<PAGE>
As filed with the Securities and Exchange Commission on 28 April 2000
Registration No. 33-1834l
811-5382
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 12
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 A OF PARAGON LIFE INSURANCE COMPANY
(Exact Name of Registrant)
PARAGON LIFE INSURANCE COMPANY
100 South Brentwood Boulevard
St. Louis, MO 63105
(Address of 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
It is proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b), of Rule 485
[X] 1 May 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date), pursuant to paragraph (a)(1) of rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
Title of securities being registered: Group and Individual Flexible Premium
Variable Life Insurance Policies.
33-18341
<PAGE>
American
Variable
Insurance
Series
. GROUP AND INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE LIFE
INSURANCE POLICIES
Prospectus dated May 1, 2000 50406
<PAGE>
GROUP AND INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
PARAGON LIFE INSURANCE COMPANY
100 South Brentwood
St. Louis, MO 63105
(314) 862-2211
This Prospectus describes flexible premium variable life insurance policies
offered by Paragon Life Insurance Company (the "Company," "we," or "us") which
are designed for use in employer-sponsored insurance programs. When a Group
Contract is issued, Certificates showing the rights of the Owners and/or
Insureds will be issued under the Group Contract. Individual Policies will be
issued when a Group Contract is not issued. The terms of the Certificate and
the Individual Policy are very similar and are collectively referred to in this
Prospectus as "Policy" or "Policies."
The Policies are designed to provide lifetime insurance protection to age 95
and provide flexibility to vary premium payments and change the level of death
benefits payable under the Policies. Flexibility allows an Owner to provide for
changing insurance needs under a single insurance policy. An Owner can allocate
net premiums among several investment portfolios ("Funds") with different
investment objectives.
The Policy provides for: (1) a value upon surrendering the Policy; (2) loans;
and (3) a death benefit payable on the Insured's death. As long as the Policy
remains in force, the death benefit payable on the Insured's death will not be
less than the Face Amount of the Policy. The Policy will remain in force so
long as there is enough value to pay certain monthly charges.
The Owner may allocate net premiums to one or more of the Divisions of
Separate Account A (the "Separate Account"). The Policy value will vary to
reflect the investment experience of the Divisions selected by the Owner.
Depending on the death benefit option elected, portions of the death benefit
may also vary. The Owner bears the entire investment risk under the Policies;
there is no minimum guaranteed value.
Each Division of the Separate Account will invest solely in a corresponding
investment portfolio of American Variable Insurance Series:
<TABLE>
<CAPTION>
FUND FUND
- ------------------------------------------------------------------
<S> <C>
Cash Management Fund Bond Fund
- ------------------------------------------------------------------
High-Yield Bond Fund Global Growth Fund
- ------------------------------------------------------------------
Growth-Income Fund U.S. Government/AAA-Rated Securities Fund
- ------------------------------------------------------------------
Growth Fund Global Small Capitalization Fund
- ------------------------------------------------------------------
Asset Allocation Fund New World Fund
- ------------------------------------------------------------------
International Fund
</TABLE>
The date of this Prospectus is May 1, 2000.
<PAGE>
Please read this Prospectus carefully and keep it. A full description of the
Funds is contained in the prospectus for each Fund, which must accompany this
Prospectus.
It may not be a good decision 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 variable life
insurance policy.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary.................................................................. 4
The Company, The Separate Account, and The Funds......................... 10
The Company
The Separate Account
The Funds
Addition, Deletion, or Substitution of Investments
Payment and Allocation of Premiums....................................... 14
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Policy Benefits.......................................................... 18
Death Benefit
Cash Value
Policy Rights and Privileges............................................. 24
Exercising Rights and Privileges Under the Policies
Loans
Surrender and Partial Withdrawals
Transfers
Right to Examine Policy
Conversion Right to a Fixed Benefit Policy
Eligibility Change Conversion
Payment of Benefits at Maturity
Payment of Policy Benefits
Charges and Deductions................................................... 29
Sales Charges
Premium Tax Charge
Monthly Deduction
Partial Withdrawal Transaction Charge
Separate Account Charges
General Matters Relating to the Policy................................... 34
Distribution of the Policies............................................. 38
General Provisions of the Group Contract................................. 38
Federal Tax Matters...................................................... 39
Safekeeping of the Separate Account's Assets............................. 42
Voting Rights............................................................ 42
State Regulation of the Company.......................................... 43
Management of the Company................................................ 44
Legal Matters............................................................ 45
Legal Proceedings........................................................ 45
Experts.................................................................. 45
Additional Information................................................... 45
Definitions.............................................................. 46
Financial Statements..................................................... F-1
Appendix A............................................................... A-1
</TABLE>
The Policies are not available in all states.
3
<PAGE>
SUMMARY OF THE POLICY
The following summary of Prospectus information should be read with the
detailed information which follows in this Prospectus. Unless we provide
otherwise, the description of the Policies contained in this Prospectus assumes
that a Policy is in effect and that there is no outstanding Indebtedness.
The Policy
The Policies (either an Individual Policy or a Certificate) described in this
Prospectus are designed for use in employer-sponsored insurance programs and
are issued in three situations.
. First--Policies in the form of certificates are issued pursuant to Group
Contracts entered into between the Company and Contractholders (see
"General Provisions of the Group Contract");
. Second--Individual Policies can be issued in connection with employer-
sponsored insurance programs where Group Contracts are not issued; and
The Insured under a Policy is usually an employee of the Contractholder or
sponsoring employer or the employee's spouse. Generally, only an employee is
eligible to be an Insured under an Executive Program Policy. If there is
sufficient Cash Surrender Value, Individual Insurance under a Group Contract or
other employer-sponsored insurance program will continue should the Group
Contract or other program cease or the employee's employment end (see "Payment
and Allocation of Premiums--Issuance of a Policy").
On behalf of Owners, the Contractholder will make planned premium payments
under the Group Contract equal to an amount authorized by employees to be
deducted from their wages. In addition, Owners may pay additional premiums. A
similar procedure will apply when an Individual Policy is issued in connection
with an employer-sponsored program.
The Policies are "variable" policies because, unlike the fixed benefits under
other types of life insurance contracts, the Cash Value and, under certain
circumstances, the death benefit under a Policy may increase or decrease
depending upon the investment experience of the Funds underlying the Divisions
to which the Owner has allocated net premium payments. So long as a Policy's
Cash Surrender Value continues to be sufficient to pay the monthly deduction,
an Owner is guaranteed a minimum death benefit equal to the Face Amount of his
or her Policy or an accelerated death benefit in a reduced amount determined in
accordance with certain riders available under the Policy. (See "General
Matters Relating to the Policy--Additional Insurance Benefits.")
