginning of the
grace period to your last known address and to any assignee
on record. If we do not receive a premium large enough so
that the net premium covers the monthly deduction by the end
of the grace period, your policy will lapse at the end of
that 62 day period and it will then terminate without cash
surrender value. If the Last Insured dies during the grace
period, any past due monthly deductions will be deducted
from the death benefit.
Reinstatement You may reinstate your lapsed policy within 5 years after
the date of lapse. This must be done prior to the younger
Insured's Attained Age 100. The policy can not be reinstated
if it has been surrendered. To reinstate, you must submit
the following items:
1. A written request for reinstatement.
2. Proof satisfactory to us that both Insureds are
Insurable by our standards, if both Insureds were alive
on the date the policy lapsed. If only one Insured was
alive on the date the policy lapsed, you must submit
proof satisfactory to us that that Insured is insurable
by our standards.
3. A net premium payment large enough to cover:
a. The monthly deductions due at the time of lapse;
and
b. Two times the monthly deduction due at the time of
reinstatement.
4. A payment to cover any Loan Interest due and unpaid at
the time of lapse.
Upon receipt of the above payments, we will deduct any
monthly deductions and loan interest due and unpaid at the
time of lapse. If both Insureds were alive on the date the
policy lapsed, both must be alive on the date we approve the
request for reinstatement. If either Insured is not alive,
such approval is void and of no effect. If only one Insured
was alive on the date the policy lapsed, that Insured must
be alive on the date we approve the request for
reinstatement. If that Insured is not alive, such approval
is void and of no effect.
The reinstated policy will be in force from the date we
approve the reinstatement application. There will be a full
monthly deduction for the policy month which includes this
date. Any application for reinstatement becomes part of the
contract of reinstatement and of this policy.
Any loan may be paid or reinstated. Any loan reinstated will
cause a cash value of an equal amount to be reinstated.
Any loan repaid at the time of reinstatement will cause an
increase in cash value equal to the amount of the repaid
loan.
Following reinstatement, the No-Lapse Period provision will
again be applicable until the No-Lapse Premium Date, shown
on the Policy Specifications page, if sufficient premium is
paid so that, as of the effective date of reinstatement, the
sum of all premiums paid, reduced by any partial withdrawals
and any loans, is greater than the No-Lapse Monthly Premiums
multiplied by the number of elapsed months since the Issue
Date.
<PAGE>
7. LOANS
Upon written request to us, you may borrow an amount not in
excess of the loan value of your policy while it is in
force. The minimum amount of your net loan request at any
one time must be at least $500. Your policy will be the sole
security for such loan. We have the right to require your
policy for endorsement.
The loan value is the cash value of your policy at the date
of the loan request plus interest to the next policy
anniversary at the General Account Cash Value Guaranteed
Interest Rate, shown on the Policy Specifications page,
reduced by:
1. Any existing loans; and
2. Loan interest to the next loan interest due date;
and
3. Every monthly deduction due to the next loan
interest due date.
You may allocate the policy loan among the General Account
and the Divisions of the Separate Account. If you do not
specify the allocation, then the policy loan will be
allocated among the General Account and the Divisions of the
Separate Account in the same proportion that the cash value
in the General Account, and the cash value in each Division
bears to the total cash value of the policy, minus the cash
value in the Loan Account, on the date of the policy loan.
Cash value equal to the policy loan allocated to the General
Account and each Division of the Separate Account will be
transferred to the Loan Account, reducing the cash value
accordingly. Any cash value transferred to the Loan Account
will be allocated to the appropriate Loan SubAccount.
Loan Interest The accrued loan interest will be due the earliest of:
Due Date
1. The next policy anniversary date.
2. The date of termination of the policy.
3. The date the loan is repaid in full.
4. The date the loan plus loan interest accrued exceeds the
cash value.
Interest will be payable annually on each policy
anniversary. If you do not pay the interest when it is due
on a policy anniversary, an amount of cash value equal to
the loan interest will also be transferred to the Loan
Account. We will charge the same rate of interest on this
amount as on the policy loan. The amount transferred will be
deducted from the General Account and the Divisions of the
Separate Account in the same proportion that the cash value
in the General Account and the cash value in each Division
bears to the total cash value of the policy, minus the cash
value in the Loan Account.
Fixed Loan The fixed loan interest rate is 4.5% for policy years 1
Interest Rates through 10, 4.25% for policy years 11 through 20 and 4.15%
for policy years 21 and later. Loan interest is payable in
arrears.
Loan All funds received will be credited to your policy as a
Repayments premium unless clearly marked for loan repayment.
You may repay your loan in whole or in part at any time
before the death of the Last Insured while the policy is in
force. When a loan repayment is made, cash value securing
the debt in the Loan Account equal to the loan repayment
will be repaid to the General Account and the Divisions of
the Separate Account in the same proportion that the cash
value in the Loan Account bears to the cash value in each
Loan SubAccount. Unpaid loans and loan interest will be
deducted from any settlement of your policy.
<PAGE>
If you fail to make repayments when the total loan and loan
interest due would exceed the cash value, your policy will
terminate. We will allow you a grace period for such payment
of loans and loan interest due. In such event the policy
becomes void at the end of the grace period. We will mail
notice to your last known address, and that of any assignee
of record. This grace period will expire 62 days from the
Monthly Anniversary immediately before the date the total
loan and loan interest exceeds the cash value; or 31 days
after such notice has been mailed, if later.
8. CASH VALUES
Cash Value The cash value of your policy is equal to the total of:
. The cash value in the General Account; plus
. The cash value in the Divisions of the Separate
Account; plus
. The cash value in the Loan Account.
Cash Value If this policy is in force beyond the younger Insured's
After Attained Attained Age 100, the cash value of your policy will be
Age 100 determined in the same manner as described below; except no
deductions will be made for monthly cost of insurance
charges. Premiums can not be paid after the younger Insured
Attains Age 100.
General Account The cash value in the General Account as of the Investment
Cash Value Start Date is equal to:
. The portion of the initial net premium received and
allocated to the General Account; minus
. The portion of the monthly deductions due from the Issue
Date through the Investment Start Date charged to the
General Account.
The cash value in the General Account on any day after the
Investment Start Date is equal to:
. The cash value on the preceding Valuation Date, with
interest on such value at the current rate; plus
. Any portion of net premium received and allocated to the
General Account on that day; plus
. Any amounts transferred to the General Account on that
day; plus
. Any loan repayments allocated to the General Account on
that day; plus
. That portion of any interest credited on outstanding
loans which is allocated to the General Account on that
day; minus
. Any amount transferred plus any transfer charge from the
General Account to the Divisions of the Separate Account
on that day; minus
. Any partial withdrawal plus any withdrawal transaction
charge made from the General Account on that day; minus
. Any amount transferred from the General Account to
the Loan Account on that day; minus
. If that day is a Monthly Anniversary, any withdrawal due
to a pro rata surrender plus any withdrawal transaction
charge made from the General Account on that day; minus
. If that day is a Monthly Anniversary, the portion
of the monthly deduction charged to the General Account
to cover the policy month which starts on that day.
<PAGE>
General Account The interest credited to the General Account cash value for
Interest Rate a specific day will be at an effective annual rate not less
than the General Account cash value guaranteed interest
rate shown on the Policy Specifications page.
Separate Account The cash value in each Division of the Separate Account on
Cash Value the Investment Start Date is equal to:
. The portion of the initial net premium received and
allocated to the Division; minus
. The portion of the monthly deductions due from the Issue
Date through the Investment Start Date charged to the
Division.
The cash value in each Division of the Separate Account on
subsequent Valuation Dates is equal to:
. The cash value in the Division on the preceding
Valuation Date multiplied by that Division's net
investment factor for the current valuation period; plus
. Any portion of net premium received and allocated to the
Division during the current valuation period; plus
. Any amounts transferred to the Division from the General
Account or from another Division during the current
valuation period; plus
. Any loan repayments allocated to the Division during the
current valuation period; plus
. That portion of any interest credited on outstanding
loans which is allocated to the Division during the
current valuation period; minus
. Any amounts transferred plus any transfer charge from
the Division during the current valuation period; minus
. Any partial withdrawal plus any withdrawal transaction
charge from the Division during the current valuation
period; minus
. Any amount transferred from the Division to the Loan
Account during that valuation period; minus
. If a Monthly Anniversary occurs during the current
valuation period, any withdrawal due to a pro rata
surrender plus any withdrawal transaction charge from
the Division during the current valuation period; minus
. If a Monthly Anniversary occurs during the current
valuation period, the portion of the monthly deduction
charged to the Division during the current valuation
period to cover the policy month which starts during
that valuation period.
Net Investment The Net Investment Factor measures the investment
Factor performance of a Division during a valuation period. The Net
Investment Factor for each Division for a valuation period
is calculated as follows:
. The value of the assets at the end of the preceding
valuation period; plus
. The investment income and capital gains---realized or
unrealized---credited to the assets in the valuation
period for which the net investment factor is being
determined; minus
. The capital losses---realized or unrealized---charged
against those assets during the valuation period; minus
. Any amount charged against each Division for taxes,
including any tax or other economic burden resulting
from the application of tax laws that we determine to be
properly attributable to the Divisions of the Separate
Account, or any amount we set aside during the valuation
period as a reserve for taxes attributable to the
operation or maintenance of each Division; minus
<PAGE>
. A charge not to exceed the daily investment percentage
shown on the Policy Specifications page for each day in
the valuation period. This corresponds to an annual
investment percentage of the mortality and expense risk
percentage shown on the Policy Specifications page;
divided by
. The value of the assets at the end of the preceding
valuation period.
Loan Account The cash value in the Loan Account as of the Investment
Cash Value Start Date is zero.
The cash value in the Loan Account on any day after the
Investment Start Date is equal to:
. The cash value in the Loan Account on the preceding
Valuation Date, with interest; plus
. Any amount transferred to the Loan Account from the
General Account on that day; plus
. Any amount transferred to the Loan Account from the
Divisions of the Separate Account on that day; minus
. Any loan repayments on that day; plus
. If that day is a policy anniversary, an amount due to
cover the loan interest, if not paid by you.
Cash value held in the Loan Account for loan collateral will
earn interest daily at an annual rate of not less than the
General Account Cash Value Guaranteed Interest Rate shown on
the Policy Specifications page. Interest credited on the
cash value held in the Loan Account will be allocated at
least once a year to the General Account and the Divisions
of the Separate Account in the same proportion that the cash
value in each Loan SubAccount bears to the cash value in the
Loan Account.
Monthly Cost The monthly cost of insurance for the following month is
of Insurance deducted on the monthly anniversary date. The monthly cost
of insurance is 1, below, multiplied by the difference
between 2 and 3 below:
1. The monthly cost of insurance rate divided by 1,000.
2. An amount as follows:
Option A Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of
Insurance Factor shown on the Policy Specifications
page; or
b. The cash value at the beginning of the policy month
multiplied by the applicable percentage of the cash
value as described in Section 7702(d) of the
Internal Revenue Code of 1986 and modified for ages
95 and above.
Option B Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of
Insurance Factor shown on the Policy Specifications
page plus the cash value at the beginning of the
policy month; or
b. The cash value at the beginning of the policy month
multiplied by the applicable percentage of the cash
value as described in Section 7702(d) of the
Internal Revenue Code of 1986 and modified for ages
95 and above.
Option C Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of
Insurance Factor shown on the Policy Specifications
page; or
b. The cash value at the beginning of the policy month
multiplied by the younger Insured's attained age
factor as shown on the policy's Death Benefit Option
C Attained Age Factors page.
3. The cash value at the beginning of the policy month,
before the deduction of the monthly cost of insurance.
<PAGE>
Monthly Cost At the beginning of each policy year, the monthly cost of
of Insurance insurance rate is determined. The monthly cost of insurance
Rates rate is based on the Attained Ages, risk classifications,
and completed policy years from the Issue Date.
The monthly cost of insurance rates will never exceed the
rates shown on the Table of Guaranteed Monthly Cost of
Insurance Rates page. Any change in the cost of insurance
rates will apply to all persons of the same age and
classification whose face amounts have been in force for the
same length of time.
Selection and The selection and issue expense charge is a monthly charge
Issue Expense for the first 10 policy years. This charge equals the face
Charge amount times a selection and issue expense charge rate,
divided by 1,000. The selection and issue expense charge is
based on the Insureds' Issue Ages and risk classifications
on the Issue Date. The selection and issue expense charge
rate will never exceed the Maximum Selection and Issue
Expense Charge Rate shown on the Policy Specifications page.
Monthly Policy A policy charge will be deducted each policy month from the
Charge cash value. The amount of the monthly policy charge will
never exceed the amount shown on the Policy Specifications
page.
Monthly The monthly deduction is:
Deduction
1. The monthly cost of insurance; plus
2. The selection and issue expense charge multiplied
by the face amount divided by 1,000; plus
3. The monthly policy charge; plus
4. The monthly cost, if any, for any rider included
with this policy.
The monthly deduction for a policy month will be allocated
among the General Account and the Divisions of the Separate
Account in the same proportion that the cash value in the
General Account and the cash value in each Division bears to
the total cash value of the policy, minus the cash value in
Loan Account on the Monthly Anniversary.
Cash Surrender The cash surrender value of this policy is:
Value
1. The cash value at the time of surrender; minus
2. Any loan and loan interest accrued; minus
3. Any unpaid selection and issue expense charge due
for the remainder of the first policy year; minus
4. Any unpaid monthly policy charge due for the
remainder of the first policy year.
Surrender You may surrender your policy for its cash surrender value
at any time during the lifetime of either Insured. We will
determine the cash surrender value as of the date we receive
your written request at our home office. The cash surrender
value will not be reduced by any monthly deduction due on
that date for a subsequent policy month.
Partial After the first policy year, upon written request to us, you
Withdrawals can make a partial withdrawal of cash subject to the
conditions listed below. The first 12 requested partial
withdrawals or transfers per policy year will be allowed
free of charge; thereafter we may impose a transfer charge
not to exceed the Maximum Transfer Charge shown on the
Policy Specifications page.
No partial withdrawal will be processed which will result in
the face amount, excluding riders, being decreased below the
Minimum Face Amount shown on the Policy Specifications page.
<PAGE>
We reserve the right to change the minimum amount or the
number of times you may make a partial withdrawal. We also
may assess a transaction charge for a withdrawal.
If the Contract Type is Option A or Option C and the death
benefit equals the face amount, then a partial withdrawal
will decrease the face amount by an amount equal to the
partial withdrawal. If the death benefit equals a percentage
of the cash value then a partial withdrawal will decrease
the face amount by any amount by which the partial
withdrawal exceeds the difference between the death benefit
and the face amount.
General Account The minimum amount of your partial withdrawal request at any
Partial one time must be at least $500 of your account.
Withdrawals
. The maximum amount of all partial withdrawals and
transfers from the General Account in a policy
year will be the greater of (1) or (2):
1. The cash surrender value of the General Account at
the beginning of that policy year multiplied by the
withdrawal percentage limit, as shown on the Policy
Specifications page.
2. The previous year's General Account maximum
withdrawal amount.
Separate Account . The minimum amount of your partial withdrawal request at
Partial any one time must be the lesser of $500 of a Division or
Withdrawals your entire balance in that Division.
. The maximum amount of your partial withdrawal from any
one of the Divisions of the Separate Account in a policy
year will be the cash surrender value of that Division.
Allocation You may allocate the partial withdrawal, subject to the
of Partial above conditions, among the General Account and the
Withdrawals Divisions of the Separate Account. If you do not specify the
allocation, then the partial withdrawal will be allocated
among the General Account and the Divisions of the Separate
Account in the same proportion that the cash value in the
General Account and the cash value in each Division bears to
the total cash value of the policy, minus the cash value in
the Loan Account on the date of the partial withdrawal. If
the General Account conditions will not allow this
proportionate allocation, we will request that you specify
an acceptable allocation.
Pro Rata After the first policy year, upon written request to us, you
Surrender can make a pro rata surrender of your policy. The pro rata
surrender can be any whole number percentage of your policy.
The pro rata surrender will reduce the face amount and the
cash value by the percentage chosen. The face amount
decrease will be subject to the following conditions:
1. The decrease will become effective on the monthly
anniversary on or following our receipt of the request.
2. You may allocate the decrease in cash value due to the
pro rata surrender among the General Account and the
Divisions of the Separate Account. If you do not specify
the allocation, then the decrease in cash value will be
allocated among the General Account and the Divisions of
the Separate Account in the same proportion that the
cash value in the General Account and the cash value in
each Division bears to the total cash value of the
policy, minus the cash value in the Loan Account on the
date of the pro rata surrender.
A pro rata surrender can not be processed if it will reduce
the face amount below the Minimum Face Amount shown on the
Policy Specifications page. No pro rata surrender will be
processed for more cash surrender value than is available on
the date of the pro rata surrender. A cash payment will be
made to you for the amount of the cash value reduction.
<PAGE>
Postponement We will usually pay any amounts payable on surrender,
of Payments partial withdrawal, or policy loan allocated to the
or Transfers Divisions of the Separate Account within seven days after
written notice is received. We will usually pay any death
benefit proceeds upon the Last Insured's death within seven
days after we receive due proof of claim. Payment of any
amount payable, from the Divisions of the Separate Account,
on surrender, partial withdrawal, policy loan or death may
be postponed whenever:
1. The New York Stock Exchange is closed (other than
customary weekend and holiday closing) or trading
on the New York Stock Exchange is restricted as
determined by the SEC;
2. The SEC, by order, permits postponement for the
protection of policy owners; or
3. An emergency exists as determined by the SEC, as a
result of which disposal of securities is not
reasonably practicable or it is not reasonably
practicable to determine the value of the net
assets of the Separate Account.
We may defer payment of the portion of any amount payable
from the General Account on surrender or partial withdrawal
for not more than six months. If we defer payment for 30
days or more, we will pay interest at the rate of 2 1/2% per
year for the period of deferment.
Transfers may also be postponed under the circumstances
listed above.
We may defer payment of the portion of any policy loan from
the General Account for not more than six months. No payment
from the General Account to pay premiums on this policy will
be deferred.
Continuation If all premium payments cease, the insurance provided under
of Insurance this policy, including benefits provided by any rider
attached to this policy, will continue in accordance with
the provisions of this policy for as long as the cash value
less any loans and loan interest accrued is sufficient to
cover the monthly deductions.
Basis of The minimum cash values are based on 1) the Minimum Cash
Computation Value Mortality Table shown on the Policy Specifications
page; and 2) for amounts allocated to the General Account,
compound interest at an annual rate of not less than the
General Account Cash Value Guaranteed Interest Rate shown on
the Policy Specifications page. There is no minimum cash
value guaranteed interest rate for amounts allocated to the
Divisions of the Separate Account.
Net single premiums are based on 1) the 7702 Table as shown
on the Policy Specifications page; and 2) the General
Account Cash Value Guaranteed Interest Rate as shown on the
Policy Specifications page.
All values are at least equal to those required by any
applicable law of the state that governs your policy. We
have filed a detailed statement of the method of calculating
cash values and reserves with the insurance supervisory
official of that state.
<PAGE>
9. PAYMENT OF POLICY BENEFITS
Payment A lump sum payment will be made as provided on the face
page.
Interest on We will pay interest on proceeds from the date of the Last
Proceeds Insured's death to the date of payment. Interest will be at
an annual rate determined by us, but never less than the
Guaranteed Interest Rate, shown on the Policy Specifications
page.
Extended Provisions for settlement of proceeds different from a lump
Provisions sum payment may only be made upon written agreement with us.
<PAGE>
JOINT AND LAST SURVIVOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
(Unisex)
Non-Participating
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
<PAGE>
ANNIVERSARY PARTIAL WITHDRAWAL RIDER
Joint and Last Survivor - Variable Life
Issued by Paragon Life Insurance Company
This rider is a part of the policy and is subject to all applicable terms and
provisions of the policy; except as modified herein.
Prior to the younger Insured's Attained Age 95, this rider replaces the Partial
Withdrawals, the General Account Partial Withdrawals and the Separate Account
Partial Withdrawals provisions with the following:
You can make a partial withdrawal of cash on any policy anniversary
date prior to the younger Insured's Attained Age 95. The amount of the
partial withdrawal may not exceed the greater of:
1. The increase in cash surrender value since the preceding policy
anniversary; or
2. The cash surrender value at the beginning of that policy year
multiplied by the Anniversary Partial Withdrawal Percentage
Limit, shown on the Policy Specifications page.
A partial withdrawal will not be processed for more cash than is available in
the cash surrender value on the date of the partial withdrawal.
The minimum amount for a partial withdrawal request from the General Account
must be at least $500.00.
The minimum amount for a partial withdrawal request from the Separate Account
must be the lesser of $500.00 of a Division; or your entire balance in that
Division.
When the younger Insured reaches Attained Age 95, this rider will terminate and
the Partial Withdrawals, the General Account Partial Withdrawals and the
Separate Account Partial Withdrawals provisions as described in the policy will
become effective. You may terminate this rider prior to the younger Insured's
Attained Age 95, by sending us a written request.
The Issue Date and the effective date of this rider and the policy are the same
unless another effective date is shown below.
- -------------------------
DATE
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
<PAGE>
DIVORCE SPLIT POLICY OPTION RIDER
Issued by Paragon Life Insurance Company
This rider is a part of the policy to which it is attached and is subject to all
applicable terms and provisions of the policy; except as modified herein.