Right to Examine Policy
The Owner has a limited right to return a Policy for cancellation within 20
days after the delivery of the Policy to the Owner, within 45 days after the
Owner signs the application, or within 10 days after the Company mails a notice
of this cancellation right to the Owner whichever is latest. If a Policy is
cancelled within this time period, a refund will be paid which will equal all
premiums paid under the Policy or any different amount required by state law.
The Owner also has a right to cancel a requested increase in Face Amount. Upon
cancellation of an increase, the Owner may request that the Company refund the
amount of the additional charges deducted in connection with the increase, or
have the amount of the additional charges added to the Cash Value. (See "Policy
Rights and Privileges--Right to Examine Policy.")
The Separate Account
The Owner may allocate the net premiums to one or more Divisions. See "The
Company, The Separate Account, and The Funds" for a complete description of the
available Funds. An Owner may change future allocations of net premiums at any
time by notifying the Company directly.
4
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Subject to certain restrictions, an Owner may transfer Cash Values among the
Divisions of the Separate Account. Currently, no charge is assessed for
transfers. The Company reserves the right to modify the transfer privilege.
(See "Policy Rights and Privileges--Transfers.")
Premiums
An Owner has flexibility concerning the amount and frequency of premium
payments. An initial premium equal to one-twelfth ( 1/12) of the planned annual
premium set forth in the specifications page of a Policy is necessary to start
a Policy. The planned annual premium is an amount specified for each Policy
based on the requested initial Face Amount and certain other factors.
. Under Group Contracts and employer-sponsored programs, the initial
premium and subsequent planned premiums generally are remitted by the
Contractholder or sponsoring employer on behalf of the Owner at intervals
agreed to by the Contractholder or employer.
However, as discussed below, planned premiums need not be paid so long as there
is sufficient Cash Surrender Value to keep the Policy in force. Subject to
certain limitations, additional premium payments in any amount and at any
frequency may be made directly by the Owner. (See "Payment and Allocation of
Premiums--Issuance of a Policy--Premiums.")
A Policy will lapse (and terminate without value) when the Cash Surrender Value
is not enough to pay the next monthly deduction and a grace period of 62 days
expires without an adequate payment being made by the Owner. (See "Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.")
Death Benefit
Death benefit proceeds are payable to the Beneficiary when the Insured dies or
to the Owner, prior to the Insured's death under circumstances described in
available riders. (See "General Matters Relating to the Policy--Additional
Insurance Benefits.") Two death benefit options are available, as follows:
. Under the "Level Type" death benefit, the death benefit is the Face
Amount of the Policy or, if greater, the applicable percentage of Cash
Value; and
. Under the "Increasing Type" death benefit, the death benefit is the Face
Amount of the Policy plus the Cash Value or, if greater, the applicable
percentage of Cash Value.
So long as a Policy remains in force, the minimum death benefit under either
option will be at least equal to the current Face Amount. (See "Policy
Benefits--Death Benefit.")
The minimum initial Face Amount is generally $25,000 under the Company's
current rules. Executive Program Policies generally have a minimum Face Amount
of $100,000. The maximum Face Amount is generally $500,000. However, we may
establish a higher maximum Face Amount for Executive Program Policies. The
Owner may generally change the Face Amount (subject to the minimum and maximum
amounts applicable to his or her policy) and the death benefit option, but in
certain cases evidence of insurability may be required. (See "Policy Benefits--
Death Benefit.")
Riders
Additional insurance benefits offered under the Policy by rider may include a
children's insurance rider, an accelerated death benefit settlement option
rider, an accidental death benefit rider, and a waiver of monthly deductions
rider. Some Group Contracts and employer-sponsored insurance programs may not
provide each of the additional benefits described above. Generally, Executive
Program Policies only have the acceleration of death benefits rider. (See
"General Matters Relating to the Policy--Additional Insurance Benefits.") We
will deduct the cost of these additional insurance benefits from Cash Value as
part of the monthly deduction. (See "Charges and Deductions--Monthly
Deduction.")
5
<PAGE>
Cash Value
The Policies provide for a Cash Value equal to the total of the Policy's Cash
Value in the Separate Account and the Loan Account (securing Policy Loans). A
Policy's Cash Value will reflect premium payments, the investment performance
of any selected Divisions of the Separate Account, transfers, any Policy Loans,
Loan Account interest rate credited, any partial withdrawals, and the charges
imposed in connection with the Policy. (See "Policy Benefits--Cash Value.")
There is no minimum guaranteed Cash Value.
Charges and Deductions
Sales Charges. Sales charges may be deducted under a Policy. The sales charges
imposed, if any, will consist of a contingent deferred sales charge, which is
assessed in the event the Policy is surrendered during the first ten Policy
years, or a combination of a front-end charge, which is deducted from premiums
paid ("premium expenses charge"), and a contingent deferred sales charge. The
amount of the contingent deferred sales charges will depend primarily on
commissions paid by the Company in connection with that Policy. The amount of
commissions paid by the Company reflects the services rendered by the broker-
dealer in enrolling a particular group, the number of employees in the group,
and other costs incurred by the broker-dealer. Where a first year commission is
paid, the applicable contingent deferred sales charge will be equal to 30
percent of premiums paid during the first Policy Year up to the guideline
annual premium for the Policy's initial Face Amount. Where the first year and
renewal commissions are zero ("0"), no sales contingent deferred charges will
be imposed.
A front-end charge will be imposed on Policies that are deemed to be individual
Policies under the Omnibus Budget Reconciliation Act of 1990 ("OBRA"). The
additional charge, which is for federal income taxes measured by premiums, is
equal to 1% of each premium payment, and compensates the Company for a
significantly higher corporate income tax liability resulting from changes made
to the Internal Revenue Code by OBRA. If first year commissions are paid and
the Policy is deemed individual under OBRA, the contingent deferred sales
charge will be reduced to 28% of the premiums paid during the first Policy Year
up to the appropriate guideline annual premium; and the premium expense charge
will be one percent of all premiums paid. The sales charges applicable to a
particular Policy will be set forth in the specifications pages of the Policy.
The contingent deferred sales charge will be assessed against the Cash Value
under a Policy upon a surrender, lapse, or decrease in Face Amount during the
first ten Policy Years. Assuming that no increases in Face Amount have become
effective, the charge will be a percentage of premiums actually paid in the
first Policy Year (30%, 28% or 0%) up to the guideline annual premium for the
initial Face Amount. The percentage will be set forth in the specifications
pages of each Policy. The amount of the charge will decrease each year after
the first Policy Year by one-tenth ( 1/10) of the total charge until it reaches
zero at the end of ten Policy Years. The timing of premium payments may affect
the amount of the charge under a Policy, because the contingent deferred sales
charge is based only on premiums actually paid in the first Policy Year.
For any increase in the Face Amount an additional contingent deferred sales
charge will be calculated equal to a percentage of premiums associated with the
increase up to the guideline premium for the increase. See "Charges and
Deductions--Sales Charges", for a discussion of the manner in which premiums
are associated with an increase. The percentage charged will be the same as
that for the initial Face Amount. The additional charge calculated for the
increase will also decrease by one-tenth ( 1/10) of the total charge each year
after the first year following the effective date of the increase until it
reaches zero after ten years. For any decrease in the initial Face Amount or in
an increase in Face Amount during the first ten years such insurance coverage
is in force, a charge will be assessed that is proportionate to the charge that
would apply to a full surrender of initial Face Amount or increase. The
contingent deferred sales charge will apply to a partial withdrawal only if the
partial withdrawal decreases the Face Amount. (See "Policy Rights and
Privileges--Surrender and Partial Withdrawals," "Policy Benefits--Death
Benefit," and "Charges and Deductions--Sales Charges--Contingent Deferred Sales
Charge.")
6
<PAGE>
Premium Tax Charge. We deduct a charge of 2% to cover state premium taxes from
premiums paid. However, a charge of 2( 1/4)% may be deducted from premiums paid
in connection with Executive Programs. (See "Charges and Deductions--Premium
Tax Charge.")
Monthly Deduction. We make a monthly deduction from the Policy's Cash Value in
the Separate Account. The monthly deduction includes the following:
. Administrative Charge. We deduct an administrative charge (see the
specification pages of the Policy) based on 1) the number of Insureds
covered under a Group Contract or other employer-sponsored insurance
program, and 2) the amount of administrative services provided by the
Company. The charge will not exceed $6.00 per month during the first
Policy Year and $3.50 per month during renewal years.
. Cost of Insurance Charge. We deduct a cost of insurance charge calculated
on each Monthly Anniversary. We determine monthly cost of insurance rates
based upon expectations as to future mortality experience. For a
discussion of the factors affecting the rate class of the Insured see
"Charges and Deductions--Monthly Deduction--Cost of Insurance."
. A charge for any additional insurance benefits provided by a rider.
Separate Account Charges
. Mortality and Expense Risk Charge. We deduct a daily charge not to exceed
.0024547% (an annual rate of .90%) of the net assets of each Division for
the Company's assumption of certain mortality and expense risks incurred
in connection with the Policies. (See "Charges and Deductions--Separate
Account Charges.")
. Federal Taxes. No charges are currently made for federal or state income
taxes. (See "Federal Tax Matters.")
. Annual Expenses of the Funds (after fee waiver and reimbursement as
applicable). The value of the assets of the Divisions will reflect the
management fee and other expenses incurred by the Funds. The following
table describes the Fund fees and expenses during the time that the Owner
owns the Policy. These fees and expenses are shown as a percentage of net
assets for the year ended December 31, 1999. The prospectus for each Fund
contains more detail concerning a Fund's fees and expenses. (See "The
Company, The Separate Account, and The Funds.")
<TABLE>
<CAPTION>
Total
Management Other Annual
Fund Fees Expenses Expenses
<S> <C> <C> <C>
Cash Management Fund 0.44% 0.01% 0.45%
High-Yield Bond Fund 0.50% 0.01% 0.51%
Growth-Income Fund 0.34% 0.01% 0.35%
Growth Fund 0.38% 0.01% 0.39%
Asset Allocation Fund 0.43% 0.01% 0.44%
International Fund 0.55% 0.05% 0.60%
Bond Fund 0.51% 0.02% 0.53%
Global Growth Fund 0.68% 0.03% 0.71%
U.S. Government/
AAA-Rated Securities Fund 0.51% 0.01% 0.52%
Global Small Capitalization Fund 0.78% 0.03% 0.81%
New World Fund 0.78% 0.05% 0.83%
</TABLE>
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.
7
<PAGE>
Partial Withdrawal Transaction Charge. We deduct a transaction charge equal to
the lesser of $25 or 2% of the amount withdrawn on each partial withdrawal of
amounts from the Separate Account. Currently, there are no transaction charges
imposed for transfers of amounts between Divisions. In addition, transfers and
withdrawals are subject to restrictions relative to amount and frequency. (See
"Payment and Allocation of Premiums--Allocation of Net Premiums and Cash
Value," "Policy Rights and Privileges--Surrender and Partial Withdrawals--
Transfers," and "Charges and Deductions--Partial Withdrawal Transaction
Charge.")
Policy Loans
After the first Policy Anniversary an Owner may borrow against the Cash Value
of a Policy. All outstanding Indebtedness will be deducted from proceeds
payable at the Insured's death, upon maturity, or upon surrender. We transfer a
portion of the Policy's Cash Value in each Division of the Separate Account to
which the loan is allocated to the Loan Account as security for the loan.
Therefore, a Policy Loan may have a permanent impact on the Policy's Cash Value
even if it is repaid. A Policy Loan may be repaid in whole or in part at any
time while the Policy is in force. (See "Policy Rights and Privileges--Loans,")
Loans taken from, or secured by, a Policy may in certain circumstances be
treated as taxable distributions from the Policy. Moreover, with certain
exceptions, a 10% additional income tax would be imposed on the portion of any
loan that is included in income. (See "Federal Tax Matters.")
Surrender and Partial Withdrawals
At any time that a Policy is in effect, an Owner may elect to surrender the
Policy and receive its Cash Surrender Value. An Owner may also request a
partial withdrawal of the Cash Value of the Policy. A partial withdrawal may
reduce the Face Amount and the death benefit payable under the Policy. If
Option A is in effect and the death benefit equals the Face Amount, the death
benefit will also be reduced by an amount equal to the contingent deferred
sales charge deducted, if any. (See "Policy Rights and Privileges--Surrender
and Partial Withdrawals.") Surrenders and partial withdrawals may have federal
income tax consequences. (See "Federal Tax Matters.")
Conversion Right
During the first 24 Policy Months following a Policy's Issue Date, the Owner
may convert the Policy to a life insurance policy that provides for benefits
that do not vary with the investment return of the Divisions. The Owner also
has a similar right with respect to increases in the Face Amount. (See "Policy
Rights and Privileges--Conversion Right to a Fixed Benefit Policy.")