Split Policy This benefit is subject to the restrictions and provisions
Option Benefit of this rider. This benefit provides you with an option to
exchange the policy to which this rider is attached for two
individual policies, one on each of the lives insured, upon
the occurrence of the contingent event.
Contingent The option may be exercised when there is a divorce between
Event the two insureds insured by the policy to which this rider
is attached.
Election of To elect this option, you must notify us within 90 days of
The Option the final divorce decree by sending us a copy of such
decree.
If this option is elected, no evidence of insurability will
be required on either insured under the new policies.
Effective Date If this option is elected, the effective date of the
Of The Exchange exchange will be the first monthaversary following the
date you notify us that you elect this option. Both insureds
must be alive on the effective date of the exchange. In
addition, the existing policy can not be in its grace period
in order for the exchange to occur.
The New The exchange must be to flexible premium adjustable life
Policies policies which are available at the time of the exchange.
Riders may be exchanged if available on the new policies.
Both issue dates of the new policies will be the effective
date of the exchange. The face amount of each new policy
will be one half of the face amount of this policy. The cash
surrender value of this policy will be divided in half and
allocated to each new policy. The rates for each new policy
will be based on:
1. the attained age as of the effective date of the
exchange; and
2. (in a non-unisex policy) sex; and
3. the same, if available, or the nearest comparable
risk classification for this policy for each
individual life insured under this policy.
Loans Any loan and loan interest due must be repaid on the date of
the exchange.
Assignments If any assignment of this policy is in effect on the date of
the exchange, it will apply to each new policy.
Termination This rider will terminate when any of the following events
Of Rider first occur:
1. The lapse of this policy; or
2. The surrender of this policy; or
3. The death of the first insured under this policy;
or
4. The election to exchange this policy under this
rider.
/s/ Matthew P.McCauley /s/ Carl H.Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
<PAGE>
SPLIT POLICY OPTION RIDER
Issued by Paragon Life Insurance Company
This rider is a part of the policy to which it is attached and is subject to all
applicable terms and provisions of the policy; except as modified herein.
Split Policy This benefit is subject to the restrictions and provisions
Option Benefit of this rider. This benefit provides you with an option to
exchange this policy, exclusive of any riders attached to
it, for two individual policies, one on each of the lives
insured, upon the occurrence of the contingent event.
Contingent The option may be exercised when there is a change to the
Event Federal Estate Tax Law which results in the occurrence of
either 1. or 2. below:
1. removal of the unlimited marital deduction
provision; or
2. reduction of at least 50% in the level of estate
taxes payable on the death of the last insured.
Election of To elect this option, you must notify us in writing within
The Option 180 days after you receive our notification that the Federal
Estate Tax Law has changed.
If this option in elected, no evidence of insurability will
be required on either insured under the new policies.
Effective Date If this option is elected, the effective date of the
Of The Exchange exchange will be the first policy anniversary following the
date you notify us that you elect this option.
The effective date of the new policies will be the
termination date of this policy.
The New The exchange must be to flexible premium adjustable life
Policies policies which are available at the time of the exchange.
Riders may be exchanged if available on the new policies.
Both issues dates of the new policies will be the effective
date of the exchange. The face amount of each new policy
will be one half of the face amount of this policy. The cash
surrender value of this policy will be divided in half and
allocated to each new policy. The rates for each new policy
will be based on:
1. the attained age as of the effective date of the
exchange; and
2. (in a non-unisex policy) sex; and
3. the same, if available, or the nearest comparable
risk classification for this policy
for each individual life insured under this policy.
Loans Any loan and loan interest due must be repaid on the date of
the exchange.
Assignments If any assignment of this policy is in effect on the date of
the exchange, it will apply to each new policy.
Transactions On The following transactions will occur on the date of the
The Effective exchange:
Date Of The
Exchange
1. The cash surrender value of this policy will be
divided in half and allocated to each new policy.
2. The excess of the reserve of each new policy over
the amount of allocated cash surrender value from
this policy must be paid by each insured. The
reserve of each new policy will be based on the
issue age of each insured as of the policy date
and the duration that this policy has been in
force. If the state has a premium tax, you will
need to pay us the amount of tax on this excess.
3. In the event that the allocated cash surrender
value from this policy is greater than the reserve
value of each new policy, the excess will be
applied against premiums due under the new
policies.
4. Premiums will be due for each new policy as of the
effective date of the exchange.
5. You must pay any administrative costs required to
handle the exchange.
1
<PAGE>
Termination This rider will terminate when any of the following events
Of Rider first occur:
1. The lapse of this policy; or
2. The surrender of this policy; or
3. The maturity of this policy; or
4. The death of the first insured to die under this
policy; or
5. The election to exchange this policy under this
rider.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
2
<PAGE>
ESTATE PRESERVATION TERM RIDER
Issued by Paragon Life Insurance Company
Please Read This Rider Carefully.
This rider is a part of the policy to which it is attached and is subject to all
applicable terms and provisions of the policy; except as modified herein. This
rider is indicated on the Policy Specifications page.
Face Amount The face amount of this rider is shown on the policy
specifications page.
Life Insurance This rider provides four year level non-convertible term
Benefit life insurance on the lives of the Insureds shown on the
policy specifications page. We will pay the face amount of
this rider to the beneficiary if this rider is in force upon
the Last Insured's death. We must receive proof that both
Insureds died before the expiration date of this rider.
Monthly Rider The monthly rider charge equals the rider's face amount
Charge times the monthly rider charge rate, divided by 1,000. This
rider's monthly rider charge rate is shown on the policy
specifications page. The monthly rider charge is based on
the joint issue ages, risk classifications, and sexes of the
Insureds.
Termination This rider will terminate on the date when any of the
following events first occurs:
1. Upon our receipt of your written request;
2. A decrease in face amount occurs;
3. Any termination of the policy;
4. The end of the fourth policy year.
The date of issue and effective date of this rider and the policy are the same.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
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LIFETIME COVERAGE RIDER
Joint and Last Survivor
If this rider is offered and accepted, it will become a part of the policy. This
rider is subject to all applicable terms and provisions of the policy, except as
modified herein. The Policy Specifications page, or if this rider is added after
issue, the Policy Specifications page for Policy Change, shows the rider
information.
Cost of The monthly rider cost of insurance is the Monthly Rider
Insurance Cost of Rate Insurance shown on the Policy Specifications
page, divided by 1000, multiplied by the difference between:
1. the Death Benefit, as defined in the policy,
divided by the Monthly Cost of Insurance Factor
shown on the Policy Specifications page; and
2. the Cash Value of the policy at the beginning of
the policy month, before the deduction of the
Monthly Cost of Insurance.
The monthly charge will be deducted from the policy's Cash
Value. Deduction will start at the younger Insured's
Attained Age 80 and continue through the younger Insured's
age 99.
Death Benefit If this rider is in force, the Death Benefit, after the
younger Insured's Attained Age 100, is the greater of:
1. The Face Amount of the base policy; or
2. 101% of the Cash Value.
Reinstatement If this rider terminates after the younger Insured's
Attained Age 80, it may not be reinstated.
Termination This rider will terminate upon the earlier of:
a. a written request to us for termination;
b. the date of termination of the policy to which
this rider is attached.
Continuation Once this rider has terminated, the base policy may continue
of Insurance in accordance with the provisions of the base policy but
without the benefit provided by this rider.
The date of issue and effective date of this rider and the policy are the same
unless another effective date of this rider is shown below.
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DATE
/s/ Matthew P.McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
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SECONDARY GUARANTEE RIDER
Joint and Last Survivor
If this rider is listed on the Policy Specifications page, it is part of the
policy. This rider is subject to all applicable terms and provisions of the
policy, except as modified herein.
Cost of The monthly rider cost of insurance is the Monthly Rider
Insurance Cost of Insurance Rate shown on the Policy Specifications
page, divided by 1000, multiplied by the difference between:
1. the Death Benefit divided by the Monthly Cost of
Insurance Factor shown on the Policy Specifications
page; and
2. the Cash Value of the base policy at the beginning of
the policy month, before the deduction of the
Monthly Cost of Insurance.
Death Benefit The Death Benefit is the greater of:
1. The Face Amount of the base policy; or
2. The Death Benefit otherwise provided by the base policy.
Notwithstanding anything in this policy, the Death Benefit
will in no case be less than the amount necessary to cause
the policy to meet the requirements for the definition of
life insurance under the Internal Revenue Code of 1986 or
any applicable successor.
Guarantee If, on a Monthly Anniversary day prior to the Secondary
Death Benefit Guarantee Date, shown on the Policy Specifications page:
Period
a. the sum of all premiums paid on this policy; less
b. any Partial Withdrawals; less
c. any outstanding loan balance;
Is greater than or equal to the sum of the Secondary
Guarantee Premium for the elapsed months since the Issue
Date, this policy will not lapse even if your Cash Surrender
Value is not sufficient to cover the Monthly Deduction on a
Monthly Anniversary day.
Policy Changes If there is a decrease in Face Amount prior to the tenth
policy anniversary the Secondary Guarantee Premium will not
be changed. If there is a decrease after the tenth policy
anniversary, we will reduce the future Secondary Guarantee
Premium by an amount proportionate to the decrease in Face
Amount. We will provide you with a new Policy Specifications
page.
If additional riders are added or cancelled we may adjust
the Secondary Guarantee Premium. We will provide you with a
new Policy Specifications page.
If the Death Benefit option of the policy is changed we will
adjust the future Secondary Guarantee Premium. We will
provide you with a new Policy Specifications page.
Guarantee If on a Monthly Anniversary day prior to the Secondary
Grace Period Guarantee Date, the sum of all premiums paid on this policy,
reduced by any Partial Withdrawals and any outstanding loan
balance, is less than the sum of the Secondary Guarantee
Premiums for the elapsed months since the Issue Date, then
the Guarantee Grace Period of 62 days will be allowed for
the payment of a premium sufficient to keep this rider in
force. The Secondary Guarantee Date and the Secondary
Guarantee Premium are shown on the Policy Specifications
page.
Notice of the amount of premium required to be paid to keep
this rider in force will be sent at the beginning of the
Guarantee Grace Period to the last known address of the
Owner and of any assignee of record. If we do not receive
the premium required by the end of the Guarantee Grace
Period this rider will terminate and the guarantee provided
by this rider will no longer be in effect. If the premium
requirement is not met and death occurs during the Guarantee
Grace Period, there is no deduction of the rider premium
required from the Death Benefit.
1
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Misstatement If there is a Misstatement of Age or Sex for either Insured
of Age or in the application and such determination is made prior to
Sex the death of the Last Insured and while this rider is in
effect, then the Secondary Guarantee Premium will be that
amount which corresponds to the Face Amount, as adjusted
under the policy, using the correct age and/or sex. The
Account Value will not change at the point of correction.
Secondary The date the Secondary Guarantee Rider expires. This date is
Guarantee shown on the Policy Specifications page.
Date
Secondary The premium required to keep the Secondary Guarantee Rider
Guarantee in force. This premium is shown on the Policy Specifications
Premium page.
Premium We will not restrict payment of any premium which is
Limitations ---
required to maintain this rider in force because such
payment will cause the Death Benefit to increase by an
amount that exceeds the premium received. We will restrict
any premium payment that would cause the policy to fail the
definition of life insurance as defined by Section 7702 of
the Internal Revenue Code of 1986 or any applicable
successor.
Reinstatement If this rider terminates it may not be reinstated.
Termination This rider will terminate as of any Monthly Anniversary
following a written request to us or upon the earlier of:
a. the death of the Last Insured;
b. the date of termination of the policy to which this
rider is attached;
c. the end of the Guarantee Grace Period following our
notice to you that the premium requirement was not met;
d. the Secondary Guarantee Date shown on the Policy
Specifications page;
e. the date a Change of Insured, on the policy to which
this rider is attached, is executed.
Continuation Once this rider has terminated, the base policy may continue
of Insurance in accordance with the provisions of the base policy but
without the benefit provided by this rider.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P. GENERAL COUNSEL
AND SECRETARY PRESIDENT
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
2
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SECONDARY GUARANTEE RIDER
Joint and Last Survivor
(Unisex)
If this rider is listed on the Policy Specifications page, it is part of the
policy. This rider is subject to all applicable terms and provisions of the
policy, except as modified herein.
Cost of The monthly rider cost of insurance is the Monthly Rider
Insurance Cost of Insurance Rate shown on the Policy Specifications
page, divided by 1000, multiplied by the difference between:
1. the Death Benefit divided by the Monthly Cost of
Insurance Factor shown on the Policy
Specifications page; and
2. the Cash Value of the base policy at the beginning of
the policy month, before the deduction of the
Monthly Cost of Insurance.
Death Benefit The Death Benefit is the greater of:
1. The Face Amount of the base policy; or
2. The Death Benefit otherwise provided by the base
policy.
Notwithstanding anything in this policy, the Death Benefit
will in no case be less than the amount necessary to cause
the policy to meet the requirements for the definition of
life insurance under the Internal Revenue Code of 1986 or
any applicable successor.
Guarantee If, on a Monthly Anniversary day prior to the Secondary
Death Benefit Guarantee Date, shown on the Policy Specifications page:
Period
a. the sum of all premiums paid on this policy; less
b. any Partial Withdrawals; less
c. any outstanding loan balance;
is greater than or equal to the sum of the Secondary
Guarantee Premium for the elapsed months since the Issue
Date, this policy will not lapse even if your Cash Surrender
Value is not sufficient to cover the Monthly Deduction on a
Monthly Anniversary day.
Policy Changes If there is a decrease in Face Amount prior to the tenth
policy anniversary the Secondary Guarantee Premium will not
be changed. If there is a decrease after the tenth policy
anniversary, we will reduce the future Secondary Guarantee
Premium by an amount proportionate to the decrease in Face
Amount. We will provide you with a new Policy Specifications
page.
If additional riders are added or cancelled we may adjust
the Secondary Guarantee Premium. We will provide you with a
new Policy Specifications page.
If the Death Benefit option of the policy is changed we will
adjust the future Secondary Guarantee Premium. We will
provide you with a new Policy Specifications page.
Guarantee If on a Monthly Anniversary day prior to the Secondary
Grace Period Guarantee Date, the sum of all premiums paid on this policy,
reduced by any Partial Withdrawals and any outstanding loan
balance, is less than the sum of the Secondary Guarantee
Premiums for the elapsed months since the Issue Date, then
the Guarantee Grace Period of 62 days will be allowed for
the payment of a premium sufficient to keep this rider in
force. The Secondary Guarantee Date and the Secondary
Guarantee Premium are shown on the Policy Specifications
page.
Notice of the amount of premium required to be paid to keep
this rider in force will be sent at the beginning of the
Guarantee Grace Period to the last known address of the
Owner and of any assignee of record. If we do not receive
the premium required by the end of the Guarantee Grace
Period this rider will terminate and the guarantee provided
by this rider will no longer be in effect. If the premium
requirement is not met and death occurs during the Guarantee
Grace Period, there is no deduction of the rider premium
required from the Death Benefit.
1
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Misstatement If there is a Misstatement of Age for either Insured in the
of Age application and such determination is made prior to the
death of the Last Insured and while this rider is in effect,
then the Secondary Guarantee Premium will be that amount
which corresponds to the Face Amount, as adjusted under the
policy, using the correct age. The Account Value will not
change at the point of correction.
Secondary The date the Secondary Guarantee Rider expires. This date is
Guarantee shown on the Policy Specifications page.
Date
Secondary The premium required to keep the Secondary Guarantee Rider
Guarantee in force. This premium is shown on the Policy Specifications
Premium Page.
Premium We will not restrict payment of any premium which is
Limitations ---
required to maintain this rider in force because such
payment will cause the Death Benefit to increase by an
amount that exceeds the premium received. We will restrict
any premium payment that would cause the policy to fail the
definition of life insurance as defined by Section 7702 of
the Internal Revenue Code of 1986 or any applicable
successor.
Reinstatement If this rider terminates it may not be reinstated.
Termination This rider will terminate as of any Monthly Anniversary
following a written request to us or upon the earlier of:
a. the death of the Last Insured;
b. the date of termination of the policy to which this
rider is attached;
c. the end of the Guarantee Grace Period following our
notice to you that the premium requirement was not met;
d. the Secondary Guarantee Date shown on the Policy
Specifications page;
e. the date a Change of Insured, on the policy to which
this rider is attached, is executed.
Continuation Once this rider has terminated, the base policy may continue
of Insurance in accordance with the provisions of the base policy but
without the benefit provided by this rider.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
2
<PAGE>
CHARTER
AND
ARTICLES OF INCORPORATION
Amended as of 1 December 1987
ARTICLE I
The name of the Corporation shall be Paragon Life Insurance Company
ARTICLE II
The principal office of the Corporation shall be located in the City or
County of St. Louis, in the State of Missouri. The initial registered office
shall be at 700 Market Street, St. Louis, MO 63101.
ARTICLE III
The Corporation is incorporated for the purpose of making insurance upon
the lives of individuals and every assurance pertaining thereto or connected
therewith, to grant, purchase and dispose of annuities and endowments of every
kind and description whatsoever, to provide an indemnity against death and for
weekly or other periodic indemnity for disability occasioned by accident or
sickness to the person of the assured and to have all the further rights,
powers, and privileges granted or permitted life insurance companies organized
under the provisions of Chapter 376, revised statutes of the State of Missouri,
and all Acts amendatory thereof or additional thereto.
ARTICLE IV
The Corporation shall have authority to issue one hundred thousand shares
of capital stock having a par value of one hundred dollars per share, of which
ten thousand shares will be initially subscribed for and issued at the price of
$310 per share.
ARTICLE V
The corporate powers of the Corporation shall be vested in a Board of
Directors and shall be exercised by the Board and by such officers, agents,
employees, and committees, as the Board may, in its discretion, from time to
time appoint and empower. The Board shall have the power from time to time to
amend, or repeal these Articles of Incorporation, and to make, amend, or repeal
such by-laws, rules, and regulations for the transaction of the business of the
Corporation as the Board may deem expedient and as are not inconsistent with the
constitution or other laws of the State of Missouri.
<PAGE>
ARTICLE VI
The Corporation shall have perpetual duration.
ARTICLE VIII
No holder of shares of the Corporation's stock shall have, by virtue of
being a holder, any presumptive or prescriptive right to subscribe for or
purchase any additional shares of stock of the Corporation.
ARTICLE IX
No contract or other transaction between this Corporation and any other
firm, association, or corporation shall be affected or invalidated by reason of
the fact that any of the directors or officer of the Corporation are employees,
directors, or officers of such other firm, association, or corporation; provided
that any such contract or transaction is entered into in good faith after the
interests of the directors or officers of the Corporation are disclosed.
ARTICLE X
The Corporation reserves the right, at any time and from time to time, to
amend or repeal any provision contained in these Articles of Incorporation in
the manner prescribed by law; and all rights conferred upon shareholders,
directors, or any other persons whomsoever by and pursuant to the Articles of
Incorporation in their present form or as hereafter amended are granted subject
to this reservation.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of
this first day of December 1987.
/s/ Helen Couranz /s/ Carl H. Anderson
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Helen Couranz - Secretary Carl H. Anderson - President
STATE OF MISSOURI) Carl H. Anderson and Helen
)SS Couranz, known to me, executed the
CITY OF ST. LOUIS) foregoing before me as officers of
The company named this first day of
December 1987.
My commission expires: 4/4/90 /s/ Karen Little
----------------
Notary Public
<PAGE>
Bylaws
Of
Paragon Life Insurance Company
------------------------------
Article I. Offices
The Corporation may have such corporate offices either in or outside of
Missouri, as the Board of Directors may from time appoint, or as the business of
the Corporation may require. The "principal" office may be designated by the
Board of Directors but the location of the Corporation in Missouri shall for all
purposes be deemed to be in the city or county in which the "registered" office
is maintained. The registered office shall be determined from time to time by
the Board of Directors and its identity put on file with the appropriate office
of the State of Missouri.
Article II. Shareholders
SECTION 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the fourth Tuesday in April in each year, if not a legal holiday, and
if a legal holiday, then on the next day not a legal holiday. At this meeting
members of the Board of Directors shall be elected to succeed those whose terms
are then expiring and such other business shall be transacted as may properly be
brought before the meeting.
SECTION 2. Special Meetings. Special Meetings of the shareholders, unless
otherwise prescribed by statute, may be called by the President or by a majority
of the entire number of the Board of Directors, and shall be called by the
President upon written request from the holders of not less than one-fifth of
all the outstanding shares entitled to vote at the meeting.
SECTION 3. Place and Hour of Meeting. Every meeting of the shareholders,
whether an annual or a special meeting, shall be held at nine o'clock in the
forenoon at the principal office of the Corporation or at such other place and
time as is specified by proper notice from the Board of Directors.
SECTION 4. Notice of Meeting. Written notice of each meeting of
shareholders stating the place, day and hour of the meeting, and in case of a
special meeting, the purposed of purposes for which the meeting is called, shall
be delivered not less than 10 nor more than 50 days before the date of the
meeting either personally or by mail, by or
<PAGE>
at the direction of the President, or the Secretary, or the persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid.