Eligibility Change Conversion
In the event that the Insured is no longer eligible for coverage under the
Group Contract, either because the Group Contract has terminated or because the
employee is no longer employed by the Contractholder, the Individual Insurance
provided by the Policy issued in connection with the Group Contract will
continue unless the Policy is cancelled or surrendered by the Owner or there is
insufficient Cash Surrender Value to prevent the Policy from lapsing.
If a Certificate was issued in connection with the Group Contract, the
Certificate will be amended automatically to continue in force as an Individual
Policy. The new Individual Policy will provide benefits which are identical to
those provided under the Certificate. If an Individual Policy was issued in
connection with a Group Contract, the Individual Policy will continue in force
following the termination of the Group Contract. (See "Policy Rights and
Privileges--Eligibility Change Conversion.")
8
<PAGE>
Illustrations
Illustrations in Appendix A show how death benefits and Cash Values may vary
based on certain hypothetical rate of return assumptions as well as assumptions
pertaining to the level of the charges. These rates are not guaranteed. They
are illustrative only and do not show past or future performance. If a Policy
is surrendered in the early Policy Years, the Cash Value payable will be low
compared to premiums accumulated with interest, and consequently the insurance
protection provided prior to surrender will be costly.
Policy Tax Compliance
We intend for the Policy to satisfy the definition of a life insurance contract
under Section 7702 of the Internal Revenue Code (the "Code"). Assuming that a
Policy qualifies as a life insurance contract under the Code, a Policy Owner
should not be taxed for receiving value from the Policy, until there is a
distribution from the Policy. Also, death benefits payable under a Policy
should be excludable from the gross income of the Beneficiary.
A Policy may be treated as a "modified endowment contract." If the Policy is a
modified endowment contract, it will affect the tax advantages offered under
the Policy. (See "Federal Tax Matters.")
Specialized Uses of the Policy
Because the Policy provides for an accumulation of Cash Value as well as a
death benefit, the Policy can be used for various individual and business
financial planning purposes. Purchasing the Policy in part for such purposes
entails certain risks. For example, if the investment performance of Divisions
to which Cash Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate sufficient
Cash Value to fund the purpose for which the Policy was purchased. Partial
withdrawals and Policy Loans may significantly affect current and future Cash
Value, Cash Surrender Value, or death benefit proceeds. Depending upon Division
investment performance and the amount of a Policy Loan, the loan may cause a
Policy to lapse. Because the Policy is designed to provide benefits on a long-
term basis, before purchasing a Policy for a specialized purpose a purchaser
should consider whether the long-term nature of the Policy is consistent with
the purpose for which it is being considered. Using a Policy for a specialized
purpose may have tax consequences. (See "Federal Tax Matters.")
Questions
If you have any questions, you may write or call the Company at 100 South
Brentwood, St. Louis, MO 63105, (314) 862-2211.
9
<PAGE>
THE COMPANY, THE SEPARATE ACCOUNT, AND THE FUNDS
The Company
Paragon Life Insurance Company is a stock life insurance company incorporated
under the laws of Missouri. We were organized in 1981 as General American
Insurance Company and on December 31, 1987, our name was changed. No change in
operations or ownership took place in connection with the name change. Our main
business is writing individual and group life insurance policies and annuity
contracts. As of December 31, 1998, it had assets in excess of $300 million. We
are admitted to do business in 49 states and the District of Columbia. Our
principal offices are at 100 South Brentwood, St. Louis, Missouri 63105 ("Home
Office"). Our Internal Revenue Service Employer Identification Number is 43-
1235869.
We are a wholly-owned subsidiary of General American Life Insurance Company
(the "Parent Company"), a Missouri life insurance company. The Parent Company
is wholly owned by GenAmerica Corporation, a Missouri general business
corporation, which is wholly owned by Metropitan Life Insurance Company, a New
York insurance company.
Guarantee. The Parent Company agrees to guarantee that we will have sufficient
funds to meet all of our contractual obligations. In the event a Policyholder
presents a legitimate claim for payment on a Paragon insurance Policy, the
Parent Company will pay such claim directly to the Policyholder if Paragon is
unable to make such 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 the Parent Company, its
successor or assignee and shall end only if the guarantee is assigned to an
organization having a financial rating from Standard & Poor's equal to or
better than the Parent Company's rating. The Parent Company does not intend
that this guarantee cover the investment experience or Cash Values of the
Policy.
Ratings. We may from time to time publish in advertisements, sales literature,
and reports to Owners or Contractholders, the ratings and other information
assigned to us by one or more independent rating organizations such as A. M.
Best Company, Standard & Poor's, and Duff & Phelps. The purpose of the ratings
is to reflect our financial strength and/or claims paying ability and should
not be considered as bearing on the investment performance of assets held in
the Separate Account. Each year the A. M. Best Company reviews the financial
status of thousands of insurers, culminating in the assignment of Best's
ratings. These ratings reflect Best's current opinion of the relative financial
strength and operating performance of an insurance company in comparison to the
norms of the life/health insurance industry. In addition, the claims paying
ability of the Company as measured by Standard & Poor's Insurance Ratings
Services or Duff & Phelps may be referred to in advertisements or sales
literature or in reports to Owners or Contractholders. These ratings are
opinions of an operating insurance company's financial capacity to meet the
obligations of its insurance policies in accordance with their terms. These
ratings do not reflect the investment performance of the Separate Account or
the degree of risk associated with an investment in the Separate Account.
Advertisements. We also may include in advertisements and other literature
certain rankings assigned to us by the National Association of Insurance
Commissioners ("NAIC"), and our analyses of statistical information produced by
the NAIC. These rankings and analyses of statistical information may describe,
among other things, our growth, premium income, investment income, capital
gains and losses, policy reserves, policy claims, and life insurance in force.
Our use of such rankings and statistical information is not an endorsement by
the NAIC.
Advertisements and literature prepared by the Company also may include
discussions of taxable and tax-deferred investment programs (including
comparisons based on selected tax brackets), alternative investment vehicles,
and general economic conditions.
10
<PAGE>
The Separate Account
We established Separate Account A (the "Separate Account") as a separate
investment account on October 30, 1987 under Missouri law. The Separate Account
receives and invests the net premiums paid under the Policies. In addition, the
Separate Account receives and invests net premiums for other flexible premium
variable life insurance policies issued by us.
The Separate Account is divided into Divisions. Each Division will invest in
Funds as shown on the cover page of this Prospectus. 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 the Company,
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 the Company only to
the extent that the Separate Account's assets exceed its liabilities arising
under the Policies. From time to time, these excess assets may be transferred
out of the Separate Account and included in the Company's general assets.
Before making any such transfers, the Company will consider any possible
adverse impact the transfer may have on the Separate Account.
The Separate Account has been registered with the Securities and Exchange
Commission ("SEC" or "Commission") 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 Commission.
The Funds
The Separate Account invests in shares of American Variable Insurance Series
(referred to as the "American Series"), a series-type mutual fund registered
with the SEC as 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 the American Variable Insurance Series. The
assets of each Portfolio used by the Policies are held separate from the assets
of the other Portfolios, and each Portfolio has investment objectives and
policies which are generally different from those of the other Portfolios. The
income or losses of one Portfolio generally have no effect on the investment
performance of any other Portfolios.
The investment objectives and policies of certain Portfolios are similar to the
investment objectives and policies of other portfolios. The investment results
of the Portfolios may differ from the results of these other portfolios. There
can be no guarantee, and no representation is made, that the investment results
of any of the Portfolios will be comparable to the investment results of any
other portfolio.
The following summarizes the investment policies of each Portfolio:
.Cash Management Fund
The Fund seeks to provide you an opportunity to earn income on your cash
reserves while preserving the value of your investment and maintaining
liquidity by investing in a diversified selection of high quality money market
instruments. The prices of money market instruments may be affected by
unfavorable political, economic, or governmental developments that could affect
the repayment of principal or the payment of interest.
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<PAGE>
.High-Yield Bond Fund
The Fund seeks to provide you with a high level of current income and
secondarily capital appreciation by investing primarily in lower quality debt
securities (rated Ba and BB or below by Moody's Investors Services, Inc. or
Standard & Poor's Corporation or unrated but determined to be of equivalent
quality), including those of non-U.S. issuers. The fund may also invest in
equity securities and securities that have both equity and debt characteristics
that provide an opportunity for capital appreciation.
.Growth-Income Fund
The Fund seeks to make your investment grow and provide you with income over
time by investing primarily in common stocks or other securities which
demonstrate the potential for appreciation and/or dividends. The fund may also
invest up to 10% of its assets in securities of issuers domiciled outside the
U.S. and not included in the Standard & Poor's 500 Composite Index.
.Growth Fund
The Fund seeks to make your investment grow by investing primarily in common
stocks of companies that appear to offer superior opportunities for growth of
capital. The fund may also invest up to 15% of its assets in equity securities
of issuers domiciled outside the U.S. and Canada and not included in the
Standard & Poor's 500 Composite Index.
.Asset Allocation Fund
The Fund seeks to provide you with high total return (including income and
capital gains) consistent with preservation of capital over the long-term by
investing in a diversified portfolio of common stocks and other equity
securities, bonds and other intermediate and long-term debt securities, and
money market instruments. The fund may also invest up to 10% of its assets in
equity securities of issuers domiciled outside the U.S. and not included in the
Standard & Poor's 500 Composite Index, and up to 5% of its assets in debt
securities on non-U.S. issuers.
.International Fund
The Fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located outside the United States (at least 65%
under normal circumstances).
.Bond Fund
The Fund seeks to maximize your level of current income and preserve your
capital by investing primarily in bonds. The fund is designed for investors
seeking income and more price stability than stocks, and capital preservation
over the long-term.
.Global Growth Fund
The Fund seeks to make your investment grow over time by investing primarily in
common stocks of companies located around the world. The fund normally will
invest in issuers domiciled in at least three countries.
.U.S. Government/AAA-Rated Securities Fund
The Fund seeks to provide you with a high level of current income, as well as
preserve your investment. The fund invests primarily in securities that are
guaranteed by the "full faith and credit" pledge of the U.S. Government and
securities that are rate AAA or Aaa by Moody's Investor's Services or Standard
& Poor's Corporation or unrated but determined to be of equivalent quality. The
fund may also invest a significant portion of its assets insecurities backed by
pools of mortgages (also called "mortgage-backed" securities).
.Global Small Capitalization Fund
The Fund seeks to make your investment grow over time by investing primarily in
stocks of smaller companies located around the world that typically have market
capitalizations of $50 million to $1.5 billion.
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<PAGE>
.New World Fund
The Fund seeks to make your investment grow over time by investing primarily in
stocks of companies with significant exposure to countries with developing
economies and/or markets. The fund may invest up to 25% of its assets in debt
securities of issuers primarily based in qualified countries which have
developing economies and/or markets.
There is no assurance that any of the Funds will achieve its stated objective.
More detailed information, including a description of risks, is in the
prospectus for the Funds, which must accompany or precede this Prospectus and
which should be read carefully. Please also refer to the "Annual Expenses of
the Funds" information of this Prospectus for a list of the Funds' annual
expenses.
Agreements. We have entered into or may enter into arrangements with certain
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 vary among the Funds
and are entered into because of administrative services provided by the
Company.
Resolving Material Conflicts. All of the Funds are also available to registered
separate accounts of other insurance companies offering variable annuity and
variable life insurance products. As a result, there is a possibility that a
material conflict may arise between the interests of Owners of Policies and of
Owners of Policies whose Cash Values are allocated to other separate accounts
investing in the Funds. In the event a material conflict arises, the Company
will take any necessary steps, including removing the assets of the Separate
Account from one or more of the Funds, to resolve the matter.
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 of the Funds 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
We also reserve the right to establish additional Divisions of the Separate
Account. We will establish new Divisions when marketing needs or investment
conditions warrant. 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:
. Eliminate or combine one or more Divisions;
. Substitute one Division for another Division; or
. 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 we deem it 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) deregistered 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, we may transfer the assets of the
Separate Account associated with the Policy to another separate account.
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<PAGE>
We cannot guarantee that the shares of the Funds will always be available. The
Funds each sell shares to the Separate Account in accordance with the terms of
a participation agreement between the Fund distributors and us. Should this
agreement terminate or should shares become unavailable for any other reason,
the Separate Account will not be able to purchase the existing Fund shares.
Should this occur, we will be unable to honor Owner requests to allocate Cash
Values or premium payments to the Divisions of the Separate Account investing
in such shares. In the event that a Fund is no longer available, we will take
reasonable steps to obtain alternative investment options.
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
We will generally issue a Group Contract to employers whose employees and/or
their spouses may become Owners (and/or Insureds) under the Group Contract so
long as the employee is within the class of employees eligible to be included
in the Group Contract. The class(es) of employees covered by a particular Group
Contract are set forth in that Group Contract's specifications pages.
The Group Contract will be issued upon receipt of an application for a Group
Contract signed by an appropriate officer of the employer and acceptance by us
at our Home Office. (See "General Provisions of the Group Contract--Issuance.")