Attendance of a shareholder at any meeting shall constitute waiver of notice of
that meeting except when a shareholder attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, 50 days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least 10 days immediately preceding such meeting. In lieu of closing the
stock transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any case to
be not more than 50 days and, in case of a meeting of shareholders, not less
than 10 days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If the board of directors does
not close the transfer books or set a record date for the determination of the
shareholders entitled to notice of, and to vote at, a meeting of shareholders,
only the shareholders who are shareholders of record at the close of business on
the twentieth day preceding the date of the meeting shall be entitled to notice
of, and to vote at the meeting and any adjournment of the meeting; except that,
if prior to the meeting written waivers of notice of the meeting are signed and
delivered to the corporation by all of the shareholders of record at the time
the meeting is convened, only the shareholders who are shareholders of record at
the time the meeting is convened shall be entitled to vote at the meeting, and
any adjournment of the meeting.
SECTION 6. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a
<PAGE>
meeting, a majority of the shares which are represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally set forth.
SECTION 8. Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the proxy.
SECTION 9. Voting of Shares. Subject to the provisions of Section 12 of
this Article II, each outstanding share entitled to vote shall be entitled to
one vote upon each matter submitted to a vote at a meeting of shareholders.
SECTION 10. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by such officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian, or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock held by the Corporation, and unissued shares, shall
not be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting. Shares owned
by a subsidiary of the
<PAGE>
Corporation shall likewise not be voted or counted in determining the number of
shares outstanding.
SECTION 11. Informal Action by shareholders. Any action which is required
or allowed to be taken at a meeting of the shareholder, may be taken without a
meeting if a consent or approval in writing, setting forth the action so taken,
shall be signed by all of the shareholders entitled to vote with respect to the
subject matter thereof.
SECTION 12. Cumulative Voting. At each election for Directors every
shareholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him for as many persons as
there are Directors to be elected, or to cumulate his votes by giving one
candidate as many votes as the number of such Directors multiplied by the number
of his shares shall equal, or by distributing such votes on the same principle
among any number of candidates.
Article III. Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
SECTION 2. Number, Tenure, and Qualifications. The number of Directors of
the Corporation shall be not less than nine nor more than twenty-one as provided
in Article VI of the Articles of Incorporation. Each Director shall hold office
until the next annual meeting of shareholders and until his successor shall have
been elected and qualified. Directors need not be residents of the State of
Missouri or shareholders of the Corporation. Directors will be elected by class
so as to equalize as nearly as possible the number in each class of members.
There shall be three classes of members, each class serving for a three year
term expiring one year after expiration of the term of the immediately preceding
class, so that the term of one class will expire each year.
SECTION 3. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. At such meeting the Board
shall elect one of their members to act as Chairman of the Board. The Board of
Directors may provide, by resolution naming the time and place, for the holding
of additional regular meetings without other notice than such resolution. Any
business may be transacted at a regular meeting.
SECTION 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman of the Board, the President,
or any two
<PAGE>
Directors. Any such special meeting shall be held at the place set out in the
resolution for regular meetings or at the registered office of the corporation
in Missouri if no such regular meeting place has been set.
SECTION 5. Notice. Notice of an special meeting shall be given at least
two days previously thereto by written notice delivered personally or mailed to
each Director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail, so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any Director at a meeting shall constitute a waiver of
notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
SECTION 6. Quorum. A majority of the number of Directors shall constitute
a quorum for the transaction of business at any meeting of the Board of
Directors, but if less than such majority is present at a meeting, a majority of
the Directors present may adjourn the meeting from time to time. If the meeting
is adjourned for more than twenty-four (24) hours, notice of the time and place
of the adjourned meeting shall be given to the directors who were not present at
the time of the adjournment.
SECTION 7. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. Action Without a Meeting. Any action that may be taken by the
Board of Directors at a meeting may be taken without a meeting, provided that
all of the Directors sign consents setting forth the action so taken. The
written consents filed with the minutes of the meetings of the Board of
Directors and shall have the same force and effect as a unanimous vote at an
election of Directors.
SECTION 9. Removal of Directors. At a meeting called expressly for that
purpose, Directors may be removed as herein provided. All or part of the Board
of Directors may be removed, with or without cause, by a vote of the holders of
a majority of the shares then entitled to vote at an election of Directors.
SECTION 10. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors. A Director elected to fill
a vacancy shall be elected
<PAGE>
for the unexpired term of his predecessor in office. Any directorship to be
filled by reason of an increase in the number of Directors may be filled by
election by the Board of Directors for a term of office continuing only until
the next election of Directors by the shareholders.
SECTION 11. Compensation. By resolution of the Board of Directors, each
Director may be paid his expenses, if any of attendance at each meeting of the
Board of Directors and may be paid a stated salary as director or a fixed sum
for attendance at each meeting of the Board of Directors or both. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
SECTION 12. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
SECTION 13. Indemnification of Directors and Officers. The Corporation
may indemnify any person who is made a party to any civil or criminal suit or
made a subject of any administrative or investigative proceeding by reason of
the fact that he is or was a director, officer, or agent of the Corporation.
This indemnity may extend to expenses, including attorney's fees, judgments,
fine, and amounts paid in settlement. The indemnity shall not be available to
persons being sued by or upon the information of the Corporation nor to persons
who are being investigated by the Corporation. The indemnity shall be
discretionary with the Board of Directors and shall not be granted until the
Board of Directors has made a determination that the person who would be
indemnified acted in good faith and in a manner he reasonable believed to be in
the best interests of the Corporation.
The Corporation shall have such other and further powers of indemnification
as are not inconsistent with the laws of Missouri.
SECTION 14. Executive Committee and Other Committees. The Board of
Directors may, by resolution or resolutions passed by a majority of the whole
board, designate an executive committee, such committee to consist of three or
more directors of the Corporation, which committee, to the extent provided in
said resolution or resolutions shall have and may exercise all of the authority
of the Board of Directors in the management of the Corporation; but the
designation of such committee and the delegation thereto of authority shall not
operate to relieve the Board of Directors, or any
<PAGE>
member thereof, of any responsibility imposed upon the Board or a Director by
the General and Business Corporation Law of Missouri.
The Board of Directors may also, by resolution or resolutions passed by a
majority of the whole board, designate other committees, with such persons,
powers, and duties as it deems desirable and as are not inconsistent with law.
SECTION 15. Meetings and Reports of Committees. A committee shall meet
from time to time on call of the chairman of the committee or of any two or more
members of the committee. Notice of each such meeting, stating the place, date
and hour thereof, shall be mailed at least four (4) days before the meeting, or
shall be served personally on each member of the committee, telegraphed or
telephoned to his address on the books of the Corporation, at least forty-eight
(48) hours before the meeting. Not such notice need state the business proposed
to be transacted at the meeting. No notice of a meeting of the committee need
be given to any member who signs a waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. No notice need be given of
an adjourned meeting of the committee except as specified in this Article.
Meetings of the committee may be held at such place or places, either within or
outside of the State of Missouri, as the committee shall determine, or as may be
specified or fixed in the respective notices or waivers thereof. A majority of
the committee constitutes a quorum for the transaction of business. Every act
or decision done or made by a majority of the members of the committee present
at a meeting duly held at which a quorum is present shall be regarded as the act
of the committee. A committee may fix its own rules of procedure. It shall
keep a record of its proceedings and shall report these proceedings to the Board
of Directors prior to the regular meeting of the Board to be held next after a
committee meets. The provisions of Sections 4, 5, 6, and 8 of this Article
shall apply to committees.
Article IV. Officers
SECTION 1. Number. The officers of the Corporation shall be a President,
one or more Vice-Presidents (the number thereof to be determined by the Board of
Directors), a Secretary, and a Treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and such assistant officers as may be
deemed necessary may be elected or appointed by the Board of Directors. Any tow
or more offices may be held by the same person, except the offices of President
and Secretary. No officer need be a shareholder.
SECTION 2. Election and Term of Office. The officers of the Corporation
to be elected by the Board of Directors shall be elected annually by the Board
of Directors at
<PAGE>
the first meeting of the Board of Directors held after each annual meeting of
the shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever in its judgment, the best interests of the corporation will
be served thereby. Election or appointment of an officer or agent shall not of
itself create contract rights and no cause for removal need to specified in any
Board resolution.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, if not also Chairman of the Board,
preside in the absence of the Chairman of the Board at meetings of the
shareholders and of the Board of Directors. He may sign, with the Secretary or
any other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of the Corporation, and he may execute all
other instruments which the Board of Directors has authorized to be executed,
except in cases where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by the bylaws to some other officer or
agent of the Corporation, or shall be required by law to b otherwise signed or
executed; and in general shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time. He shall be, ex officio, a member of all standing committees
of the Board of Directors.
SECTION 6. The Vice President. In the absence of the President or in the
event of his death, inability, or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. In addition, any Vice-President shall perform
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors.
<PAGE>
SECTION 7. The Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of the bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder as furnished by such
shareholder; (e) sign with the President certificates for shares of the
Corporation; the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of he stock transfer books of
the Corporation; and (g) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the President or by the Board of Directors, or as prescribed in these bylaws.
SECTION 8. The Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
(b) receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositaries as shall be
selected in accordance with the provisions of Article V hereof; and (c) in
general perform all of the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the President or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of the
Corporation.
Article V. Contracts, Loans,
Checks, and Deposits
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences on indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
<PAGE>
SECTION 3. Checks, Drafts, and Similar Instruments. All checks, drafts or
other orders for the payment of money, notes, or other evidences of indebtedness
issued in the name or the Corporation, shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositaries as the Board of Directors may
select.
Article VI. Certificates for
Shares and Their Transfer
SECTION 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice-
President and by the Secretary and sealed with the corporate seal of a facsimile
thereof. The signatures of such officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or one of its employees. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate and then upon such terms and indemnity to the Corporation as the
Board of Directors may prescribe.
SECTION 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, and only upon surrender to the Secretary for
cancellation of the certificate for the shares which are to be transferred. The
person in whose name shares stand on the books of the Corporation shall be
deemed by the Corporation to be the owner thereof for all purposes.
Article VII. Fiscal Year
The fiscal year of the Corporation shall begin on the first day of January
and end on the thirty-first day of December in each year.
<PAGE>
Article VIII. Dividends
The Board of Directors may, from time to time, declare and the Corporation
may pay dividends on its outstanding shares in the manner, and upon the terms
and conditions provided by law and its articles of incorporation.
Article IX. Corporate Seal
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the came of the Corporation
and the state of incorporation and the words, "Corporate Seal." The seal shall
be in the charge of the Secretary.
Article X. Waiver of Notice
Whenever any notice is required to be given to any shareholder or director
of the Corporation under the provisions of these bylaws or under the provisions
of the articles of incorporation or under the provisions of the General and
Business Corporation Law of Missouri, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice.
Article XI. Amendments
These bylaws may be altered, amended, or repealed and new bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors provided that no bylaw may be adopts or amended so as to be
inconsistent with the Charter of the Corporation or the Constitution or laws of
the State of Missouri.
Article XII. Construction
Whenever a word in the masculine gender is used in these bylaws it shall be
understood to be in or include the feminine gender when appropriate under the
circumstances. These bylaws are to be construed to be consistant with
applicable law, and if such construction is not possible then the invalidity of
a bylaw or portion thereof shall not affect the validity of the other bylaws of
the Corporation, which shall remain in full force and effect.
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND,
--------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
PARAGON LIFE INSURANCE COMPANY
------------------------------
THIS AGREEMENT, made and entered into as of this 1st day of September,
1993 by and among PARAGON LIFE INSURANCE COMPANY, (hereinafter the "Company"), a
Missouri corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as such schedule may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts (hereinafter
the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated October 15, 1985 (File No. 812-6102), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
1
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the
2
<PAGE>
Fund calculates its net asset value pursuant to rules of the Securities and
Exchange Commission and the Fund shall use reasonable efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of selected
Portfolios offered by the then-current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof.
3
<PAGE>
Payment shall be in federal funds transmitted by wire. For purpose of Section
2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 376.309 of the Insurance Code of the State of
Missouri and has registered or, prior to any issuance or sale of the Contracts,
will register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Missouri and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code")
4
<PAGE>
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Missouri and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Missouri to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Missouri and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Missouri and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
5
<PAGE>
coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less than five million dollars ($5 million). The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule C
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
6
<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee object to such use within
fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
7
<PAGE>
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund. Currently,
no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
8
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6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
9
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and
10
<PAGE>
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company; or
11
<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of
12
<PAGE>
this Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the
13
<PAGE>
Underwriter; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a
14
<PAGE>
failure to comply with the diversification
requirements specified in Article VI of this Agreement);or
(ii) arise out of or result from any material breach of any
representation or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
15
<PAGE>
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by one year's advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects
16
<PAGE>
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination outstanding
under any other provision of this Agreement; provided, however any
termination under this Section 10.1(h) shall be effective forty five
(45) days after the notice specified in Section 1.6(b) was given.
In the event of a termination under subparagraph (f) above, the Company
agrees that the Company shall make a good faith effort to secure another
underlying investment medium as soon as reasonably possible, and the Fund
and the Underwriter agree that Fund shares will continue to be made
available to new and existing contracts for such period, not to exceed one
year, as may be necessary for the Company to effect the change of investment
medium.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Underwriter)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
17
<PAGE>
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
100 South Brentwood
St. Louis, MO 63105
Attn: VUL Administrator
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request
18
<PAGE>
in order to ascertain whether the variable life insurance operations of the
Company are being conducted in a manner consistent with the California Variable
Life Insurance Regulations and any other applicable law or regulations.
12.7 The Fund and Underwriter agree that to the extent any advisory or
other fees received by the Fund, the Underwriter or the Adviser are determined
to be unlawful in legal or administrative proceedings under the 1973 NAIC model
variable life insurance regulation in the states of California, Colorado,
Maryland or Michigan, the Underwriter shall indemnify and reimburse the Company
for any out of pocket expenses and actual damages the Company has incurred as a
result of any such proceeding; provided however that the provisions of Section
8.2(b) of this and 8.2(c) shall apply to such indemnification and reimbursement
obligation. Such indemnification and reimbursement obligation shall be in
addition to any other indemnification and reimbursement obligations of the Fund
or the Underwriter under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.10. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory), as soon as
practical and in any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders or policyholders, as soon as
practical after the delivery thereof;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
19
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
PARAGON LIFE INSURANCE COMPANY VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Carl H. Anderson By: /s/ J. Gary Burkhead
-------------------------- ----------------------------
Carl H. Anderson J. Gary Burkhead
Title: President & CEO Title: Senior V.P.
----------------------- -------------------------
Date: 9/14/93 Date: 10/1/93
------------------------ --------------------------
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kurt A. Lange
-----------------------
Kurt A. Lange
Title: President
--------------------
Date: 9/24/93
---------------------
20
<PAGE>
Schedule A & B
--------------
The following separate accounts and contract forms for which one or more
portfolios of Variable Insurance Products Fund is to be made available by
Paragon Life Insurance Company:
<TABLE>
<CAPTION>
Name of Date Established Contract
Separate Account by Board of Directors Form Numbers
---------------- --------------------- ------------
- ----------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Separate Account B January 4, 1993 30022, 30037 Group Certificate
30023, 30036 Group Master Contract
30021, 30040 Individual Policy
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Separate Account C August 1, 1993 30022, 30037 Group Certificate
30023, 30036 Group Master Contract
30021, 30040 Individual Policy
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Separate Account D January 3, 1995 30041 Individual Policy
30042 Joint and Last Survivor Policy
- ----------------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of the date first specified above.
PARAGON LIFE INSURANCE COMPANY VARIABLE INSURANCE PRODUCTS FUND
By: /s/ Craig K. Nordyke By: /s/ Robert Pozen
--------------------------------- ---------------------------
Craig K. Nordyke Robert Pozen
Executive Vice President & Chief Actuary Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin Kelly
---------------------------------
Kevin Kelly
Vice President
21
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of units
which are attributed to each contractowner/policyholder (the "Customer") as
of the Record Date. Allowance should be made for account adjustments made
after this date that could affect the status of the Customers' accounts as
of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company either
before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
22
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by the
Insurance Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the
meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and is
the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return
23
<PAGE>
envelope. The mutilated or illegible Card is disregarded and considered to
be not received for purposes of vote tabulation. Any Cards that have "kicked
out" (e.g. mutilated, illegible) of the procedure are "hand verified," i.e.,
examined as to why they did not complete the system. Any questions on those
Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be required
from the Company as well as an original copy of the final vote. Fidelity
Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal will
be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
24
<PAGE>
PARTICIPATION AGREEMENT
-----------------------
Among
VARIABLE INSURANCE PRODUCTS FUND II,
-----------------------------------
FIDELITY DISTRIBUTORS CORPORATION
---------------------------------
and
PARAGON LIFE INSURANCE COMPANY
------------------------------
THIS AGREEMENT, made and entered into as of this 1st day of September,
1993 by and among PARAGON LIFE INSURANCE COMPANY, (hereinafter the "Company"), a
Missouri corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as such schedule may be
amended from time to time (each such account hereinafter referred to as the
"Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts
(hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
<PAGE>
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable
life and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to one or more variable life and annuity
contracts; and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Underwriter agrees to sell to the Company those shares of the
Fund which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section 1.1, the Company
shall be the designee of the Fund for receipt of such orders from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the
<PAGE>
Fund calculates its net asset value pursuant to rules of the Securities and
Exchange Commission and the Fund shall use reasonable efforts to calculate such
net asset value on each day which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, the Board of Trustees of the Fund
(hereinafter the "Board") may refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund will
be sold only to Participating Insurance Companies and their separate accounts.
No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of selected
Portfolios offered by the then-current prospectus of the Fund and in accordance
with the provisions of such prospectus. The Company agrees that all net amounts
available under the variable life and variable annuity contracts with the form
number(s) which are listed on Schedule B attached hereto and incorporated herein
by this reference, as such Schedule B may be amended from time to time hereafter
by mutual written agreement of all the parties hereto, (the "Contracts") shall
be invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Fund if (a) such other investment company, or series
thereof, has investment objectives or policies that are substantially different
from the investment objectives and policies of all the Portfolios of the Fund;
or (b) the Company gives the Fund and the Underwriter 45 days written notice of
its intention to make such other investment company available as a funding
vehicle for the Contracts; or (c) such other investment company was available as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement; or (d) the Fund or Underwriter consents to the use of such other
investment company.
1.7. The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.1 hereof.
<PAGE>
Payment shall be in federal funds transmitted by wire. For purpose of Section
2.10 and 2.11, upon receipt by the Fund of the federal funds so wired, such
funds shall cease to be the responsibility of the Company and shall become the
responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7 p.m. Boston
time.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
State laws and that the sale of the Contracts shall comply in all material
respects with state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 376.309 of the Insurance Code of the State of
Missouri and has registered or, prior to any issuance or sale of the Contracts,
will register each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment account for the
Contracts.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Missouri and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code")
<PAGE>
and that it will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently treated
as endowment, annuity or life insurance contracts, under applicable provisions
of the Code and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Missouri and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Missouri to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Missouri and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and
shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Missouri and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money or securities of the Fund are and
shall continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimal
<PAGE>
coverage as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, in an amount not less than five million dollars ($5 million). The
aforesaid Bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Underwriter shall provide the Company (at the Company's
expense) with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts and the Fund's
prospectus printed together in one document (such printing to be at the
Company's expense).
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter (or in the
Fund's discretion, the Prospectus shall state that such Statement is available
from the Fund), and the Underwriter (or the Fund), at its expense, shall print
and provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies
of its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C attached hereto and incorporated herein by this reference, which
standards will also be provided to the other Participating Insurance Companies.
<PAGE>
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee object to such use within fifteen Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its separate
account(s), is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company or its designee object to such use within
fifteen Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with the Securities and
Exchange Commission or other regulatory authorities.
<PAGE>
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund and Underwriter shall pay no fee or other compensation
to the Company under this agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing and such payments will be made out of existing fees otherwise payable to
the Underwriter, past profits of the Underwriter or other resources available to
the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing
the Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
---------------
<PAGE>
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of
its disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
<PAGE>
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and
<PAGE>
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts
or sales literature for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on behalf of
the Fund for use in the Registration Statement or prospectus for the
Contracts or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement, prospectus,
or sales literature of the Fund or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was made in
reliance upon information furnished to the Fund by or on behalf of the
Company; or
<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such
may arise from such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement or to the Fund, whichever is
applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in
writing within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent),
but failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of
this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses
of any additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the
Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
----------------------------------
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the
<PAGE>
meaning of Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
for purposes of this Section 8.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or sales literature of the
Fund (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of the Fund, Adviser or Underwriter
or persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation or warranty made by the Underwriter in this
Agreement or arise out of or
<PAGE>
result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions
of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
---------------------------
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a
<PAGE>
failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
--------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
<PAGE>
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
-----------
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by one year's advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state or federal law or such law
precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund may
fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects
<PAGE>
since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter the
written notice specified in Section 1.6(b) hereof and at the time
such notice was given there was no notice of termination
outstanding under any other provision of this Agreement; provided,
however any termination under this Section 10.1(h) shall be
effective forty five (45) days after the notice specified in
Section 1.6(b) was given.