Individuals (i.e., eligible employees and/or their spouses) wishing to purchase
a Policy, whether under a Group Contract or an employer-sponsored insurance
program, must complete the appropriate application for Individual Insurance and
submit it to our authorized representative or us at our Home Office. We will
issue to each Contractholder either a Certificate or an Individual Policy to
give to each Owner.
Individual Policies, rather than Certificates, will be issued
(1) to independent contractors of the employer;
(2) to persons who wish to continue coverage after a Group Contract has
terminated;
(3) to persons who wish to continue coverage after they no longer are
employed by the Group Contractholder;
(4) if state law restrictions make issuance of a Group Contract
impracticable; or
(5) if the employer chooses to use an employer-sponsored insurance program
that does not involve a Group Contract.
Issue Ages. A Policy generally will be issued only to Insureds of Issue Ages 17
through 70 who supply satisfactory evidence of insurability. We may issue
Policies to individuals falling outside the Issue Ages or decline to issue
Policies to individuals within the Issue Ages.
Employee Eligibility. In order for an employee to be eligible to purchase a
Policy, the employee must be actively at work at the time the application for
Individual Insurance is signed. In addition, the Contractholder may determine
specific classes to which the employee must belong to be eligible to purchase a
Policy. "Actively at work" means that the employee must work for the
Contractholder or sponsoring employer at the employee's usual place of work (or
such other places as required by the Contractholder or sponsoring employer) in
the course of such work for the full number of hours and the full rate of pay,
as set by the employment practices of the employer. Ordinarily the time worked
per week must not be less than 30 hours. However, we reserve the right to waive
or modify the "actively at work" requirement at our discretion.
In addition, the Contractholder may require that an employee must be employed
by the employer as of a certain date or for a certain period of time. We will
set forth this date or time period in the Group Contract specifications pages.
Employees of any Associated Companies of the Contractholder will be considered
employees of the Contractholder. We may also allow an individual who is an
independent contractor working
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<PAGE>
primarily for the sponsoring employer to be considered an eligible employee. An
independent contractor may receive an Individual Policy rather than a
Certificate depending upon state law applicable to the contracts. An employee
may include a partner in a partnership if the employer is a partnership.
Guaranteed Issue. We will issue the Policy and any children's insurance rider
applied for by the employee pursuant to our guaranteed issue procedure. We
offer the guaranteed issue procedure only when an employee is given the
opportunity to purchase a Policy for the first time. Under this procedure the
employee is required to answer qualifying questions in the application for
Individual Insurance, but is not required to submit to a medical or paramedical
examination. The maximum Face Amount that an employee can generally apply for
under the guaranteed issue procedure ("Guaranteed Issue Amount") is three times
the employee's salary up to a ceiling that is based on the number of eligible
employees under a Group Contract or other employer-sponsored insurance program.
We may offer guaranteed issue with Executive Programs or Corporate Programs
depending upon the number of eligible employees or if other existing insurance
coverage is cancelled.
Simplified Underwriting. The employee must submit to a simplified underwriting
procedure requiring the employee to respond satisfactorily to certain health
questions in the application:
. where the Face Amount exceeds the guaranteed issue limits;
. where the Policy has been offered previously to the employee;
. where the guaranteed issue requirements set forth in the application for
Individual Insurance are not met; or
. in connection with certain programs that may be offered without
guaranteed issue.
A blood test may be required. This requirement is generally applicable only to
Executive Programs Programs.
Simplified underwriting must be followed in connection with the issuance of any
children's rider, if the employee is not eligible for guaranteed issue
underwriting, or, (even when the employee is eligible) if the child does not
satisfy the guaranteed issue requirements set forth in the application for
Individual Insurance.
Acceptance of an application is always subject to our underwriting rules, and
we reserve the right to reject an application for any reason.
Employee's Spouse. If a Policy is to be issued to a spouse, the appropriate
application for Individual Insurance must be supplied. We will subject the
spouse to the simplified underwriting procedure described above. Guaranteed
issue is not available. We generally do not offer spouse coverage under
Executive Program Policies or Corporate Program Policies.
Issue Date. The Issue Date is the effective date for all coverage provided in
the original application for Individual Insurance. The Issue Date is used to
determine Policy Anniversaries, Policy Years, and Policy Months. A Policy will
not take effect until:
. the appropriate application for Individual Insurance is signed;
. the initial premium has been paid prior to the Insured's death;
. the Insured is eligible for it; and
. the information in the application is determined to be acceptable to the
Company.
Interim Insurance. Interim Insurance in the amount of insurance applied for may
be available prior to the issuance of a Policy which is being underwritten on a
guaranteed issue basis up to the Guaranteed Issue Amount. If available, interim
insurance will start as of the date of the application. Interim insurance ends
on the earliest of the following dates:
. the date insurance begins on the Policy applied for;
. the date a Policy other than the Policy applied for is offered to the
applicant;
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<PAGE>
. the date the Company notifies the applicant that the application for any
proposed Insured is declined;
. 60 days from the date of application; or
termination of employment with the Contractholder or sponsoring employer.
Premiums
The initial premium is due on the Issue Date, and usually will be paid by the
Contractholder or employer on behalf of the Owner. The Company requires that
the initial premium for a Policy be at least equal to one-twelfth ( 1/12) of
the planned annual premium for the Policy set forth in the specifications
pages. The planned annual premium is an amount specified for each Policy based
on the requested initial Face Amount, the Issue Age of the Insured and the
charges under the Policy. (See "Charges and Deductions.") The Owner is not
required to pay premiums equal to the planned annual premium.
We will apply premiums paid by a Contractholder or sponsoring employer or
designated payor to a Policy as of the Valuation Date we receive the prmeiums.
Premiums will be "received" on a Valuation Date when we receive supporting
documentation necessary for us to determine the amount of premium per Policy
and the cash premium.
Planned Premium Payments. After the initial premium, and subject to the
limitations described below, premiums may be paid in any amount and at any
interval. Under Group Contracts and Individual Policies issued in connection
with other employer-sponsored insurance programs, the planned annual premium
usually will be paid by the Contractholder or sponsoring employer on behalf of
the Owner pursuant to a planned premium payment schedule. A planned premium
payment schedule provides for premium payments in a level amount at fixed
intervals (usually monthly) agreed to by the Contractholder or employer and us.
The amount of the premiums paid by the sponsoring employer or Contractholder
will be equal to the amount authorized by the employee. The Owner may skip
planned premium payments. Failure to pay one or more planned premium payments
will not always cause the Policy to lapse. The Policy will lapse if the Cash
Surrender Value is insufficient to cover the next Monthly Deduction. (See
"Payment and Allocation of Premiums--Policy Lapse and Reinstatement.")
Unscheduled Premiums. In addition to any planned payments made, an Owner may
make unscheduled premium payments at any time and in any amount, subject to the
minimum and maximum premium limitations described below. The payment of an
unscheduled premium payment may have Federal income tax consequences. (See
"Federal Tax Matters.") As mentioned above, an Owner may also skip planned
premium payments. Therefore, unlike conventional insurance policies, a Policy
does not obligate the Owner to pay premiums in accordance with a rigid and
inflexible premium schedule.
Continuance of Insurance. Failure of the Contractholder to pay the planned
premium payments authorized by its employees may cause the Group Contract to
terminate. (See "General Provisions of the Group Contract--Termination.")
Provided that there is sufficient Cash Surrender Value to prevent the Policy
from lapsing, the Individual Insurance provided will automatically continue in
the event of Group Contract termination. (See "Policy Rights and Privileges--
Eligibility Change Conversion.") Individual Insurance will also continue if the
employee's employment with the Contractholder or sponsoring employer
terminates. In either circumstance, an Owner of an Individual Policy (or a
Certificate converted by amendment to an Individual Policy) will establish a
new schedule of planned premiums. The new schedule will have the same planned
annual premium, and the payment intervals will be no more frequent than
quarterly. In Corporate Programs, there will generally be no change in planned
or scheduled premiums upon discontinuing the employment of an Insured.
Premium Limitations. Every premium payment paid must be at least $20. Total
premiums paid under a Policy may not exceed the current maximum premium
limitations established by federal tax laws in any Policy Year. The maximum
premium limitation for a Policy Year is the sum of the premiums paid under the
Policy that will
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not at any time exceed the guideline premium limitations referred to in Section
7702(c) of the Internal Revenue Code of 1986. If at any time a premium is paid
which would result in total premiums exceeding the current maximum premium
limitation, we will accept only that portion of the premium which will make
total premiums equal the maximum. Any part of the premium in excess of the
maximum premiums will be returned directly to the Owner within 60 days of the
end of the Policy Year in which payment is received (unless we agree) and no
further premiums will be accepted until allowed by the current maximum premium
limitations prescribed by Federal tax law. See "Federal Tax Matters" for a
further explanation of premium limitations.
Section 7702A creates an additional premium limitation, which, if exceeded, can
change the tax status of a Policy to that of a "modified endowment contract." A
modified endowment contract is a life insurance contract, from which
withdrawals are treated (for tax purposes) (1) as a distribution of any taxable
income under the contract, and (2) as a distribution of nontaxable investment
in the contract. Also, such withdrawals may be subject to a 10% federal income
tax penalty. We have adopted administrative steps designed to notify an Owner
when we believe that a premium payment will cause a Policy to become a modified
endowment contract. Owner will be given a limited amount of time to request
that the premium be reversed in order to avoid the Policy's classification as a
modified endowment contract. (See "Federal Tax Matters.")
Allocation of Net Premiums and Cash Value
Net Premiums. The net premium equals:
(1) the premium paid; less
(2) the premium expense charge;
(3) any charge to compensate us for anticipated higher corporate income
taxes resulting from the sale of a Policy; and
(4) the premium tax charge. (See "Charges and Deductions--Sales Charges.")
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how net premiums are to be allocated among the 10 Divisions of the
Separate Account. Beginning with the initial premium payment, all premiums will
be allocated in accordance with the Owner's instructions upon our receipt of
the premiums. However, the minimum percentage, of any allocation to a Division
is 10 percent of the net premium, and fractional percentages may not be used.
The allocation for future net premiums may be changed without charge at any
time by providing notice in writing directly to us. Any change in allocation
will take effect immediately upon our receipt of the written notification. No
charge is imposed for changing the allocations of future net premiums.
The Policy's Cash Value also may be transferred between the Divisions of the
Separate Account. (See "Policy Rights and Privileges--Transfers.")
The value of amounts allocated to the Divisions will vary with the investment
performance of the Funds underlying the Divisions. The Owner bears the entire
investment risk. Investment performance will affect the Policy's Cash Value,
and may affect the death benefit as well. Owners should periodically review
their allocations of premiums and values in light of market conditions and
overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional life insurance policies, the failure to make a
premium payment following the initial premium payment will not itself cause a
Policy to lapse. However, a Policy can lapse even if planned premiums have been
paid. Lapse will occur only when the Cash Surrender Value is insufficient to
cover the monthly deduction, and a grace period expires without a sufficient
payment being made. (See also "General Provisions of the Group Contract--Grace
Period--Termination.") Thus, the payment of premiums in any amount does not
guarantee that the Policy will remain in force until the Maturity Date.
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The grace period, which is 62 days, begins on the Monthly Anniversary on which
the Cash Surrender Value is not enough to cover the next monthly deduction,
premium expense charge, and premium tax charge. We will notify the Owner at the
beginning of the grace period by mail. The notice will specify the amount of
premium required to keep the Policy in force and the date the payment is due.
Subject to minimum premium requirements, the amount of the premium required to
keep the Policy in force will be the amount of the current monthly deduction.
(See "Charges and Deductions.") If the Company does not receive the required
amount within the grace period, the Policy will lapse and terminate without
Cash Value. If the Insured dies during the grace period, any overdue monthly
deductions will be deducted from the death benefit payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written application
at any time within five years after the date of lapse and before the Maturity
Date. The right to reinstate a lapsed Policy will not be affected by the
termination of a Group Contract or the termination of an employee's employment
during the reinstatement period. Reinstatement is subject to the following
conditions:
. Evidence of the insurability of the Insured satisfactory to us (including
evidence of insurability of any person covered by a rider to reinstate
the rider).
. Payment of a premium that, after the deduction of any premium expense
charge and any premium tax charge, 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.
. Payment or reinstatement of any Indebtedness. Any Indebtedness reinstated
will cause a Cash Value of an equal amount also to be reinstated.
Any loan paid at the time of reinstatement will cause an increase in Cash Value
equal to the amount of the repaid loan. 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 Indebtedness reinstated, increased by the
net premiums paid at reinstatement and any loans paid at the time of
reinstatement.
The effective date of reinstatement will be the date of our approval of the
application for reinstatement. There will be a full monthly deduction for the
Policy Month that includes that date.