In the event of a termination under subparagraph (f) above, the Company
agrees that the Company shall make a good faith effort to secure another
underlying investment medium as soon as reasonably possible, and the Fund
and the Underwriter agree that Fund shares will continue to be made
available to new and existing contracts for such period, not to exceed one
year, as may be necessary for the Company to effect the change of
investment medium.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated
transactions, or (ii) as required by state or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"). Upon request, the Company will promptly
furnish to the Fund and the Underwriter the opinion of counsel for the Company
(which counsel shall be reasonably satisfactory to the Fund and the Underwriter)
to the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice of its
intention to do so.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
<PAGE>
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
100 South Brentwood
St. Louis, MO 63105
Attn: VUL Administrator
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
-------------
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request
<PAGE>
in order to ascertain whether the variable life insurance operations of the
Company are being conducted in a manner consistent with the California Variable
Life Insurance Regulations and any other applicable law or regulations.
12.7. The Fund and Underwriter agree that to the extent any advisory
or other fees received by the Fund, the Underwriter or the Adviser are
determined to be unlawful in legal or administrative proceedings under the 1973
NAIC model variable life insurance regulation in the states of California,
Colorado, Maryland or Michigan, the Underwriter shall indemnify and reimburse
the Company for any out of pocket expenses and actual damages the Company has
incurred as a result of any such proceeding; provided however that the
provisions of Section 8.2(b) of this and 8.2(c) shall apply to such
indemnification and reimbursement obligation. Such indemnification and
reimbursement obligation shall be in addition to any other indemnification and
reimbursement obligations of the Fund or the Underwriter under this Agreement.
12.8. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.9. This Agreement or any of the rights and obligations hereunder
may not be assigned by any party without the prior written consent of all
parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement.
12.10. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory), as soon as
practical and in any event within 45 days after the end of each
quarterly period:
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders or policyholders, as soon as
practical after the delivery thereof;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
PARAGON LIFE INSURANCE VARIABLE INSURANCE
COMPANY PRODUCTS FUND
By: /s/ Carl H. Anderson By: /s/ J. Gary Burkhead
----------------------- ---------------------
Carl H. Anderson J. Gary Burkhead
Title: President & CEO Title: Senior V. P.
------------------- ---------------------
Date: 9/14/93 Date: 10/1/93
-------------------- ---------------------
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kurt A. Lange
-----------------------
Kurt A. Lange
Title: President
-----------------------
Date: 9/24/93
------------------------
<PAGE>
Schedule A & B
--------------
The following separate accounts and contract forms for which one or more
portfolios of Variable Insurance Products Fund is to be made available by
Paragon Life Insurance Company:
<TABLE>
<CAPTION>
Name of Date Established Contract
Separate Account by Board of Directors Form Numbers
---------------- --------------------- ------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Separate Account B January 4, 1993 30022, 30037 Group Certificate
30023, 30036 Group Master Contract
30021, 30040 Individual Policy
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Separate Account C August 1, 1993 30022, 30037 Group Certificate
30023, 30036 Group Master Contract
30021, 30040 Individual Policy
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Separate Account D January 3, 1995 30041 Individual Policy
30042 Joint and Last Survivor Policy
- --------------------------------------------------------------------------------------------------
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of the date first specified above.
<TABLE>
<CAPTION>
PARAGON LIFE INSURANCE COMPANY VARIABLE INSURANCE PRODUCTS FUND
<S> <C>
By: /s/ Craig K. Nordyke By: /s/ Robert Pozen
---------------------------------------- ----------------------------------------
Craig K. Nordyke Robert Pozen
Executive Vice President & Chief Actuary Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By: /s/ Kevin Kelly
----------------------------------------
Kevin Kelly
Vice President
</TABLE>
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter as
early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done verbally approximately two months before
meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in the
number of Customers to Fidelity, as soon as possible, but no later than two
weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy statement.
Underwriter will provide at least one copy of the last Annual Report to the
Company.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Legal Department
of the Underwriter or its affiliate ("Fidelity Legal") must approve the
Card before it is printed. Allow approximately 2-4 business days for
printing information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Company for insertion
into envelopes (envelopes and return envelopes are provided and paid for by
the Insurance Company). Contents of envelope sent to Customers by Company
will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as quickly
as possible and that their vote is important. One copy will be
supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but not including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a new
Card and return
<PAGE>
envelope. The mutilated or illegible Card is disregarded and considered to
be not received for purposes of vote tabulation. Any Cards that have
"kicked out" (e.g. mutilated, illegible) of the procedure are "hand
verified," i.e., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of shares.) Fidelity Legal must
review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston time.
Fidelity Legal may request an earlier deadline if required to calculate the
vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
PARAGON LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 12th day of October 1995, by and
among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), PARAGON LIFE INSURANCE COMPANY, a Missouri corporation (the "Company")
on its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, Walnut Street Securities, Inc. ("WSS") the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
ARTICLE I. Sale of Trust Shares
--------------------
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business
Day, as defined below) and which are available for purchase by such
Accounts, executing such orders on a daily basis at the net asset value
next computed after receipt by the Trust or its designee of the order for
the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange, Inc. (the "NYSE") is open for trading and on
which the Trust calculates its net asset value pursuant to the rules of the
SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with
the Trust and MFS (the "Participating Insurance Companies") and their
separate accounts, qualified pension and retirement plans and MFS or its
affiliates. The Trust and MFS will not sell Trust shares to any insurance
company or separate account unless an agreement containing provisions
substantially the same as Articles III and VII of this Agreement is in
effect to govern such sales. The Company will not resell the Shares except
to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy holders on that Business Day), executing such requests on a daily
basis at the net asset value next computed after receipt by the Trust or
its designee of the request for redemption. For purposes of this Section
1.4, the Company shall be the designee of the Trust for receipt of requests
for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of
such request for redemption by 9:30 a.m. New York time on the next
following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares
by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of
-2-
<PAGE>
Section 1.1. hereof. In the event of net redemptions, the Trust shall pay
the redemption proceeds by 2:00 p.m. New York time on the next Business Day
after an order to redeem the shares is made in accordance with the
provisions of Section 1.4. hereof. All such payments shall be in federal
funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby elects
to receive all such dividends and distributions as are payable on a
Portfolio's Shares in additional Shares of that Portfolio. The Trust shall
notify the Company of the number of Shares so issued as payment of such
dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. Certain Representations, Warranties and Covenants
--------------------------------------------------
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales accordance with the securities laws of the various states only if and
to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that WSS, the underwriter for the
individual variable annuity and the variable life policies, is a member in
good standing of the NASD and is a registered broker-dealer with the SEC.
The Company represents and warrants that the Company and WSS will sell and
distribute
-3-
<PAGE>
such policies in accordance in all material respects with all applicable
state and federal securities laws, including without limitation the 1933
Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the registration statement for its Shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify the
Shares for sale in accordance with the laws of the various states only if
and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
ARTICLE III. Prospectus and Proxy Statements; Voting
---------------------------------------
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; provided, however, that the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event
-4-
<PAGE>
that the Company requests that the Trust or its designee provides the
Trust's prospectus in a "camera ready" or diskette format, the Trust shall
be responsible for providing the prospectus in the format in which it or
MFS is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (e.g., typesetting expenses), and
the Company shall bear the expense of adjusting or changing the format to
conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above,
or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order. The
Trust and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. Sales Material and Information
-------------------------------
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
-5-
<PAGE>
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning the
Trust or any other such entity in connection with the sale of the Policies
other than the information or representations contained in the registration
statement, prospectus or statement of additional information for the
Shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or
in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved by the Trust, MFS or their respective
designees, except with the permission of the Trust, MFS or their respective
designees. The Trust, MFS or their respective designees each agrees to
respond to any request for approval on a prompt and timely basis. The
Company shall adopt and implement procedures reasonably designed to ensure
that information concerning the Trust, MFS or any of their affiliates which
is intended for use only by brokers or agents selling the Policies (i.e.,
information that is not intended for distribution to Policy holders or
prospective Policy holders) is so used, and neither the Trust, MFS nor any
of their affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of
the Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The parties hereto agree that this Section 4.4. is
neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for no-
action letters, and all amendments to any of the above, that relate to the
Policies, or to the Trust or its Shares, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
The Company and the Trust shall also each promptly inform the other or the
results of any examination by the SEC (or other regulatory authorities)
that relates to the Policies, the Trust or its Shares, and the party that
was the subject of the examination shall provide the other party with a
copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
-6-
<PAGE>
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements
a plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution
and Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to
the Company or to the underwriter for the Policies if and in amounts agreed
to by the Trust in writing. Each party, however, shall, in accordance with
the allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expense initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports and proxy materials to
Policy owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Policies under applicable
federal securities and state insurance laws; the cost of preparing,
printing and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing annual
individual account statements for Policy owners as required by state
insurance laws.
ARTICLE VI. Diversification and Related Limitations
---------------------------------------
6.1. The Trust and MFS represent and warrant that they will use their best
efforts to ensure that each Portfolio of the Trust will meet the
diversification requirements of Section 817(h)(1) of the Code and Treas.
Reg. 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts, as they may be amended
from time to time (and any revenue rulings, revenue procedures, notices,
and other published announcements of the Internal Revenue Service
interpreting these sections).
-7-
<PAGE>
ARTICLE VII. Potential Material Conflicts
----------------------------
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth
in the Trust's exemptive application pursuant to which the SEC has granted
the Mixed and Shared Funding Exemptive Order by providing the Board, as it
may reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are disregard.
The Company also agrees that, if a material irreconcilable conflict arises,
it will at is own cost remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Trust, or submitting to a vote of all affected contract owners whether to
withdraw assets from the Trust or any Portfolio and reinvesting such assets
in a different investment medium and, as appropriate, segregating the
assets attributable to any appropriate group of contract owners that votes
in favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their contracts
or policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; provided, however, that such
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shares funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical
to such Sections are contained in such Rule(s) as so amended or adopted.
-8-
<PAGE>
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification by the Company
-------------------------------
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including reasonable counsel
fees) to which an Indemnified Party may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the commission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or this designee, or
persons under its control and on which the Company has reasonably
relied) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Trust by or on behalf
of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
-9-
<PAGE>
8.2. Indemnification by the Trust
----------------------------
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Shares or the
Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statement or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(d) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially
-10-
<PAGE>
similar representations, warranties and covenants; (ii) the failure by the
Company or any Participating Insurance Company to maintain its segregated
asset account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as a
duly registered unit investment trust under the provisions of the 1940 Act
(unless exempt therefrom); or (iii) the failure by the Company or any
Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5.
of commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this
section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any Indemnified Party otherwise than under
this section. In case any such action is brought against any Indemnified
Party, and it notified the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the indemnifying
party of its intention to assume the defense of an action, the Indemnified
Party shall bear the expenses of any additional counsel obtained by it, and
the indemnifying party shall not be liable to such Indemnified Party under
this section for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
---------------
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Notice of Formal Proceedings
-----------------------------
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
-11-
<PAGE>
ARTICLE XI. Termination
------------
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) days' prior written notice to the Trust of the
Date of any proposed vote or other action taken to replace the
Shares; or
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
-12-
<PAGE>
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated transactions,
or as required by state insurance laws or regulations, the Company shall
not redeem the Shares attributable to the Policies (as opposed to the
Shares attributable to the Company's assets held in the Accounts), and the
Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until thirty
(30) days after the Company shall have notified the Trust of its intention
to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. Notices
--------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Paragon Life Insurance Company
100 South Brentwood
St. Louis, MO 63105
Attn: C.H. Anderson, President & CEO
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
-13-
<PAGE>
ARTICLE XIII. Miscellaneous
-------------
13.1. Subject to the requirement of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of
the owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement or as otherwise required by applicable law or regulation,
shall not disclose, disseminate or utilize such names and addresses and
other confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and
liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon
the assets or property of the Portfolio on whose behalf the Trust has
executed this instrument. The Company also agrees that the obligations of
each Portfolio hereunder shall be several and not joint, in accordance with
its proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
-14-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
PARAGON LIFE INSURANCE COMPANY
By its authorized officer,
By: /s/ Craig K. Nordyke
------------------------
Craig K. Nordyke
Title: Executive Vice President & Chief Actuary
----------------------------------------
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
By: /s/ A. Keith Brodkin
-----------------------
A. Keith Brodkin
Chairman and President
------------------------
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
-----------------------
Arnold D. Scott
Sr. Executive Vice President
----------------------------
-15-
<PAGE>
As of August 6, 1999
--------------
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
--------------------------------------
<TABLE>
<CAPTION>
Name of Separate
Account and Date Policies Funded Portfolios
Established by Board of Directors by Separate Account Applicable to Policies
=============================================================================================================================
<S> <C> <C>
Separate Account B Group and Individual MFS Global Governments Series
Flexible Premium Variable MFS Total Return Series
January 4, 1993 Life Insurance Policies MFS Utilities Series
MFS Research Series
MFS Emerging Growth Series
MFS Growth With Income Series
MFS Capital Opportunities Series
MFS Money Market Series
MFS Bond Series
MFS New Discovery Series
MFS High Income Series
MFS Foreign & Colonial Emerging
Markets Series*
MFS Limited Maturity Series*
MFS Growth Series
- -----------------------------------------------------------------------------------------------------------------------------
Separate Account D Individual Flexible Premium MFS Emerging Growth Series
Variable Life Insurance Policies
January 3, 1995
Joint and Last Survivor
Flexible Premium
Variable Life Insurance Policies
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Series is only available for investment by owners of Policies which were
in existence on May 1, 1999.
-16-
<PAGE>
PARTICIPATION AGREEMENT
Among
PUTNAM CAPITAL MANAGER TRUST
PUTNAM MUTUAL FUNDS CORP.
and
PARAGON LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 30th day of October, 1995,
among Paragon Life Insurance Company (the "Company"), a Missouri corporation, on
its own behalf and on behalf of each separate account of the Company set forth
on Schedule A hereto, as such Schedule may be amended from time to time (each
such account hereinafter referred to as the "Account"), PUTNAM CAPITAL MANAGER
TRUST (the "Trust"), a Massachusetts business trust, and PUTNAM MUTUAL FUNDS
CORP. (the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Trust is an open-end diversified management investment company
and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into Participation Agreements with the Trust and
the Underwriter (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission, dated December 29, 1993 (File No. 812-8612), granting the variable
annuity and variable life insurance separate accounts participating in the Trust
exemptions from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit
shares of the Trust to be sold to and held by variable annuity and variable life
insurance separate accounts of the Participating Insurance Companies (the
"Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment
company under the 1940 Act and the sale of its shares is registered under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has registered or will register certain variable life
and/or variable annuity contracts under the 1933 Act and any applicable state
securities and insurance law; and
<PAGE>
WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule A hereto, to set aside and invest
assets attributable to one or more variable insurance contracts (the
"Contracts"); and
WHEREAS, the Company has registered or will register the Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in certain Funds
("Authorized Funds") on behalf of each Account to fund certain of the Contracts
and the Underwriter is authorized to sell such shares to unit investment trusts
such as each Account at net asset value;
NOW, THEREFORE, in consideration of the promises herein, the Company, the
Trust and the Underwriter agree as follows:
ARTICLE 1. Sale of Trust Shares
--------------------
1.1 The Underwriter agrees, subject to the Trust's rights under Section
1.2 and otherwise under this Agreement, to sell to the Company those Trust
shares representing interests in Authorized Funds which each Account orders,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the shares of the
Trust. For purposes of this Section 1.1, the Company shall be the designee of
the Trust for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of such order by 9:30 a.m. eastern time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Trust calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission. The initial Authorized
Funds are set forth in Schedule B, as such schedule is amended from time to
time.
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Trust shall
use reasonable efforts to calculate such net asset value on each day on which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Trustees of the Trust (the "Trustees") may refuse to sell shares of any Fund
to the Company or any other person, or suspend or terminate the offering of
shares of any Fund if such action is required by law or by regulatory
authorities having jurisdiction over the Trust or if the
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Trustees determine, in the exercise of their fiduciary responsibilities, that to
do so would be in the best interests of shareholders.
1.3 The Trust and the Underwriter agree that shares of the Trust will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Fund will be sold to the general public.
1.4 The Trust shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 9:30
a.m., Eastern time, on the next following Business Day.
1.5 The Company shall purchase and redeem the shares of Authorized Funds
offered by the then current prospectus of the Trust in accordance with the
provisions of such prospectus.
1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1. I hereof. Payment shall be in federal funds transmitted by wire.
For the purposes of Sections 2.6 and 2.7 upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall be the responsibility of the Trust or its agent.
1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company to
the Underwriter in an appropriate title for each Account or the appropriate sub-
account of each Account.
1.8 The Underwriter shall furnish prompt notice (by wire or telephone,
followed by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Underwriter
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.9 The Underwriter shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the Trust calculates its net asset value per share and each of the Trust and the
Underwriter shall use its best efforts to make such net asset value per share
available by 7:00 p.m. Eastern time.
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1.10 The Company shall offer the Contracts only to officers and employees
of Marsh & McLennan Companies, Inc., Putnam Investments, Inc. and their
respective affiliates except as the Underwriter may agree.
ARTICLE II. Representations and Warranties
------------------------------
2.1 The Company represents and warrants that
(a) at all times during the term of this Agreement the Contracts are or
will be registered under the 1933 Act; the Contracts will be issued and sold in
compliance in all material respects with all applicable laws and the sale of the
Contracts shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a separate account under applicable law and has registered
or, prior to any issuance or sale of the Contracts, will register each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a segregated investment account for the Contracts; and
(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.2 The Trust represents and warrants that
(a) at all times during the term of this Agreement Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and the Trust is
and shall remain registered under the 1940 Act. The Trust shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Trust shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Trust or the Underwriter in connection with their sale by the Trust to
the Company and only as required by Section 2.4;
(b) it is currently qualified as a Regulated Investment Company under
Subchapter M of the Code, and that it will use its best efforts to maintain such
qualification (under Subchapter M or any successor provision) and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future; and
(c) it is lawfully organized and validly existing under the laws of
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Massachusetts and that it does and will comply in all material respects with the
1940 Act.
2.3 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Trust shares
in accordance with all applicable securities laws applicable to it, including
without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4 Notwithstanding any other provision of this Agreement, the Trust shall
be responsible for the registration and qualification of its shares and of the
Trust itself under the laws of any jurisdiction only in connection with the
sales of shares directly to the Company through the Underwriter. The Trust
shall not be responsible, and the Company shall take full responsibility, for
determining any jurisdiction in which any qualification or registration of Trust
shares or the Trust by the Trust may be required in connection with the sale of
the Contracts or the indirect interest of any Contract in any shares of the
Trust and advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
2.5 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.6 The Trust and Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals/
entities dealing with the money or securities of the Trust are and shall
continue to be at al times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1941 Act or related
provisions as may be promulgated from time to time. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a bonding
company reasonable acceptable to the Company.
2.7 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other entities dealing with the
money or securities of the Trust are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust, in an amount not less than five million dollars ($5 million) or such
greater amount as is required of entities subject to Rule 17g-1 of the 1941 Act.
The aforesaid Bond shall include coverage for larceny and embezzlement and shall
be issued by a bonding company reasonable acceptable to the Trust.
ARTICLE II. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1 The Trust shall provide such documentation (including a camera ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the
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Contracts and the Trust's prospectus printed together in one or more documents
(such printing to be at the Company's expense).
3.2 The Trust's Prospectus shall state that the Statement of Additional
Information for the Trust is available from the Underwriter or its designee (or
in the Trust's discretion, the Prospectus shall state that such Statement is
available from the Trust), and the Underwriter (or the Trust), at its expense,
shall print and provide such Statement free of charge to the Company and to any
owner of a Contract or prospective owner who requests such Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other Communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners, such distribution to be at the expense of
the Company.
3.4 The Company shall vote all Trust shares as required by law and the
Shared Funding Exemptive Order. The Company reserves the right to vote Trust
shares held in any separate account in its own right, to the extent permitted by
law and the Shared Funding Exemptive Order. The Company shall be responsible
for assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements
and the Shared Funding Exemptive Order.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Trust will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1 Without limiting the scope or effect of Section 4.2, the Company shall
furnish, or shall cause to be furnished, to the Underwriter each piece of sales
literature or other promotional material in which the Trust, its investment
adviser or the Underwriter is named at least 15 days prior to its use. No such
material shall be used if the Underwriter objects to such use within five
Business Days after receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the
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Contracts other than the information or representations contained in the
registration statement or prospectus for the Trust shares, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
annual or semi-annual reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust or its designee
or by the Underwriter, except with the written permission of the Trust or the
Underwriter or the designee of either or as is required by law.
4.3 The Underwriter or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material prepared by the Underwriter in which the Company
and/or its separate account(s) is named at least 15 days prior to its use. No
such material shall be used if the Company or its designee objects to such use
within five Business Days after receipt of such material. The Company
acknowledges that the Underwriter does not currently intend to prepare sales
literature naming the Company or its separate account.
4.4 Neither the Trust nor the Underwriter shall give any information or
make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the written permission of the Company or as is required by
law.
4.5 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e. any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all registered representatives.
ARTICLE V. Fees and Expenses
-----------------
5.1 The Trust and Underwriter shall pay no fee or other compensation to
the Company under this agreement.
5.2 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall bear the expenses for the cost of
registration and qualification of the Trust's shares, preparation and filing of
the Trust's prospectus and registration statement, proxy materials and reports,
setting the prospectus and shareholder reports in type, setting in type and
printing the proxy materials, and the preparation of all statements and notices
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required by any federal or state law, in each case as may reasonably be
necessary for the performance by it of its obligations under this Agreement.