POLICY BENEFITS
Death Benefit
As long as the Policy remains in force, we will, (upon proof of the Insured's
death), pay the death benefit proceeds of a Policy in accordance with the death
benefit option in effect at the time of the Insured's death. Payment of death
benefit proceeds will not be affected by termination of the Group Contract,
employer-sponsored insurance program or by termination of an employee's
employment.
If a rider permitting the accelerated payment of death benefit proceeds has
been added to the Policy, the death benefit may be paid in a single sum prior
to the death of the Insured and may be less than otherwise would be paid upon
the death of the Insured. (See "General Matters Relating to the Policy--
Additional Insurance Benefits.")
The amount of the death benefit proceeds payable will be determined at the end
of the Valuation Period during which the Insured's death occurred. The proceeds
may be paid in a single sum or under one or more of the settlement options set
forth in the Policy. (See "Policy Rights and Privileges--Payment of Policy
Benefits.") Death benefit proceeds will be paid to the surviving Beneficiary or
Beneficiaries specified in the application or as subsequently changed.
The Policy provides two death benefit options: a "Level Type" death benefit
("Option A") and an "Increasing Type" death benefit ("Option B"). Option B
generally will be the only option presented. The
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death benefit under either option will never be less than the current Face
Amount of the Policy as long as the Policy remains in force. (See "Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.") The minimum Face
Amount currently is $25,000. The maximum Face Amount is generally $500,000.
However, in connection with a particular Group Contract or employer sponsored
insurance program, we may establish a substantially higher Face Amount for
Policies issued under that Contract or program.
Option A. Under Option A, the death benefit is:
(1) the current Face Amount of the Policy or, if greater,
(2) the applicable percentage of Cash Value on the date of death.
The applicable percentage is 250% for an Insured Attained Age 40 or below on
the Policy Anniversary prior to the date of death. For Insureds with an
Attained Age over 40 on that Policy Anniversary, the percentage is lower and
declines with age as shown in the Applicable Percentage Table below. Under
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. Owners
who prefer to have favorable investment performance reflected in higher Cash
Value for the same Face Amount, rather than increased death benefit, generally
should select Option A.
APPLICABLE PERCENTAGE TABLE
<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
- ------------ ----------
<S> <C>
40...................... 250%
41...................... 243
42...................... 236
43...................... 229
44...................... 222
45...................... 215
46...................... 209
47...................... 203
48...................... 197
49...................... 191
50...................... 185
51...................... 178
52...................... 171
53...................... 164
54...................... 157
55...................... 150
56...................... 146
57...................... 142
58...................... 138
59...................... 134
60...................... 130
</TABLE>
<TABLE>
<CAPTION>
Applicable
Attained Age Percentage
- ------------ ----------
<S> <C>
61...................... 128%
62...................... 126
63...................... 124
64...................... 122
65...................... 120
66...................... 119
67...................... 118
68...................... 117
69...................... 116
70...................... 115
71...................... 113
72...................... 111
73...................... 109
74...................... 107
75 to 90................ 105
91...................... 104
92...................... 103
93...................... 102
94...................... 101
95 or older............. 100
</TABLE>
The applicable percentages in the foregoing table are based on federal tax law
requirements described in Section 7702(d) of the Code. The Company reserves the
right to alter the applicable percentage to the extent necessary to comply with
changes to Section 7702(d) or any successor provision thereto.
Option B. Under Option B, the death benefit is equal to:
(1) the current Face Amount plus the Cash Value of the Policy or, if
greater,
(2) the applicable percentage of the Cash Value on the date of death. The
applicable percentage is the same as under Option A.
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Under 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).
Owners who prefer to have favorable investment performance reflected in higher
death benefits for the same Face Amount generally should select Option B. All
other factors equal, for the same premium dollar, Option B provides lower
initial Face Amount resulting in earlier cash accumulation.
Change in Death Benefit Option. After the first Policy Anniversary, the Owner
may change the death benefit option. We reserve the right to limit the number
of changes in death benefit options to one each Policy Year. A request for a
change must be made directly to us in writing. The effective date of such a
change will be the Monthly Anniversary on or following the date we receive the
change request.
If the death benefit option is changed from Option A to Option B, the Face
Amount after the change will equal the Face Amount before the change less the
Cash Value on the effective date of the change. Satisfactory evidence of
insurability must be submitted directly to us with a request for a change from
Option A to Option B. This change may not be made if it would result in a Face
Amount of less than $25,000.
If the death benefit option is changed from Option B to Option A, the Face
Amount after the change will equal the Face Amount before the change plus the
Cash Value on the effective date of change.
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. No charges will
be imposed upon a change from death benefit Option B to Option A. Changing from
Option A to Option B, however, will result in a decrease in the Face Amount
which may, in turn, result in a contingent deferred sales charge. This
contingent deferred sales charge will be assessed on the decrease in Face
Amount in the same manner as it would be assessed on a requested decrease in
Face Amount. In addition, if, prior to or accompanying a change in the death
benefit option, there has been an increase in the Face Amount, the cost of
insurance charge may be different for the increased amount. (See "Charges and
Deductions--Monthly Deduction--Cost of Insurance.")
No change in death benefit option will be permitted that results in the death
benefit under a Policy being included in gross income because the federal tax
law requirements are not satisfied. (See "Federal Tax Matters.")
Change in Face Amount. Subject to certain limitations set forth below, an Owner
may increase or decrease the Face Amount of a Policy (without changing the
death benefit option) after the first Policy Anniversary. A written request for
a change in the Face Amount must be sent directly to us. A change 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 "Charges and
Deductions--Monthly Deduction--Cost of Insurance.") In addition, a change in
Face Amount may have federal income tax consequences. (See "Federal Tax
Matters.")
Face Amount Decreases. Any decrease in the Face Amount will become effective on
the Monthly Anniversary on or following our receipt of the written request. The
amount of the requested decrease must be at least $5,000 and the Face Amount
remaining in force after any requested decrease may not be less than the
minimum amount Face Amount, generally $25,000. 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 those requirements. A
decrease in the Face Amount will reduce the Face Amount in the following order:
(1) The Face Amount provided by the most recent increase;
(2) The next most recent increases successively; and
(3) The initial Face Amount.
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<PAGE>
This order of reduction will be used to determine the amount of subsequent cost
of insurance charges (see "Charges and Deductions--Monthly Deduction--Cost of
Insurance"), and whether an in what amount a contingent deferred sales charge
will be deducted. If the decrease in Face Amount is made against coverage that
has been in effect for less than ten years and if the Policy provides for a
contingent deferred sales charge, then such charge will be assessed against all
Divisions proportionately. (See "Charges and Deductions--Sales Charges--
Contingent Deferred Sales Charge.")
Face