5.3 The Company shall bear the expenses of (a) printing and distributing
the Trust's prospectus in connection with sales of the Contracts and (b)
distributing the reports to Trust's Shareholders and (c) of distributing the
Trust's proxy materials to owners of the Contracts.
ARTICLE VI. Diversification
---------------
6.1 The Trust shall use its best efforts to cause each Authorized Fund to
maintain a diversified pool of investments that would, if such Fund were a
segregated asset account, satisfy the diversification provisions of Treas. Reg.
(S) 1.817-5(b)(1) or (2).
ARTICLE VII. Potential Conflicts
-------------------
7.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. A material irreconcilable conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities law or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trust shall promptly inform the Company if
the Trustees determine that a material irreconcilable conflict exists and the
implications thereof.
7.2 The Company will report any potential or existing conflicts of which
it is aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order, by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
7.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists, the
Company shall to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
separate accounts from the Trust or any Fund and reinvesting such assets in a
different investment medium, including (but not limited to) another Fund of the
Trust, or submitting the question whether such segregation should be implemented
to a vote of all affected contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract
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owners, life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected contract owners the option of making such a change;
and (2) establishing a new registered management investment company or managed
separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in one or more portfolios of the Trust and terminate this Agreement
with respect to such Account; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. No charge or penalty shall be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Trust shall, to the
extent permitted by law and any exemptive relief previously granted to the
Trust, continue to accept and implement orders by the Company for the purchase
(or redemption) of shares of the Trust.
7.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected Account's investment in one
or more Authorized Funds of the Trust; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented, unless a shorter period is required by law, and until the
end of the foregoing six month period (or such shorter period if required by
law), the Underwriter and Trust shall, to the extent permitted by law and any
exemptive relief previously granted to the Trust, continue to accept and
supplement orders by the Company for the purchase (and redemption) of shares of
the Trust. No charge or penalty will be imposed as a result of such withdrawal.
7.6 For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict. Neither the Trust nor
the Underwriter shall be required to establish a new finding medium for the
Contracts, nor shall the Company be required to do so, if an offer to do so has
been declined by vote of a majority of Contract owners materially adversely
affected by the material irreconcilable conflict. In the event that the
Trustees determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the Account's
investment in one or more Authorized Funds of the Trust and terminate this
Agreement within six (6) months (or such shorter period as may be required by
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law or any exemptive relief previously granted to the Trust) after the Trustees
inform the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent required by
any such material irreconcilable conflict as determined by a majority of the
disinterested Trustees. No charge or penalty will be imposed as a result of
such withdrawal.
7.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Article VII shall be carried out
with a view only to the interests of Contract owners.
7.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
7.9 The Company has reviewed the Shared Funding Exemption Order and
hereby assumes all obligations referred to therein which are required,
including, without limitation, the obligation to provide reports, material or
data as the Trustees may request as conditions to such Order, to be assumed or
undertaken by the Company.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification by the Company
------------------------------
8.1 (a). The Company shall indemnify and hold harmless the Trust and the
Underwriter and each of the Trustees, directors of the Underwriter, officers,
employees or agents of the Trust or the Underwriter and each person, if any, who
controls the Trust or the Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Trust's shares or the Contracts or
the performance by the parties of their obligations hereunder and:
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(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a Registration Statement,
Prospectus or Statement of Additional Information for the Contracts or
contained in the Contracts or sales literature for the Contracts (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of the Trust for
use in the Registration Statement, Prospectus or Statement of Additional
Information for the Contracts or in the Contracts or sales literature (or
any amendment or supplement) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or representations
(other than statements or representations contained in the Trust's
Registration Statement or Prospectus, or in sales literature for Trust
shares not supplied by the Company, or persons under its control) or
wrongful conduct of the Company or persons under its control, with respect
to the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, or sales
literature of the Trust or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Trust or the Underwriter by or on behalf of
the Company; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result
from any other breach of this Agreement by the Company, as limited by and
in accordance with the provisions of Sections 8.1 (b) and 8.1 (c) hereof.
8.1 (b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent such may arise
from such Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or duties under this
Agreement or to the Trust, whichever is applicable.
8.1 (c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
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Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Company to such Indemnified Party of
the Company's election to assume the defense thereof the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.1 (d) The Underwriter shall promptly notify the Company of the
commencement of any litigation or proceedings against the Trust or the
Underwriter in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
8.1 (e) The provisions of this Section 8.1 shall survive any termination
of this Agreement.
8.2 Indemnification by the Underwriter
----------------------------------
8.2 (a) The Underwriter shall indemnify and hold harmless the Company and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter which consent may not
be unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Contracts or the performance by
the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the sales literature of the
Trust prepared by or approved by the Trust or Underwriter (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the
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Underwriter or Trust by or on behalf of the Company for use in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or representations
(other than statements or representations contained in the Registration
Statement, Prospectus, Statement of Additional Information or sales
literature for the Contracts not supplied by the Underwriter or persons
under its control) of the Underwriter or persons under its control, with
respect to the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, Statement
of Additional Information or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Underwriter; or
(iv) arise out of or result from any breach of any representation and/or
warranty made by the Underwriter in this Agreement or arise out of or
result from any other breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof; or
8.2 (b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
8.2 (c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Underwriter of any such claim
shall not relieve the Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Underwriter will be entitled to participate, at its
own expense, in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Underwriter to such Indemnified
Party of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall
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bear the fees and expenses of any additional counsel retained by it, and the
Underwriter will not be liable to such Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.2 (d) The Company shall promptly notify the Underwriter of the Trust
of the commencement of any litigation or proceedings against it or any of its
officers or directors, in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.2 (e) The provisions of this Section 8.2 shall survive any termination
of this Agreement.
8.3 Indemnification by the Trust
----------------------------
8.3 (a) The Trust shall indemnify and hold harmless the Company, and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in a Registration Statement,
Prospectus and Statement of Additional Information of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to the Underwriter or Trust by or on behalf of
the Company for use in the Registration Statement, Prospectus, or Statement
of Additional Information for the Trust (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Trust
shares; or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement or arise out of or
result from any other material breach of this Agreement by the Trust, as
limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
14
<PAGE>
8.3 (b) The Trust shall not be liable under the indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party s willful misfeasance, bad faith, or gross negligence or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Trust, the Underwriter or each
Account, whichever is applicable.
8.3 (c) The Trust shall not be liable under this indemnification
provision with respect to any claim made against any Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent) on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim, but failure to notify the Trust of any such claim shall
not relieve the Trust from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
named in the action. After notice from the Trust to such Indemnified Party of
the Trust's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Trust will not be liable to such Indemnified Party under this Agreement for any
legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
8.3 (d) The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or, directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.
8.3 (e) The provisions of this Section 8.3 shall survive any termination
of this Agreement.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
15
<PAGE>
ARTICLE X. Termination
-----------
10.1. This Agreement shall terminate:
(a) at the option of any party upon 90 days advance written notice to the
other parties; or
(b) at the option of the Trust or the Underwriter in the event that formal
administrative proceedings are instituted against the Company by the NASD, the
Securities and Exchange Commission, the Insurance Commissioner of the State of
Missouri or any other regulatory body regarding the Company's duties under this
Agreement or related to the sales of the Contracts, with respect to the
operation of any Account, or the purchase of the Trust shares, provided,
however, that the Trust or the Underwriter determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust or Underwriter by the NASD, the
Securities and Exchange Commission, or any state securities or insurance
department or any other regulatory body in respect of the sale of shares of the
Trust to the Company, provided, however, that the Company determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Trust or Underwriter to
perform its obligations under this Agreement; or
(d) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 30 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares; or
(e) with respect to any Authorized Fund, upon 30 days advance written
notice from the Underwriter to the Company, upon a decision by the Underwriter
to cease offering shares of the Fund for sale.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10. I(a) may be exercised for any
reason or for no reason.
10.3 No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination. Such prior written notice shall be given
in advance of the effective date of termination as required by this Article X.
16
<PAGE>
10.4 Notwithstanding any termination of this Agreement, subject to Section
1.2 of this Agreement, the Trust and the Underwriter shall, at the option of the
Company, continue to make available additional shares of the Trust pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, subject to Section 1.2
of this Agreement, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement.
10.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally required Redemption"). Upon request, the Company will promptly
furnish to the Trust and the Underwriter an opinion of counsel for the Company,
reasonably satisfactory to the Trust, to the effect that any redemnification
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, subject to
Section 1.2 of this Agreement, the Company shall not prevent Contract owners
from allocating payments to an Authorized Fund that was otherwise available
under the Contracts without first giving the Trust or the Underwriter 90 days
notice of its intention to do.
ARTICLE XI. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
One Post Office Square
Boston, MA 02109
Attention: John R. Verani
If to the Underwriter:
One Post Office Square
Boston, MA 02109
Attention: General Counsel
If to the Company:
17
<PAGE>
Paragon Life Insurance Company
100 South Brentwood
St. Louis, MO 63125
Attention: President & CEO
ARTICLE XII. Miscellaneous
-------------
12.1 A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as Trustees and not individually and that the obligations
of or arising out of this instrument, including without limitation Article VII,
are not binding upon any of the Trustees or shareholders individually but
binding only upon the assets and property of the Trust.
12.2 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.3 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the NASD and state insurance regulators) and
shall pert-nit such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
12.6 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7 Notwithstanding any other provision of this Agreement, the
obligations of the Trust and the Underwriter are several and, without limiting
in any way the generality of the foregoing, neither such party shall have any
liability for any action or failure to act by the other party, or any person
acting on such other party's behalf.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
PARAGON LIFE INSURANCE COMPANY
By its authorized officer,
/s/ Craig K. Nordyke
---------------------------
Name: Craig K. Nordyke, FSA, MAAA
Title: Executive Vice President and Chief
Actuary
PUTNAM CAPITAL MANAGER TRUST
By its authorized officer,
/s/ John R. Verani
-------------------------
Name: John R. Verani
Title: Vice President
PUTNAM MUTUAL FUNDS CORP.
By its authorized officer,
/s/ Jeffrey M. Miller
----------------------------
Name: Jeffrey M. Miller
Title: Senior Vice President
19
<PAGE>
Schedule A
Contracts
---------
Separate Accounts
-----------------
Separate Account B
Separate Account D
Contracts
---------
Group and Individual
Flexible Premium Variable Life Insurance
Joint and Last Survivor
Flexible Premium Variable Life Insurance
20
<PAGE>
Schedule B
Authorized Funds
----------------
Putnam VT Asia Pacific Growth Fund
Putnam VT Diversified Income Fund
Putnam VT High Yield Fund
Putnam VT Global Asset Allocation Fund
Putnam VT Global Growth Fund
Putnam VT Growth and Income Fund
Putnam VT International Growth Fund
Putnam VT International Growth and Income Fund
Putnam VT International New Opportunities Fund
Putnam VT Money Market Fund
Putnam VT New Opportunities Fund
Putnam VT Income Fund
Putnam VT Utilities Growth and Income Fund
Putnam VT Voyager Fund
21
<PAGE>
PARTICIPATION AGREEMENT
PARTICIPATION AGREEMENT (the "Agreement") made by and between SCUDDER VARIABLE
LIFE INVESTMENT FUND (the "Fund"), a Massachusetts business trust created under
a Declaration of Trust dated March 15, 1985, as amended, with a principal place
of business in Boston, Massachusetts and PARAGON LIFE INSURANCE COMPANY, a
Missouri corporation (the "Company"), with a principal place of business in
St. Louis County, Missouri, on behalf of the Separate Account B (the "Account"),
a separate account of the Company. WHEREAS, the Fund acts as the investment
vehicle for the separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to herein as
"Variable Insurance Products") to be offered by insurance companies which have
entered into participation agreements substantially identical to this Agreement
("Participating Insurance Companies") and their affiliated insurance companies;
and
WHEREAS, the beneficial interest in the Fund is divided into several series of
shares of beneficial interest ("Shares"), and additional series of Shares may be
established, each designated a "Portfolio" and representing the interest in a
particular managed portfolio of securities; and
WHEREAS, it is in the best interest of Participating Insurance Companies to make
capital contributions if required so that the annual expenses of each Portfolio
of the Fund in which a Participating Insurance Company is a shareholder will not
exceed a fixed percentage of the Portfolio's average annual net assets; and
WHEREAS, the Parties desire to evidence their agreement as to certain other
matters,
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Additional Definitions.
For the purposes of this Agreement, the following definitions shall
apply:
(a) The "expenses of a Portfolio" for any fiscal year shall mean the expenses
for such fiscal year as shown in the Statement of Operations (or similar report)
certified by the Fund's independent public accountants;
(b) A "Portfolio's average daily net assets" for each fiscal year shall mean
the sum of the net asset values determined throughout the year for the purpose
of determining net asset value per Share, divided by the number of such
determinations during such year;
(c) The Company's "Required Contribution" on behalf of the Account in respect
of a Portfolio for any fiscal year shall mean an amount equal to the expenses of
that Portfolio for such year minus the below-indicated percentage of that
Portfolio's average daily net assets for the year:
<PAGE>
Managed International Portfolio . . . . . . 1.50%
Each other Portfolio. . . . . . . . . . . . 0.75%
multiplied by a fraction the denominator of which is the average daily net
assets of that Portfolio and the numerator of which is the average daily net
asset value of the Shares of that Portfolio owned by the Account (referred to
herein as a "Participating Shareholder"). The Company's Required Contribution in
respect of a Portfolio shall be pro-rated based on the number of business days
on which this Agreement is in effect for periods of less than a fiscal year.
(d) The "average daily net asset value of the Shares of the Portfolio" owned by
the Account for any fiscal year of the Fund shall mean the greater of (i)
$500,000 or (ii) the sum of the aggregate net asset values of the Shares so
owned determined during the fiscal year, as of each determination of the net
asset value per Share, divided by the total number of determinations of net
asset value during such year.
(e) "Shares" means shares of beneficial interest, without par value, of any
Portfolio, now or hereafter created, of the Fund.
2. Capital Contribution.
The Company on behalf of the Account shall, within sixty days after the end of
each fiscal year of the Fund, make a capital contribution to the Fund in respect
of each Portfolio equal to the Required Contribution for that Portfolio for such
year; provided, however, that in the event that both clauses (i) and (ii) of
paragraph (d) of Section 1 of this Agreement or similar agreements are
applicable to different Participating Insurance Companies during the same fiscal
year, there shall be a proportionate reduction of the Required Contribution of
each Participating Insurance Company to which said clause (ii) is applicable so
that the total of all required capital contributions to the Fund on behalf of
any Portfolio is not greater than the excess of the expenses of that Portfolio
for that fiscal year less the percentage of that Portfolio's total expenses set
forth in paragraph (c) of Section 1 of this Agreement for such fiscal year.
3. Duty of Fund to Sell.
The Fund shall make its Shares available for purchase at the applicable net
asset value per Share by Participating Insurance Companies and their affiliates
and separate accounts on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission; provided,
however, that the Trustees of the Fund may refuse to sell Shares of any
Portfolio to any person, or suspend or terminate the offering of Shares of any
Portfolio, if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Trustees, necessary in the
best interest of the shareholders of any Portfolio.
4. Requirement to Execute Participation Agreement; Requests.
Each Participating Insurance Company shall, prior to purchasing Shares
<PAGE>
in the Fund, execute and deliver a participation agreement in a form
substantially identical to this Agreement. The Fund shall make available, upon
written request from the Participating Insurance Company given in accordance
with Paragraph 10, to each Participating Insurance Company which has executed an
Agreement and which Agreement has not been terminated pursuant to Paragraph 8
(i) a list of all other Participating Insurance Companies, and (ii) a copy of
the Agreement as executed by any other Participating Insurance Company. The Fund
shall also make available upon request to each Participating Insurance Company
which has executed an Agreement and which Agreement has not been terminated
pursuant to Paragraph 8, the net asset value of any Portfolio of the Fund as of
any date upon which the Fund calculates the net asset value of its Portfolios
for the purpose of purchase and redemption of Shares.
5. Indemnification.
The Company agrees to indemnify and hold harmless the Fund and each of its
Trustees and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933 (the "Act") against any and
all losses, claims, damages, liabilities or litigation (including legal and
other expenses), arising out of the acquisition of any Shares by any person, to
which the Fund or such Trustees, officers or controlling person may become
subject under the Act, under any other statute, at common law or otherwise,
which (i) may be based upon any wrongful act by the Company, any of its
employees or representatives, any affiliate of or any person acting on behalf of
the Company or a principal underwriter of its insurance products, or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering Shares or any
amendment thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or omission was made
in reliance upon information furnished to the Fund by the Company, or (iii) may
be based on any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering insurance products
sold by the Company or any insurance company which is an affiliate thereof, or
any amendments or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, unless such statement or
omission was made in reliance upon information furnished to the Company or such
affiliate by or on behalf of the Fund; provided, however, that in no case (i) is
the Company's indemnity in favor of a Trustee or officer or any other person
deemed to protect such Trustee or officer or other person against any liability
to which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his duties or
by reason of his reckless disregard of obligations and duties under this
Agreement or
<PAGE>
(ii) is the Company to be liable under its indemnity agreement contained in this
Paragraph 5 with respect to any claim made against the Fund or any person
indemnified unless the Fund or such person, as the case may be, shall have
notified the Company in writing pursuant to Paragraph 10 within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon the Fund or upon such person
(or after the Fund or such person shall have received notice of such service on
any designated agent), but failure to notify the Company of any such claim shall
not relieve the Company from any liability which it has to the Fund or any
person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this Paragraph 5. The Company shall be entitled
to participate, at its own expense, in the defense, or, if it so elects, to
assume the defense of any suit brought to enforce any such liability, but, if it
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and satisfactory to the Fund, to its officers and Trustees, or to any
controlling person or persons, defendant or defendants in the suit. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, the Fund, such officers and Trustees or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Company does not elect to
assume the defense of any such suit, the Company will reimburse the Fund, such
officers and Trustees or controlling person or persons, defendant or defendants
in such suit, for the reasonable fees and expenses of any counsel retained by
them. The Company agrees promptly to notify the Fund pursuant to Paragraph 10 of
the commencement of any litigation or proceedings against it in connection with
the issue and sale of any Shares.
The Fund agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the Act against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
it or such directors, officers or controlling person may become subject under
the Act, under any other statute, at common law or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any wrongful
act by the Fund, any of its employees or representatives or a principal
underwriter of the Fund, or (ii) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering Shares or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading unless such statement or omission was made in reliance upon
information furnished to the Fund by the Company or (iii) may be based on any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering insurance
<PAGE>
products sold by the Company, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Fund; provided, however, that in
no case (i) is the Fund's indemnity in favor of a director or officer or any
other person deemed to protect such director or officer or other person against
any liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligations and duties under
this Agreement or (ii) is the Fund to be liable under its indemnity agreement
contained in this Paragraph 5 with respect to any claims made against the
Company or any such director, officer or controlling person unless it or such
director, officer or controlling person, as the case may be, shall have notified
the Fund in writing pursuant to Paragraph 10 within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon it or upon such director, officer or
controlling person (or after the Company or such director, officer or
controlling person shall have received notice of such service on any designated
agent), but failure to notify the Fund of any claim shall not relieve it from
any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
Paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Company, its directors, officers or controlling person or persons, defendant or
defendants, in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Company, its directors, officers or
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Company or such directors, officers or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Fund agrees promptly to notify the
Company pursuant to Paragraph 10 of the commencement of any litigation or
proceedings against it or any of its officers or Trustees in connection with the
issuance or sale of any Shares.
6. Procedure for Resolving Irreconcilable Conflicts.
(a) The Trustees of the Fund will monitor the operations of the Fund for the
existence of any material irreconcilable conflict among the interests of all the
contractholders and policyowners of Variable Insurance Products (the
"Participants") of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise, among other things,
<PAGE>
from: (a) an action by any state insurance regulatory authority; (b) a change in
applicable insurance laws or regulations; (c) a tax ruling or provision of the
Internal Revenue Code or the regulations thereunder; (d) any other development
relating to the tax treatment of insurers, contractholders or policyowners or
beneficiaries of Variable Insurance Products; (e) the manner in which the
investments of any Portfolio are being managed; (f) a difference in voting
instructions given by variable annuity contractholders, on the one hand, and
variable life insurance policyowners, on the other hand, or by the
contractholders or policyowners of different participating insurance companies;
or (g) a decision by an insurer to override the voting instructions of
Participants.
(b) The Company will be responsible for reporting any potential or existing
conflicts to the Trustees of the Fund. The Company will be responsible for
assisting the Trustees in carrying out their responsibilities under this
Paragraph 6(b) and Paragraph 6(a), by providing the Trustees with all
information reasonably necessary for the Trustees to consider the issues raised.
The Fund will also request its investment adviser to report to the Trustees any
such conflict which comes to the attention of the adviser.
(c) If it is determined by a majority of the Trustees of the Fund, or a
majority of its disinterested Trustees, that a material irreconcilable conflict
exists involving the Company, the Company shall, at its expense, and to the
extent reasonably practicable (as determined by a majority of the disinterested
Trustees), take whatever steps are necessary to eliminate the irreconcilable
material conflict, including withdrawing the assets allocable to some or all of
the separate accounts from the Fund or any Portfolio and reinvesting such assets
in a different investment medium, including another Portfolio of the Fund,
offering to the affected Participants the option of making such a change or
establishing a new funding medium including a registered investment company.
For purposes of this Paragraph 6(c), the Trustees, or the disinterested
Trustees, shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict. In the event of a determination of the
existence of an irreconcilable material conflict, the Trustees shall cause the
Fund to take such action, such as the establishment of one or more additional
Portfolios, as they in their sole discretion determine to be in the interest of
all shareholders and Participants in view of all applicable factors, such as
cost, feasibility, tax, regulatory and other considerations. In no event will
the Fund be required by this Paragraph 6(c) to establish a new funding medium
for any variable contract or policy.
The Company shall not be required by this Paragraph 6(c) to establish
a new funding medium for any variable contract or policy if an offer to do
so has been declined by a vote of a majority of the Participants materially
adversely affected by the material irreconcilable conflict. The Company
will recommend to its Participants that they decline an offer to establish
<PAGE>
a new funding medium only if the Company believes it is in the best interest of
the Participants.
(d) The Trustees' determination of the existence of an irreconcilable material
conflict and its implications promptly shall be communicated to all
Participating Insurance Companies by written notice thereof delivered or mailed,
first class postage prepaid.
7. Voting Privileges.
The Company shall be responsible for assuring that its separate account or
accounts participating in the Fund shall use a calculation method of voting
procedures substantially the same as the following: those Participants permitted
to give instructions and the number of Shares for which instructions may be
given will be determined as of the record date for the Fund shareholders'
meeting, which shall not be more than 60 days before the date of the meeting.
Whether or not voting instructions are actually given by a particular
Participant, all Fund shares held in any separate account or sub-account thereof
and attributable to policies will be voted for, against, or withheld from voting
on any proposition in the same proportion as (i) the aggregate record date cash
value held in such sub-account for policies giving instructions, respectively,
to vote for, against, or withhold votes on such proposition, bears to (ii) the
aggregate record date cash value held in the sub-account for all policies for
which voting instructions are received. Participants continued in effect under
lapse options will not be permitted to give voting instructions. Shares held in
any other insurance company general or separate account or sub-account thereof
will be voted in the proportion specified in the second preceding sentence for
shares attributable to policies.
8. Duration and Termination.
This Agreement shall remain in force for the period ending five years from the
date of its execution (such date and any anniversary of such date being
hereinafter called a "Renegotiation Date"), and from year to year thereafter
provided that neither the Company nor the Fund shall have given written notice
to the other within thirty (30) days prior to a Renegotiation Date that it
desires to renegotiate the amount of contribution to capital due hereunder
("Renegotiation Notice"). If a Renegotiation Notice is properly given as
aforesaid and the Fund and the Company shall fail, within sixty (60) days after
the Renegotiation Date, either to enter into an amendment to this Agreement or a
written acknowledgment that the Agreement shall continue in effect, this
Agreement shall terminate as of the one hundred twentieth day after such
Renegotiation Date. If this Agreement is so terminated, the Fund may, at any
time thereafter, redeem the Shares of any Portfolio held by a Participating
Shareholder. The Fund agrees that it will not effect such redemption during the
period following the Company's filing of a notice with the Securities and
Exchange Commission (the "SEC") to obtain approval to make a substitution for
the Shares provided, however, the Company has filed such notice with the SEC
promptly following the sixtieth day after
<PAGE>
the Renegotiation Date. This Agreement may be terminated at any time, at the
option of either of the Company or the Fund, when neither the Company, any
insurance company nor the separate account or accounts of such insurance company
which is an affiliate thereof which is not a Participating Insurance Company own
any Shares of the Fund or may be terminated by either party to the Agreement
upon a determination by a majority of the Trustees of the Fund, or a majority of
its disinterested Trustees, following certification thereof by a Participating
Insurance Company given in accordance with Paragraph 10 that an irreconcilable
conflict exists among the interests of (i) all contractholders and policyholders
of Variable Insurance Products of all separate accounts or (ii) the interests of
the Participating Insurance Companies investing in the Fund. Notwithstanding
anything to the contrary in this Agreement or its termination as provided
herein, the Company's obligation to make a capital contribution to the Fund in
accordance with this Agreement at the time in effect shall continue (i)
following a properly given Renegotiation Notice, in the absence of agreement
otherwise, until termination of this Agreement, and (ii) (except termination due
to the existence of an irreconcilable conflict), following termination of this
Agreement, until the later of the fifth anniversary of the date of this
Agreement or the date on which the Company, its separate account(s) or the
separate account(s) of any affiliated insurance company owns no Shares.
9. Compliance.
The Fund will comply with the provisions of Section 4240(a) of the New York
Insurance Law. Each Portfolio of the Fund will comply with the provisions of
Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to diversification requirements for variable annuity, endowment and
life insurance contracts. Specifically, each Portfolio will comply with either
(i) the requirement of Section 817(h)(1) of the Code that its assets be
adequately diversified, or (ii) the "Safe Harbor for Diversification" specified
in Section 817(h)(2) of the Code, or (iii) the diversification requirement of
Section 817(h)(1) of the Code by having all or part of its assets invested in
U.S. Treasury securities which qualify for the "Special Rule for Investments in
United States Obligations" specified in Section 817(h)(3) of the Code. The
provisions of Paragraphs 6 and 7 of this Agreement shall be interpreted in a
manner consistent with any Rule or order of the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, applicable to
the parties hereto. No Shares of any Portfolio of the Fund may be sold to the
general public.
10. Notices.
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify
<PAGE>
in writing to the other party.
If to the Fund:
Scudder Variable Life Investment Fund
175 Federal Street
Boston, Massachusetts 02110
(617) 482-3990
Attn: David B. Watts
If to the Company:
Paragon Life Insurance Company
100 South Brentwood
St. Louis, Mo 63105
Attn: Carl H. Anderson
11. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous.
The name "Scudder Variable Life Investment Fund" is the designation of the
Trustees for the time being under a Declaration of Trust dated March 15, 1985,
as amended, and all persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund. No Portfolio shall
be liable for any obligations properly attributable to any other Portfolio. The
captions in this Agreement are included for convenience of reference only and in
no way define or delineate any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which taken together shall constitute one and
the same instrument.
13. Entire Agreement.
This Agreement incorporates the entire understanding and agreement among the
parties hereto, and supersedes any and all prior understandings and agreements
between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the 30th
day of April, 1993.
SEAL
SCUDDER VARIABLE LIFE INVESTMENT FUND
<PAGE>
By: /s/ David B. Watts
President
SEAL
PARAGON LIFE INSURANCE COMPANY
By: /s/ Carl H. Anderson
Its: President and Chief Executive Officer
<PAGE>
Life Application Part I
- ------- Use Dark Ink Only
PARAGON
LIFE INSURANCE COMPANY
100 South Brentwood
St. Louis, MO 63105
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
1. PROPOSED INSURED(S) 3. BENEFICIARY
- --------------------------------------------------------------- -------------------------------------------------------------
Proposed Insured (1) Primary Date of Birth Relationship % Share
First Name Initial Last Name JAMES DOE 01 / 01 / 89 SON 100
JOHN J. DOE
-----------------------------------------------------
Date of Birth State of Birth Sex Primary Date of Birth Relationship % Share
05 / 01 / 64 [X] Male [_] Female
/ /
-------------------------------------------------------
Social Security Number ------------------------------------------------------------
123 - 45 - 6789 -----------------------------------------------------------
Contingent Date of Birth Relationship % Share
Occupation Earned Income Net Worth
IRONWORKER / /
- --------------------------------------------------------------- -------------------------------------------------------
Contingent Date of Birth Relationship % Share
- --------------------------------------------------------------- / /
Proposed Insured (2) ------------------------------------------------------
First Name Initial Last Name
JANE A. DOE ------------------------------------------------------------
Date of Birth State of Birth Sex 4. HEALTH STATUS
04 / 01 / 64 [_] Male [X] Female ------------------------------------------------------------
a. Have you been hospitalized within the previous 90 days?
Social Security Number Proposed Insured (1) [ ] Yes [X] No
234 - 56 - 7890 Proposed Insured (2) [ ] Yes [X] No
Occupation Earned Income Net Worth b. Have you used tobacco in any form within the last 24
months?
- --------------------------------------------------------------- Proposed Insured (I) [ ] No
[X] Yes Type: Amount/Frequency: Date Last Used:
- ---------------------------------------------------------------
Home Address (Number, Street and Apt. #) CIGARETTES 1 PACK PER DAY
123 MAIN STREET ---------------------------------------------------------
Proposed Insured (2) [_] No
City State Zip [X] Yes Type: Amount/Frequency: Date Last Used:
ST. LOUIS, NO 11111
ST. LOUIS, MO 11111 CIGARETTES 1 PACK PER DAY
----------------------------------------------------------
- ---------------------------------------------------------------- ------------------------------------------------------------
2. REPLACEMENT 5. OWNER
- ---------------------------------------------------------------- -------------------------------------------------------------
Will the insurance being applied for replace or Owner's First Name Initial Last Name
change any existing life insurance or annuity? [_] Yes [X] No
-------------------------------------------------------
--------------------------------------------------------------- Owner's Relationship to Proposed Insured
-------------------------------------------------------
Will the insurance being applied for receive any Owner's Address (Number, Street and Apt. #)
values (to pay premiums/additional payments)
from another policy/contract? [_] Yes [X] No -------------------------------------------------------
- ---------------------------------------------------------------- City/State Zip Telephone Number
-------------------------------------------------------
Owner's Social Security Number or Tax ID Number
-------------------------------------------------------
-------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
6. PLAN, BENEFITS & RIDERS
- ------------------------------------------------------------------------------------------------------------------------------------
Plan Name Desired Policy Date Benefit Riders (If available on plan selected)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE [X] Anniversary Partial Withdrawal Rider
- -------------------------------------------------------------- [X] Estate Preservation Term Rider
[X] Lifetime Coverage Rider
Face Amount Proposed Effective Date [X] Secondary Guarantee Rider
$100,000 [_] Other________________________
- -------------------------------------------------------------- [_] Other________________________
[_] Other________________________
Method of Payment (check one) and Premium
[_] One Payment $
----------
[X] Annual $ 974.37 /year
----------
[_] Semi-Annual $ /every six months
----------
[_] Monthly* $ /month
----------
*(Available only through automatic bankdraft which requires authorization)
- ------------------------------------------------------------------------------------------------------------------------------------
Policy Option: [X] Option A [_] Option B [_] Option C
- ------------------------------------------------------------------------------------------------------------------------------------
UNDERWRITING CONTACT INFORMATION
PROPOSED INSURED (1) PROPOSED INSURED (2)
Contact at: [X] Home (111)111-1111 Contact at: [X] Home (111) 111--1111
-------------------------- ------------------------
(Phone Number) (Phone Number)
[_] Business [_] [Business
---------------------- --------------------
(Phone Number) (Phone Number)
Best days and time WED. 6:00 P.M. Best days and time WED. 6:00 P.M.
----------------------------- ---------------------------
Special Remarks Special Remarks
-------------------------------- -------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
[Additional Instructions/Home Office Endorsement (Not applicable in Kentucky, Maryland, Minnesota, Missouri, New Hampshire,
Pennsylvania, West Virginia, Wisconsin)]
- ------------------------------------------------------------------------------------------------------------------------------------
7. [ELECTRONIC PROSPECTUS OPTION
- ------------------------------------------------------------------------------------------------------------------------------------
In the future, Paragon Life Insurance Company may deliver prospectus updates, semi-annual and annual reports to consenting policy
owners electronically by the delivery methods listed below. If you wish to receive future updates in this manner, check your
choice below.
[_] 1) mailing a diskette containing the document;
[_] 2) mailing a CD-ROM containing the document;
[_] 3) e-mailing the document; or
[_] 4) e-mailing a notice identifying an Internet site where the document
can be viewed and downloaded.
Whichever option you choose, Paragon Life Insurance Company will supply the documents in a format compatible with one of the
following (please choose one):
[_] Microsoft Windows
[_] Macintosh
Please indicate your consent by checking the appropriate boxes.
You may incur normal and customary online usage charges to receive a document under Option 3 or 4. If you would like to receive
these documents in electronic format when available, please check the box and insert your e-mail address here
(____________________________). This consent will be in effect until you revoke it. You can revoke your consent by calling
Paragon Life Insurance Company's Service Center at: [1-800-638-9294] or writing to P.O. Box [14490], St. Louis, MO 63178. You may
revoke it at any time. If you consent to electronic delivery, at any time you also may request that we send you a paper copy.]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8. VARIABLE LIFE INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
1. Suitability Information:
a. Have you received the Paragon prospectus for the policy applied for? [X] Yes [_] No
Date of Prospectus: ____/___/___
Date of any supplement: ____/___/___
b. Have you received a prospectus for the underlying funds of the policy
applied for? [X] Yes [_] No
c. Do you understand that:
(i) the death benefit and cash surrender value will increase or
decrease depending on investment experience, and
(ii) there is no guaranteed cash surrender value? [X] Yes [_] No
d. Do you believe that the policy applied for meets your insurance
objectives and your anticipated financial needs? [X] Yes [_] No
2. Net Premium Allocation (Percentages must be in whole numbers, minimum of 5%
and total 100%); Default is 100% Money Market Portfolio:
SEPARATE ACCOUNT DIVISIONS:
[Fidelity - Contrafund Portfolio]......................................... 25 %
--------------
[Fidelity - Equity-Income Portfolio]...................................... %
--------------
[Fidelity - Growth Portfolio]............................................. %
--------------
[Fidelity - Index 500 Portfolio].......................................... %
--------------
[MFS - Emerging Growth]................................................... 25 %
--------------
[Putnam - PVT High Yield Portfolio)....................................... %
--------------
[Putnam - PVT New Opportunities Portfolio]................................ %
--------------
[Putnam - PVT U.S. Government and High Quality Bond Portfolio]............ %
--------------
[Putnam - PVT Voyager Portfolio).......................................... %
--------------
[Scudder - International Portfolio]....................................... 25 %
--------------
[Scudder - Money Market Portfolio]........................................ %
--------------
[T. Rowe Price - Limited-Term Bond Portfolio]............................. %
--------------
[T. Rowe Price - New America Growth Portfolio]............................ %
--------------
[T. Rowe Price - Personal Strategy Balanced Portfolio].................... 25 %
--------------
GENERAL ACCOUNT OPTION:........................................................... %
--------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DECLARATIONS
I agree that all the statements and answers in this application and any
amendments to it, including any supplements, are true, complete and correctly
recorded. I also agree that this application, any required medical examination,
and any supplement or amendment to either will be part of the policy, issued. If
a premium payment is given in exchange for a Temporary Insurance Agreement
(TIA), the Company will be liable only as set forth in that Agreement. If a
premium payment is not given, then insurance will take effect when a policy is
approved by the Company for issue as applied for, the first full premium is
paid, and the health and insurability of any person proposed for insurance have
not changed since the date of this application. If a policy is issued other than
as applied for, insurance will take effect under the policy only when a policy
issued by the Company is delivered to and accepted by me, the first full premium
is paid, and the health and insurability of any person proposed for insurance
have not changed since the date of this application.
PROPOSED INSURED'S AUTHORIZATION
I authorize any physician, medical practitioner, hospital, clinic, other medical
or medically related facility, insurance company, the Medical Information Bureau
(MIB), consumer reporting agency or employer to release to Paragon Life
Insurance Company its subsidiaries, its reinsurers or its legal representatives
any information they may have relative to diagnosis, treatment and prognosis of
any physical or mental condition including drug an or alcohol abuse and/or any
other information about me. I understand that any information obtained will be
used to determine eligibility for insurance and will not be released to any
person or organization except reinsurers, the MIB, other persons or
organizations performing business or legal services in connection with my
application, and other insurance companies to whom I have applied or to whom a
claim has been made, or as may be otherwise lawfully required, or as I may
further authorize. I know that I may request a copy of this authorization. I
also acknowledge receipt of the Notice of Information Practices. I understand
that if an investigative consumer report is ordered in connection with this
application, I may be interviewed in connection with the preparation of the
report and, upon request, I will be provided with a copy of the report. A
photographic copy of this authorization will be as valid as the original. This
authorization will be valid for 30 months from the date shown below.
<PAGE>
OWNER'S CERTIFICATION: Under the penalties of perjury, I certify that: I) The
number shown on this form is my correct Taxpayer Identification Number (or, if
no number is shown, I am waiting for a number to be issued to me); and 2)I am
not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the IRS has notified
me that I am no longer subject to backup withholding.
PLEASE NOTE: Cross out and initial #2) above it you have been notified by the
IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax return.
The IRS does not require consent to any provision of this document other than
the certifications required to avoid backup withholding.
<TABLE>
<S> <C>
- -------------------------------------------------------- -----------------------------------------------------------------------
- ----------------------------------------------------- ---------------------------------------------------------------------
State where signed Date (MM/DD/YY) State where signed Date (MM/DD/YY)
X X
- ----------------------------------------------------- ---------------------------------------------------------------------
Signature of Proposed Insured (1) Signature of Proposed Insured (2)
(Parent or Guardian if Proposed Insured under age 18) (Parent or Guardian if Proposed Insured under age 18)
X X
- ----------------------------------------------------- ---------------------------------------------------------------------
Signature of Owner Signature of Owner
- -------------------------------------------------------- -----------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT:
Do you certify that you have truly and accurately recorded on this application
the information supplied by the applicant? [X] Yes [_] No
To the best of your knowledge, is this a replacement? [_] Yes [X] No
(If "Yes", complete and submit required replacement forms.)
X
- ------------------------------------------------------------------
Signature of Licensed Agent Date (MM/DD/YY)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
- --------------------------------------------------------------------------------
Temporary Insurance Agreement and Advance Premium Receipt
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY: This Agreement may provide a LIMITED AMOUNT of Life
--------------------- --------------
Insurance for a LIMITED PERIOD OF TIME, subject to the terms below. NO AGENT
----------------------
OR BROKER IS AUTHORIZED TO WAIVE OR CHANGE ANY OF THE TERMS OF THIS
AGREEMENT. ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE COMPANY. DO NOT
MAKE CHECK PAYABLE TO THE AGENT OR BROKER OR LEAVE THE PAYEE BLANK.
This Agreement must be completed when (and only when) money is paid in
conjunction with this agreement. Money cannot be accepted and no Temporary
Insurance will be in effect if the answer to any of the Health Questions
listed below is "Yes" or left blank.
We acknowledge receipt from John J. Doe a premium of $ 974.37 and an
--------------- -------
application numbered 123456 on which John J. and Jane A. Doe is (are)
---------- -----------------------
shown as the Proposed Insured(s). If the name(s) of the Proposed Insured(s)
shown on this Agreement and as shown in the application are not the same, NO
TEMPORARY INSURANCE will be in effect, even if money is paid.
Since variable life insurance coverage is being applied for, the date of the
check, the date the application was signed and the date this Agreement was
signed MUST be the same.
NOTE: To obtain the maximum period of coverage (60 days), at least 1/6th
of the annual premium must be submitted with this Agreement. If the
amount paid is less than 1/6th of the annual premium, the maximum
period of coverage will be proportionately less.
HEALTH QUESTIONS
NO MONEY SHOULD BE ACCEPTED IF ANY QUESTION BELOW IS ANSWERED "YES."
NO COVERAGE IS IN EFFECT UNTIL ALL REQUIREMENTS HAVE BEEN MET.
Has the Proposed Insured(s) or any person proposed for coverage in connection
with the application bearing the same number as shown above:
<TABLE>
<CAPTION>
Proposed Proposed
Insured (1) Insured (2)
-----------------------------------
<C> <S> <C> <C> <C> <C>
1. Within the past 90 days: Yes No Yes No
(a) been admitted to a hospital or other medical facility? [_] [X] [_] [X]
(b) been advised to be admitted to a hospital or other medical facility? [_] [X] [_] [X]
(c) had surgery performed or recommended? [_] [X] [_] [X]
2. Within the past 2 years, had or been treated for or been advised to be
treated for:
(a) heart disease, stroke, or cancer? [_] [X] [_] [X]
(b) alcohol or drug dependence or abuse? [_] [X] [_] [X]
</TABLE>
By signing below, the Proposed Insured(s) states that he/she has received a
copy of and has read this Agreement including the terms and conditions on the
reverse side and declares that the answers to the Health Questions are true
to the best of his/her knowledge and belief. Also, the Proposed Insured(s)
and Applicant/Owner understand and agree to all of the terms of this
Agreement.
<TABLE>
<S> <C>
Signature of Proposed Insured (1)
Signed at (City, State) Date (Parent or Guardian if Proposed Insured under age 18)
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
Signature of Proposed Insured (2)
Signed at (City, State) Date Parent or Guardian if Proposed Insured under age 18)
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
Signature of Applicant/Owner
Witnessed by Licensed Agent (If other than Proposed Insured(s))
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
</TABLE>
Submit this original with the application.
This Form Can Only Be Used In
<PAGE>
- --------------------------------------------------------------------------------
Temporary Insurance Agreement and Advance Premium Receipt (Cont.)
- --------------------------------------------------------------------------------
TERMS, CONDITIONS AND LIMITATIONS
AMOUNT OF COVERAGE: $500,000 Maximum for all Life Insurance Applications or
------------------
Agreements
Subject to the limitations contained in this Agreement, if money has been
accepted by the Company as advance payment for the Application for Life
Insurance identified by number in this Agreement, and if the Proposed
Insured(s) or any other person proposed for coverage dies while this
Agreement is in effect, the Company will pay to the Beneficiary named in that
application the LESSER of: (a) the amount of all death benefits applied for
on each such person, including any accidental or supplemental death benefits,
if applicable; or (b) $500,000. Even if more than one Temporary Insurance
Agreement and Advance Premium Receipt is in effect, the total amount paid
under all such agreements cannot be more than a maximum amount of $500,000.
This maximum amount also will be reduced by any other life and accidental
death insurance in force with us. The MINIMUM amount of temporary life
-------
insurance will be either the amount applied for or $50,000, whichever is
less.
DATE COVERAGE BEGINS: If an advance premium has been paid, Temporary
--------------------
Insurance under this Agreement will begin when the following requirements are
met:
1) This Agreement has been completed; and
2) The Application for Life Insurance and the Medical Declarations or
Application Part II have been fully completed; and
3) All required medical examination requirements have been completed.
DATE COVERAGE TERMINATES: Temporary Insurance under this Agreement will
------------------------
terminate automatically on the earliest of the following dates:
1) 60 days from the date of this Agreement; or
2) The date insurance begins under the policy(ies) applied for; or
3) The date a policy, other than applied for, is offered to the person
named as Owner in the application; or
4) The date the Company mails notice to the Proposed Insured(s) at the
address shown in the application that the application or this Agreement
has been declined by the Company.
SPECIAL LIMITATIONS:
-------------------
1) This Agreement provides benefits only for the type of insurance applied
for in the application. And, except as limited by this Agreement, our
liability is governed by the terms of the policy(ies) for which
application was made.
2) Fraud or misrepresentations in the application or in the answers to the
Health Questions in this Agreement invalidate this Agreement and the
Company's only liability is to refund any premium paid, plus interest.
3) If the Proposed Insured(s) dies by suicide, the Company's liability is
limited to a refund of any premium paid, plus interest.
4) There is no coverage under this Agreement if the check submitted with
the application is not honored by the bank the first time it is
presented.
5) No agent or broker is authorized to accept a payment for a Proposed
Insured(s) who is less than 15 days old or over age 70 on the date of
this Agreement.
Any payment made under this Agreement applies only to the purchase of
Temporary Insurance. If we issue the policy as applied for, or if you accept
a policy issued other than as applied for, then the amount paid will be
credited to the first year's premium due under the policy issued. Except as
otherwise provided under the terms of the policy, no refund will be made if
we issue a policy as applied for. The effective date of the policy issued
will be determined in accordance with our current policy dating procedures.
The full amount paid with this Agreement will be refunded to you, with
interest, if:
1) The application or this Agreement is declined or cancelled by us, or
2) We receive your signed request to cancel the application or this
Agreement.
Submit this original with the application.
This Form Can Only Be Used In
<PAGE>
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
- --------------------------------------------------------------------------------
Temporary Insurance Agreement and Advance Premium Receipt
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY: This Agreement may provide a LIMITED AMOUNT of Life
--------------------- --------------
Insurance for a LIMITED PERIOD OF TIME, subject to the terms below. NO AGENT
----------------------
OR BROKER IS AUTHORIZED TO WAIVE OR CHANGE ANY OF THE TERMS OF THIS
AGREEMENT. ALL PREMIUM CHECKS MUST BE MADE PAYABLE TO THE COMPANY. DO NOT
MAKE CHECK PAYABLE TO THE AGENT OR BROKER OR LEAVE THE PAYEE BLANK.
This Agreement must be completed when (and only when) money is paid in
conjunction with this agreement. Money cannot be accepted and no Temporary
Insurance will be in effect if the answer to any of the Health Questions
listed below is "Yes" or left blank.
We acknowledge receipt from John J. Doe a premium of $ 974.37 and an
--------------- ------------
application numbered 123456 on which John J. and Jane A. Doe is (are)
---------- ---------------------------
shown as the Proposed Insured(s). If the name(s) of the Insured(s) shown on
this Agreement and as shown in the application are not the same, NO TEMPORARY
INSURANCE will be in effect, even if money is paid.
Since variable life insurance coverage is being applied for, the date of the
check, the date the application was signed and the date this Agreement was
signed MUST be the same.
NOTE: To obtain the maximum period of coverage (60 days), at least 1/6th
of the annual premium must be submitted with this Agreement. If the
amount paid is less than 1/6th of the annual premium, the maximum
period of coverage will be proportionately less.
HEALTH QUESTIONS
NO MONEY SHOULD BE ACCEPTED IF ANY QUESTION BELOW IS ANSWERED "YES."
NO COVERAGE IS IN EFFECT UNTIL ALL REQUIREMENTS HAVE BEEN MET.
Has the Proposed Insured(s) or any person proposed for coverage in connection
with the application bearing the same number as shown above:
<TABLE>
<CAPTION>
Proposed Proposed
Insured (1) Insured (2)
---------------------------------
<C> <S> <C> <C> <C> <C>
1. Within the past 90 days: Yes No Yes No
(a) been admitted to a hospital or other medical facility? [_] [X] [_] [X]
(b) been advised to be admitted to a hospital or other medical facility? [_] [X] [_] [X]
(c) had surgery performed or recommended? [_] [X] [_] [X]
2. Within the past 2 years, had or been treated for or been advised to be
treated for:
(a) heart disease, stroke, or cancer? [_] [X] [_] [X]
(b) alcohol or drug dependence or abuse? [_] [X] [_] [X]
</TABLE>
By signing below, the Proposed Insured(s) states that he/she has received a
copy of and has read this Agreement including the terms and conditions on the
reverse side and declares that the answers to the Health Questions are true
to the best of his/her knowledge and belief. Also, the Proposed Insured(s)
and Applicant/Owner understand and agree to all of the terms of this
Agreement.
<TABLE>
<S> <C>
Signature of Proposed Insured (1)
Signed at (City, State) Date (Parent or Guardian if Proposed Insured under age 18)
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
Signature of Proposed Insured (2)
Signed at (City, State) Date (Parent or Guardian if Proposed Insured under age 18)
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
Signature of Applicant/Owner
Witnessed by Licensed Agent (If other than Proposed Insured(s))
---------------------------------------------------- ---------------------------------------------------------------
---------------------------------------------------- ---------------------------------------------------------------
</TABLE>
Proposed Insured(s)'s Copy
This Form Can Only Be Used In
<PAGE>
- --------------------------------------------------------------------------------
Temporary Insurance Agreement and Advance Premium Receipt (Cont.)
- --------------------------------------------------------------------------------
TERMS, CONDITIONS AND LIMITATIONS
AMOUNT OF COVERAGE: $500,000 Maximum for all Life Insurance Applications or
------------------
Agreements
Subject to the limitations contained in this Agreement, if money has been
accepted by the Company as advance payment for the Application for Life
Insurance identified by number in this Agreement, and if the Proposed
Insured(s) or any other person proposed for coverage dies while this
Agreement is in effect, the Company will pay to the Beneficiary named in that
application the LESSER of: (a) the amount of all death benefits applied for
on each such person, including any accidental or supplemental death benefits,
if applicable; or (b) $500,000. Even if more than one Temporary Insurance
Agreement and Advance Premium Receipt is in effect, the total amount paid
under all such agreements cannot be more than a maximum amount of $500,000.
This maximum amount also will be reduced by any other life and accidental
death insurance in force with us. The MINIMUM amount of temporary life
-------
insurance will be either the amount applied for or $50,000, whichever is
less.
DATE COVERAGE BEGINS: If an advance premium has been paid, Temporary
--------------------
Insurance under this Agreement will begin when the following requirements are
met:
1) This Agreement has been completed; and
2) The Application for Life Insurance and the Medical Declarations or
Application Part II have been fully completed; and
3) All required medical examination requirements have been completed.
DATE COVERAGE TERMINATES: Temporary Insurance under this Agreement will
------------------------
terminate automatically on the earliest of the following dates:
1) 60 days from the date of this Agreement; or
2) The date insurance begins under the policy(ies) applied for; or
3) The date a policy, other than applied for, is offered to the person
named as Owner in the application; or
4) The date the Company mails notice to the Proposed Insured(s) at the
address shown in the application that the application or this Agreement
has been declined by the Company.
SPECIAL LIMITATIONS:
-------------------
1) This Agreement provides benefits only for the type of insurance applied
for in the application. And, except as limited by this Agreement, our
liability is governed by the terms of the policy(ies) for which
application was made.
2) Fraud or misrepresentations in the application or in the answers to the
Health Questions in this Agreement invalidate this Agreement and the
Company's only liability is to refund any premium paid, p]us interest.
3) If the Proposed Insured(s) dies by suicide, the Company's liability is
limited to a refund of any premium paid, plus interest.
4) There is no coverage under this Agreement if the check submitted with
the application is not honored by the bank the first time it is
presented.
5) No agent or broker is authorized to accept a payment for a Proposed
Insured(s) who is less than 15 days old or over age 70 on the date of
this Agreement.
Any payment made under this Agreement applies only to the purchase of
Temporary Insurance. If we issue the policy as applied for, or if you accept
a policy issued other than as applied for, then the amount paid will be
credited to the first year's premium due under the policy issued. Except as
otherwise provided under the terms of the policy, no refund will be made if
we issue a policy as applied for. The effective date of the policy issued
will be determined in accordance with our current policy dating procedures.
The full amount paid with this Agreement will be refunded to you, with
interest, if:
1) The application or this Agreement is declined or cancelled by us, or
2) We receive your signed request to cancel the application or this
Agreement.
Proposed Insured(s)'s Copy
This Form Can Only Be Used In
<PAGE>
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
REQUEST FOR CONSIDERATION OF REINSTATEMENT
Request for consideration of reinstatement of policy number 16,000,001
--------------------
together with any supplemental agreements or riders, on the life/lives of
John Doe
- --------
This policy lapsed for non-payment of the premium due January 1, 2000
--------------------------
TO THE PERSON/PERSONS INSURED BY THIS POLICY, PLEASE COMPLETE, SIGN BELOW and on
Page 2.
Please answer the following questions pertaining to all persons formerly covered
under this policy and any of its supplemental agreements or riders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INSURED #1
<S> <C> <C>
1. Are you in good health as of the current date? ................................... [_] Yes [_] No
2. In the past five years, have you had any accidents, disease, illness,
hospitalization or medical or surgical examination or treatments? ................ [_] Yes [_] No
If the answer is "No" to question #1 and/or "Yes" to question #2 above, please complete below:
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME OF INSURED
(If more space is needed, DETAILS OF DATES OF NAME AND ADDRESS OF
use other side.) ILLNESS OR INJURY TREATMENT RESULTS ATTENDING PHYSICIAN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. Smith, 300 Tree St
John Doe broken ankle 1-99 Good St. Louis, MO
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Date Signed City and State Signature of Insured #1
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
OTHER INSUREDS
1. Are you in good health as of the current date? .................................. [_] Yes [_] No
2. In the past five years, have you had any accidents, disease, illness,
hospitalization or medical or surgical examination or treatments? ............... [_] Yes [_] No
If the answer is "No" to question #1 and/or "Yes" to question #2 above, please complete below:
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
NAME OF INSURED
(If more space is needed, DETAILS OF DATES OF NAME AND ADDRESS OF
use other side.) ILLNESS OR INJURY TREATMENT RESULTS ATTENDING PHYSICIAN
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Date Signed City and State Signature of Other Insureds
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
If address has changed, please provide new address for premium billings and other communications.
- ---------------------------------------------------------------------------------------------------------------
CORPORATE OWNER, PLEASE COMPLETE: INDIVIDUAL OWNER(S), OTHER THAN INSURED,
- ----------------------------------------------------- PLEASE SiGN HERE:
Full name of corporation
x
- ----------------------------------------------------- ---------------------------------------
Signature and title of officer
x
- ----------------------------------------------------- ---------------------------------------
</TABLE>
PLEASE READ AUTHORIZATION AND SIGN AT X ON BACK OF THIS FORM.
1
<PAGE>
- --------------------------------------------------------------------------------
AUTHORIZATION TO OBTAIN INFORMATION
I authorize any physician, medical practitioner, hospital, clinic, other
medical or medically related facility, insurance or reinsuring company, the
Medical Information Bureau, Inc., consumer reporting agency, or employer
having information available as to diagnosis, treatment and prognosis with
respect to any physical or mental condition and/or treatment of me or any
member of my family included in this policy and any other non-medical
information of me or any member of my family included in this policy to give
to Paragon Life Insurance Company or its legal representative, any and all
such information.
I understand the information obtained by use of the Authorization will be
used by Paragon Life Insurance Company to determine eligibility for
reinstatement of insurance and eligibility for benefits under an existing
policy. Any information obtained will not be released by Paragon Life
Insurance Company to any person or organization except to reinsuring
companies, the Medical Information Bureau, Inc., or other persons or
organizations performing business or legal services in connection with my
application, claim, or as may be otherwise lawfully required or as I may
further authorize.
I know that I may request to receive a copy of this Authorization. I agree
that a photographic copy of this Authorization will be as valid as the
original. I agree this Authorization will be valid for 30 months from the
date shown below.
For your protection the laws of several states require the following
statement:
Any person who knowingly and with intent to injure, defraud or deceive any
insurer or other person, files a statement of claim or an application
containing any materially false, incomplete or misleading information commits
a fraudulent insurance act, which is considered a crime in many states and
subjects such person to criminal and civil penalties. Penalties may include
imprisonment, fines, denial of insurance, and civil damages. In the state of
Florida such conduct makes a person guilty of a felony of the third degree.
Any insurance company or agent of an insurance company who knowingly provides
false, incomplete, or misleading facts or information to a policyholder or
claimant for the purpose of defrauding or attempting to defraud the
policyholder or claimant with regard to a settlement or award payable from
insurance proceeds will be reported to the state agency that regulates
insurance companies.
- --------------------------------------------------------------------------------
Signature of Insured/Insureds
(if Insured is a minor, signature of parent or guardian)
x
--------------------------------------- -----------------------------
Date signed
x
--------------------------------------- -----------------------------
Date signed
- --------------------------------------------------------------------------
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
2
<PAGE>
AMENDMENT OF APPLICATION
------------------------
Policy Number: 16,000,001 Insured: John Doe
The application for this policy is amended as follows:
Proposed Insured's social security # is 123-45-6789.
This amendment and the application will be part of this policy.
Dated at
----------------------------- ----------------------------------
(Signature of Proposed Insured-
Parent of Guardian of Minor
Proposed Insured)
This day of year
------- ------- ----- ----------------------------------
(*Signature of Applicant/Owner)
- -------------------------------------- ----------------------------------
Signature of Additional Adult Insured
----------------------------------
*Signature and address if other
than Proposed Insured. If Owner
is a Corporation, Partnership,
or Trust, an authorized officer,
partner, or trustee must sign and
state title.
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
Home Office Use only: Face Amount PM Account # File #
- --------------------------------------------------------------------------------
APPLICATION PART II
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Proposed Insured Birthdate Social Security Number
John J. Doe 5/1/64 123-45-6789
Premium Payer Billing Address
John J. Doe 123 Main Street, St. Louis. MO 11111
2. Employer's Name and Address Employer's Phone Number
Steam Iron Company 111-111-1122
3. Occupation Length of Employment Driver's License Number/State
Ironworker 15 years D123456789/MO
4. Are you a U.S. Citizen? Yes
[If no:
What country?
How long in U.S.A.?
Plan to remain?
Type of VISA?]
5. Do you plan to travel or reside outside the U.S.A. in the next two years? No
[If yes:
Travel or Reside?
Where?
When?
How long?
Purpose?]
6. Do you have other life insurance policies, including riders, in force? No
[If yes:
Name of company?
Face amount?
When issued?
Business or Personal?]
7. Will the insurance being applied for replace any of the policies listed in Question 6 above? No
[If yes:
Which company?
What amount?
Business or Personal?]
8. Have you, within the last 90 days, applied for life insurance with this or any
other company? No
[If yes:
What company?
Face amount?
Intend to accept?
Total amounts all companies to be accepted?]
</TABLE>
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
9. Have you ever been denied, rated, or offered a policy or rider other
than that applied for? No
[If yes:
What was the adverse action(s)?
Date(s) of action(s)?
Why was the action(s) taken (if known)?
Type of insurance?
Name of insurance company?]
10. Have you, within the past three years, had any moving vehicle violations? Yes
[If yes:
Type? Speeding
When? May 1996
Penalty?] Fine Paid
11. Have you, within the past ten years, had a traffic citation for driving while intoxicated
or driving under the influence of intoxicants or drugs? No
[If yes:
When?
Penalty?
Were classes required to reinstate license?
Treatment required?
Type of treatment? When? Where?]
12. a. Have you been a pilot or student pilot during the past three years or have any intention of
becoming a pilot in any type of aircraft within the next twelve months? No
[If yes:
Pilot license currently held?
Rating (s): Airline Transport Rating Instrument Flight Rating
Total solo hours flown as pilot?
</TABLE>
Type and Schedule of hours flown as pilot, co-pilot, or other crew member:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Type of Flying Type of Aircraft Date of Total to Last 12 Est. Next
Last Flight Date Months 12 Mos.
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Private?
- ---------------------------------------------------------------------------------------------
Student?
- ---------------------------------------------------------------------------------------------
Flight instructor?
- ---------------------------------------------------------------------------------------------
Commercial -
scheduled?
- ---------------------------------------------------------------------------------------------
Commercial -
Non-scheduled?
- ---------------------------------------------------------------------------------------------
Agriculture?
- ---------------------------------------------------------------------------------------------
Business?
- ---------------------------------------------------------------------------------------------
Civil Air Patrol?
- ---------------------------------------------------------------------------------------------
Military?
- ---------------------------------------------------------------------------------------------
Other?
(Give details)]
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
b. Have you flown during the past three years or intend to fly: ultralight, biplane,
prototype, experimental or personally built or assembled aircraft, or any other type
of aircraft, except as mentioned above? No
</TABLE>
<TABLE>
<CAPTION>
[If yes:
Type and Schedule of number of flights:
- --------------------------------------------------------------------------------------------------------
Type of Craft Club Usual Last 1-2 yrs Next Accident (if any)/Details
Member Location and 12 Ago 12
Details Type of Mos. Mos.
Terrain
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ultralight -
powered
- --------------------------------------------------------------------------------------------------------
Ultralight--
unpowered
- --------------------------------------------------------------------------------------------------------
Biplane?
- --------------------------------------------------------------------------------------------------------
Prototype?
- --------------------------------------------------------------------------------------------------------
Experimental?
- --------------------------------------------------------------------------------------------------------
Personally
built?
- --------------------------------------------------------------------------------------------------------
Personally
assembled?
- --------------------------------------------------------------------------------------------------------
Other?
(Give details)
- --------------------------------------------------------------------------------------------------------
</TABLE>
Should you not qualify for coverage at standard rates, do you desire:
[ ] Full coverage with extra premium, if available?
[ ] Restricted aviation coverage without extra premium, if available?]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
13. Have you participated within the past two years, or do you contemplate
participating in: Sky sports, motor vehicle racing, underwater diving,
mountain or rock climbing, or any other similar avocations? No
</TABLE>
[If yes:
If Sky Sports:
Type and Schedule of number of flights or jumps:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Type Club Usual Last 1-2 Next Usual Greatest Accident (if any)/
member/ location 12 Yrs 12 height (in height/ Details
Certification and type Mos. Ago Mos. feet) distance
/Instruction of terrain (in feet)/
Duration
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gas Ballooning?
- ---------------------------------------------------------------------------------------------------------------------
Hot air
ballooning?
- ---------------------------------------------------------------------------------------------------------------------
Hang gliding -
experimental
equipment with
parachute?
- ---------------------------------------------------------------------------------------------------------------------
Hang gliding -
experimental
equipment
without
parachute?
- ---------------------------------------------------------------------------------------------------------------------
Hang gliding
without
experimental
equipment with
parachute?
- ---------------------------------------------------------------------------------------------------------------------
Hang gliding
without
experimental
equipment without
parachute?
- ---------------------------------------------------------------------------------------------------------------------
Parachuting?
- ---------------------------------------------------------------------------------------------------------------------
Delayed
jumping
skydiving?
- ---------------------------------------------------------------------------------------------------------------------
Relative
freefall
skydiving?
- ---------------------------------------------------------------------------------------------------------------------
Relative canopy
skydiving?
- ---------------------------------------------------------------------------------------------------------------------
B.A.S.E.
jumping?
- ---------------------------------------------------------------------------------------------------------------------
Other?
(Give details)]
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
[If Motor Vehicle Racing:
Type? Automobile Motorcycle Motorboat Snowmobile Other
Number of races:
Last twelve months?
1 to 2 Years Ago?
Next twelve months?
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Type of race: Drag Stock Midget Sports Car Hot Rod Go Kart Other
Motorcycle Motorboat Snowmobile
</TABLE>
Make?
Model?
Class?
Category?
Displacement?
Horsepower? Number of CC's?
Timing? Vehicle vs. Vehicle Vehicle vs. Clock
Maximum speed (mph)?
Average speed (mph)?
Distance of race?
Location? Oval track Closed Circuit Drag Strip Hill Climb
Other (Give details):
Type of road?
List all racing organization affiliations:
Races supervised by what organization(s)?
Ever or intend to compete outside U.S.A. or Canada?
If yes, Details:
Details of any racing accident:]
[If Motorboat:
Type(s) of event?
Type of boat?
Class and Category?
List all racing organization affiliations:
Races supervised by?
Average length?
Maximum speed?
Average speed?]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
[If Underwater Diving:
When last certified?
Level of certification?
List all diving club affiliations:
Use buddy system?
Any night diving?
Number of Dives:
<TABLE>
<CAPTION>
Depth Location Purpose Avg. Last 1 to 2 Next
i.e. Oceans, Lakes, i.e. time 12 years 12 Mos.
Cave, Ice, Recreation, Mos. ago
Other (details) Certification,
Rescue,
Salvage,
Other (details)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0-100 ft
- ---------------------------------------------------------------------------------------------------------
101-150 ft
- ---------------------------------------------------------------------------------------------------------
Over 150 ft]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
[If Mountain or Rock Climbing:
Number of climbs:
Last 12 months?
1 to 2 years ago?
Next 12 months?
<TABLE>
<S> <C> <C> <C> <C> <C>
Type: Mountain Rock Ice Other (details):
Location: Ranges Caves Rock formations Trails Other (details):
</TABLE>
Usual heights (ft)?
Maximum height (ft)?
How often climbed to maximum height?
Grade and Class (if known)?
Geographical area or specific ranges?
List all club affiliations:
Use direct-aid climbing?
Details of guide participation:
Details of rescue duty:
Details of any climbing accident:]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
HEALTH STATEMENTS
14. a. Who is your personal doctor who can give us the most complete and up to
date information concerning your present health? Dr. Smith
(Indicate if "None")
b. [When was this doctor last consulted? March 1999 Why? Cold
What treatment was given or medication prescribed? None
Type of treatment? None
Types of medication prescribed? None Dosage? N/A
Doctor's address and Phone number:] 123 Elm Drive St. Louis, MO 11111
15. a. What is your height? 6'
b. What is your weight? 200lbs.
c. Any weight loss in the past year? No
[If yes,
Number of pounds lost?
Reason?]
16. Do you exercise? Yes
[If yes,
Type? Walk
How often?] Daily
17. Do you drink alcohol? Yes
[If yes,
Frequency? Weekends
How many drinks on average per occasion?] 2-4
18. a. Are your parents living?
Mother Yes Age 60 [Cause of Death, if deceased]
Father Yes Age 60 [Cause of Death, if deceased]
b. Have any brothers or sisters died of heart disease before
age 60? No
[If yes:
How many?
At what ages?]
19. In the last ten years have you had, been treated for, or
diagnosed as
having:
a. Cancer, disorder of the blood, stroke, or diabetes? Yes
[If yes,
If cancer:
When was the cancer diagnosed?
What type of cancer?
Where was the cancer?
What kind of treatment?
Currently taking medication?
If yes, Type(s)? Dosage?
Have all cancer studies been normal since end of treatment?
If no, Type(s) of study(ies)? Date of study(ies?) Results?
When was last visit to doctor?
What doctor has records? Name, Address, Phone Number]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
[If disorder of the blood:
Name of blood disorder?
When diagnosed?
How treated?
How often?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number:]
[If stroke:
Dates of stroke(s):
What kind of permanent damage sustained?
Any reoccurrence of symptoms?
If yes, Describe symptoms? When did they occur? Have they resolved?
If yes, When?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number]
[If diabetes:
At what age was diabetes diagnosed? 30
Are you currently being treated with insulin for diabetes? No
If yes, Dosage? Times taken?
Any complications? No
If yes, What type(s)? When occurred?
Current medication (other than insulin)? Yes
If yes, Type(s)? Glyburide Dosage? 1 pill per day
Check blood sugar routinely? Yes
If yes, What does fasting level usually run? 115
When was last visit to doctor? February 1999
If within the last year, any blood tests? Yes
If yes, Type(s)? Glucose Results? Normal
What doctor has records? See #14 Name, Address, Phone number:]
b. High blood pressure, chest pain, heart attack, or any other disease or
disorder of the heart or circulatory system? No
[If yes,
If high blood pressure:
When first diagnosed?
Blood pressure reading taken within the last 3 months?
If yes, what was reading (if known)?
Any blood pressure reading over 140/90 within the last 2 years (if known)?
If yes, What were reading(s)? Approximate date(s) of reading(s)?
Any complications?
If yes, What type(s)?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number]
[If chest pain:
Dates of occurrence?
Has diagnosis been made?
How diagnosed?
Have symptoms remained stable?
If no: Describe symptoms:
Currently taking medications?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
If yes: Type(s)? Dosage?
Currently involved in any form of cardiac rehabilitation?
If yes, What form(s)? Results?
Any tests done?
If yes, What type(s)? When? Results?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number]
[If heart attack:
When was heart attack?
How treated?
Any chest pain or other heart symptoms since the heart attack?
If yes, When? How was it treated?
Currently taking medication?
If yes, Type(s)? Dosage?
Currently involved in any form of cardiac rehabilitation?
If yes, What type(s) How often?
Any tests done?
If yes, What type(s)? When? Results?
When was last visit to doctor?
What doctor has records? Name, Address, Phone Number]
[If other disease or disorder of the heart or circulatory system:
Name of condition?
When diagnosed?
How diagnosed?
How treated?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number:]
[If irregular heart beat:
When diagnosed?
How diagnosed?
When was last episode?
How often does this occur?
Currently taking medication?
If yes, Type(s)? Dosage?
Do you have a pacemaker?
If yes, When inserted?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number:]
[If coronary artery disease:
When diagnosed?
How diagnosed?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number
Surgically treated?]
[If yes, What type of surgery?
If angioplasty:
When?
How many blockages opened?
Any heart attack before the angioplasty?
If yes, When? How treated?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
Any chest pain since the angioplasty?
If yes, When? How treated?
Any follow up cardiac test(s) since the angioplasty?
If yes, What type(s)? Dates? Results?
Where done?
Currently involved in any cardiac rehabilitation?
If yes, What type(s)? How often?
Where is rehabilitation done?
Currently taking medication?
If yes, Type(s)? Dosage?
When was visit to doctor?
What doctor has records? Name, Address, Phone number]
[If bypass surgery:
When was surgery?
How many vessels bypassed?
Any heart attack before the surgery?
If yes, When?
Where was surgery done?
Any chest pain since the surgery?
If yes, When? How treated?
Any follow up cardiac test(s) since the surgery?
If yes, What type(s)? Dates? Results?
Where done?
Currently taking medication?
If yes, Type(s)? Dosage?
Currently involved in any form of cardiac rehabilitation
If yes, What type(s)? How often?
Where is rehabilitation done?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If other cardiac surgery:
What type(s) of surgery(ies) performed?
Dates of surgery(ies)?
Results?
Where performed?
Currently taking medication?
If yes, Type(s)? Dosage?
Any follow up cardiac tests since the surgery?
If yes, What type(s)? When? Result(s)?
When was visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If heart murmur:
When discovered?
How discovered?
Description of murmur (if known):
Any symptoms?
If yes, Describe:
Currently taking medication?
If yes, Type(s)? Dosage?
Had echocardiogram within the last two years?
If yes, Date? Results?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number:]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
c. Asthma, emphysema, or any other disease or disorder of the lungs or
respiratory system? No
[If yes,
If asthma:
When was last episode or attack?
How often do episodes occur?
How treated?
Currently taking medication?
If yes, Type(s)? Dosage?
Any hospitalizations or emergency room visits?
If yes, When? What hospital?
Hospital location?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If emphysema:
When diagnosed?
Any functional limitations as result of emphysema?
If yes, Describe:
Currently taking medication for emphysema?
If yes, Type(s)? Dosage?
Currently involved in any form of pulmonary rehabilitation?
If yes, Type(s)? How often?
Where is rehabilitation done?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If other disease or disorder of the lungs or respiratory system:
Name of the condition?
When diagnosed?
How treated?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
d. Cirrhosis, hepatitis, or any other disease or disorder of
the liver? No
[If yes,
If cirrhosis:
When diagnosed?
How treated?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If hepatitis:
When diagnosed?
What type?
How diagnosed?
How treated?
Cured?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If other disease or disorder of the liver:
Name of the liver disorder or disease?
When diagnosed?
How diagnosed?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
How treated?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
e. Any disease or disorder of the intestines, stomach, kidney,
bladder, or prostate? No
[If yes,
If intestines:
Name of the intestinal disorder or disease?
When diagnosed?
How treated?
When was last major flare-up?
How often are flare-ups?
Any bleeding episodes?
If yes, What dates? How treated?
Any surgery?
If yes, What type(s)? What date(s)? Where done?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If stomach:
Name of the stomach disorder or disease?
When diagnosed?
How treated?
When was last major flare-up?
Any bleeding episodes?
If yes, What dates? How treated?
Any surgery?
If yes, What type(s)? What date(s)? Where done?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If kidney:
Name of the kidney disorder or disease?
When diagnosed?
How discovered?
How treated? Date(s) of treatment?
Surgery?
If yes, What type(s)? What date(s)? Where done?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If bladder:
Name of the bladder disorder or disease?
When diagnosed?
How discovered?
How treated? Dates of treatment?
Any surgery?
If yes, Type(s)? What date(s)? Where done?
Currently taking medication?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If prostate:
Name of the prostate disorder or disease?
When diagnosed?
How discovered?
When was last PSA level taken? Results?
How often is PSA level taken?
How treated? Dates of treatment?
Any surgery?
If yes, What type(s)? What date(s)?
Where done?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
f. Depression, stress, anxiety, or any other psychological or
emotional disorder or symptoms? No
[If yes,
If depression, stress, anxiety:
When was initial diagnosis made?
How treated?
Ever hospitalized?
If yes, When? How long? How treated?
Type of follow up care? Frequency?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If other psychological or emotional disorder or symptoms:
Name of disorder (if known)?
Describe symptoms:
When was initial diagnosis made?
How treated? What dates(s)?
Ever hospitalized?
If yes, When? How long? How treated?
Type of follow up care? Frequency?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
20. a. In the last five years, have you consulted any other physician or other
medical practitioner? No
[If yes,
Reasons seen?
Dates seen?
How treated?
Results?
Any surgery performed?
If yes, Reason(s)? Date(s) of surgery?
Result(s)?
Who was the surgeon? Name, Address, Phone number
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
b. Other than the above, during the past five years, have you had any
checkup, illness, injury, or health conditions, had or been
recommended to have any treatment, hospitalization, surgery, or
medical tests? Yes
[If yes,
If checkup:
Reason? Follow diabetes
Date? Last 5 years
What tests performed? Routine Bloodwork Results? Controlled
What doctor has records? See #14 Name, Address, Phone Number]
[If illness:
What was the illness?
What were the symptoms?
When?
Date of recovery?
Did you visit your doctor?
If yes, Doctor's Name, Address, Phone number]
[If injury:
When was the injury?
Extent of the injury?
Type of treatment? Results?
Date of recovery?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If health condition:
Name of the condition?
Symptoms?
When diagnosed?
Type of treatment? Results?
Currently taking medication?
If yes, Type(s)? Dosage?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If treatment:
Type of treatment?
Name of the condition?
Date(s) of treatment? Results?
When was last visit to doctor?
Doctor who has records? Name, Address, Phone number]
[If hospitalization:
For what condition?
Dates of hospitalization(s)?
How long hospitalized?
Results?
Doctor/Hospital that has records? Name, Address, Phone number]
[If surgery:
For what condition?
Date of surgery(ies)? Results? Where done?
Date of recovery?
Doctor who has records? Name, Address, Phone number]
[If medical tests:
What type of test(s)?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
Dates of test(s)?
Reason for test(s)? Results?
Doctor who has records? Name, Address, Phone number]
21. Have you ever:
a. Been diagnosed by a member of the medical profession as having AIDS
or AIDS Related Complex? No
[If yes,
What doctor or facility diagnosed? Name, Address, Phone number]
b. Tested positive for antibodies to the AIDS (HIV) virus? No
(If yes,
What doctor or facility diagnosed? Name, Address, Phone number]
22. Have you:
a. Used (once or more) or do you now use barbiturates, amphetamines,
hallucinogenic drugs (including marijuana), cocaine, heroin,
narcotics, any similar substances, or any prescription drug except in
accordance with a physician's instruction? No
[If yes,
Type of substance or drug?
What dates used?
Frequency of use?
Was any treatment recommended?
If yes, Type of treatment(s)? Date(s)?
Name of doctor or facility where treated? Name, Address, Phone number]
b. Been advised to limit or discontinue the use of alcohol or drugs;
sought or received treatment, counseling, or participated
in a group for alcohol or drug use? No
[If yes,
What type of advice given?
When was it given?
Did you comply?
What type of alcohol or drugs?
What was the frequency?
Date last used?
What type of treatment?
Dates of treatment(s)? Results?
What type of counseling?
Dates of counseling? Results?
What type(s) of group participation?
When did you start?
Why did you start?
How often was participation?
Are you still participating? Results?
Doctor or facility that has records? Name, Address, Phone number]
23. Other than the above, are you currently taking any medication, or have you
been advised to take any medication? No
[If yes,
If currently taking:
Type(s) of medication? Dosage?
Reason(s) why taken?
Doctor who has records? Name, Address, Phone number]
[If been advised:
Reason(s) why advised?
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
Type(s) of medication? Dosage?
Reason not yet taking medication?
Intended date of starting medication?
Doctor who has records? Name, Address, Phone number]
24. To the best of your knowledge, do you have any mental or physical
impairment or disease not already described in this application? No
[If yes,
If mental impairment or disease:
Type of mental impairment or disease?
When diagnosed?
How treated?
Dates of treatment? Results?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number]
[If physical impairment or disease:
Type of physical impairment or disease?
When diagnosed?
How treated?
Dates of treatment? Results?
When was last visit to doctor?
What doctor has records? Name, Address, Phone number]
25. Additional Comments:
<PAGE>
PARAGON LIFE INSURANCE COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MO 63105
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACKNOWLEDGEMENT AND AUTHORIZATION
- --------------------------------------------------------------------------------
I have read all the questions and answers in this Application Part II and any
amendments to it including any supplements and they are true, complete and
correctly recorded. I agree to give Paragon Life Insurance Company written
notice of any change in my health or habits that occurs after signing this
Application Part II, but before receiving the policy and paying the first
premium, if not already paid.
I agree that:
1. This Application Part II, the Life Application Part I, and any amendments
will be the basis for and will be part of the policy issued;
2. No agent or medical/paramedical examiner has authority to alter the
Company's rules or requirements, this Application Part II, or the policy;
3. If a premium payment was given in exchange for a Temporary Insurance
Agreement (TIA), the Company will be liable only as set forth in that
Agreement. If a premium payment was not given, then insurance will take
effect when a policy is approved by the Company for issue as applied for,
the first full premium is paid, and the health and insurability of any
person proposed for insurance have not changed since the date of the
application. If a policy is issued other than as applied for, insurance
will take effect under the policy only when a policy issued by the Company
is delivered to and accepted by me, the first full premium is paid, and
the health and insurability of any person proposed for insurance have not
changed since the date of this application.
- --------------------------------------------------------------------------------
Dated at _______________________________________________ Date________________
(City, State)
Signature of Proposed Insured __________________________________________________
(Parent or Guardian if Proposed Insured under age 18)
- --------------------------------------------------------------------------------
<PAGE>
When will additional questions not be asked?
---
Question 4 If answered "Yes", additional questions will not be asked.
Question 5 If answered "No", additional questions will not be asked.
Question 6 If answered "No", additional questions will not be asked.
Question 7 If answered "No", additional questions will not be asked.
Question 8 If answered "No", additional questions will not be asked.
Question 9 If answered "No", additional questions will not be asked.
Question 10 If answered "No", additional questions will not be asked.
Question 11 If answered "No", additional questions will not be asked.
Question 12a If answered "No", additional questions will not be asked.
Question l2b If answered "No", additional questions will not be asked.
Question 13 If answered "No", additional questions will not be asked.
If answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he
participates only in motor vehicle racing, the questions
pertaining to sky sports, motorboat, underwater diving, and
mountain or rock climbing will not be asked.
Question 14 If answered "None", additional questions will not be asked.
Question 15c If answered "No", additional questions will not be asked.
Question 16 If answered "No", additional questions will not be asked.
Question 17 If answered "No", additional questions will not be asked.
Question 18a If answered "Yes", additional questions will not be asked.
Question 18b If answered "No", additional questions will not be asked.
Question 19a If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having only cancer, the questions pertaining to
disorder of the blood, stroke, and diabetes will not be asked.
Question 19b If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having high blood pressure and chest pain, the
questions pertaining to heart attack and other disease or disorder
of the heart or circulatory system will not be asked.
Question 19c If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having only asthma, the questions pertaining to
emphysema and other disease or disorder of the lungs or
respiratory system will not be asked.
Question 19d If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having only cirrhosis, the questions pertaining
to hepatitis and other disease of disorder of the liver will not
be asked.
Question 19e If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having a disease or disorder of the intestines,
the questions pertaining to disease or disorder of the stomach,
kidney, bladder, and prostate will not be asked.
Question 19f If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
been diagnosed as having depression, stress, or anxiety, the
questions pertaining to other psychological or emotional disorder
or symptoms will not be asked.
Question 20a If answered "No", additional questions will not be asked
Question 20b If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
had a checkup, the questions pertaining to illness, injury, health
condition, treatment, hospitalization, surgery and medical tests
will not be asked.
Question 21a If answered "No", additional questions will not be asked.
Question 21b If answered "No", additional questions will not be asked.
Question 22a If answered "No", additional questions will not be asked.
Question 22b If answered "No", additional questions will not be asked.
Question 23 If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he is
currently taking medication, the questions pertaining to been
advised to take medication will not be asked.
Question 24 If answered "No", additional questions will not be asked. If
answered "Yes", questions pertaining only to that topic will be
asked. For example, if the proposed insured indicates that he has
a mental impairment or disease, the questions pertaining to
physical impairment or disease will not be asked.
<PAGE>
Direct Dial (314) 444-0647
Fax # (314) 444-0510
23 August 1999
Matthew P. McCauley
Vice President
Associate General Counsel
[email protected]
Paragon Life Insurance Company
100 South Brentwood Boulevard
St. Louis, Missouri 63105
Dear Sirs:
This opinion is furnished in connection with the offering of Flexible Premium
Joint and Last Survivor Variable Life Insurance policies of Paragon Life
Insurance Company ("Paragon") and Separate Account D of Paragon Life Insurance
Company ("Separate Account") under the Securities Act of 1933, as amended (the
"Act").
I am the Vice president and General Counsel of Paragon, and in such capacity I
am familiar with Paragon's Articles of Incorporation and By-Laws and have
reviewed all statements, records, instruments and documents which I have deemed
necessary to examine for the purpose of this opinion. I have examined the form
of registration statement to be filed with the Securities and Exchange
Commission of Form S-6 in connection with the registration under the Act, of the
Contracts. I have supervised the establishment of the Separate Account on 3
January 1995, by the Board of Directors of Paragon as a Separate Account for
assets designed to support the contracts. I am familiar with the proceedings
taken and proposed to be taken in connection with the authorization, issuance
and sale of the contracts. Based upon a review of these documents and such laws
that I consider appropriate, I am of the opinion that:
1. Paragon is validly organized and in good standing under the laws of the
State of Missouri and a validly existing corporation.
2. The Separate Account is duly created and validly existing as a Separate
Account pursuant to the provisions of Section 309 of Chapter 376 of the
Revised Statutes of Missouri.
3. The Individual Contracts to be issued pursuant to the terms of the
Registration Statement have been duly authorized and, when issued and
delivered as provided therein, will constitute legal, validly issued, and
binding obligations of Paragon in accordance with their terms.
<PAGE>
23 August 1999
Page 2
4. To the extent so provided in the Contracts, the portion of the assets to
be held in the Separate Account equal to the reserves and liabilities under
the Contracts will not be chargeable with liabilities arising out of any
other business Paragon may conduct.
5. General American Life Insurance Company's resolution dated 20 December
1984 stating that it will assume all policies issued by Paragon, honor all
guarantees in said policies, and make determinations with respect to the
non-guaranteed aspects of Paragon's policies as if they were issued by
General American Life Insurance Company in the event Paragon ceases to be a
life insurance subsidiary of General American Life Insurance Company, does
not constitute a guarantee of the investment experience or cash values of
any Contract issued by Paragon.
6. The disclosure in the Registration Statement regarding the resolution
described in item 5 has been prepared or reviewed by me, and is fair,
correct, and complete in all material respects.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/S/ Matthew P. McCauley
------------------------
Matthew P. McCauley
<PAGE>
Exhibit 12
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Independent Auditors' Consent
The Board of Directors
Paragon Life Insurance Company
We consent to the use of our report included herein on Paragon Life Insurance
Company and to the reference to our firm under the heading "Experts" in the
Registration Statement and Prospectus.
/s/ KPMG LLP
St. Louis, Missouri
September 1, 1999
<PAGE>
[SUTHERLAND ASBILL LOGO HERE]
ATTORNEYS AT LAW
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2415
202.383.0100
fax 202.637.3593
www.sablaw.com
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0138
Internet: [email protected] Exhibit 13
September 1, 1999
Board of Directors
Paragon Life Insurance Company
100 South Brentwood Boulevard
St. Louis, Missouri 63105
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Prospectus filed as part of Pre-Effective Amendment No. 1
to the registration statement on Form S-6 for Separate Account D of Paragon Life
Insurance Company (File No. 333-80393). In giving this consent, we do not admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933.
Very truly yours,
SUTHERLAND ASBILL & BRENNAN LLP
By: /s/ Stephen E. Roth
---------------------------
Stephen E. Roth
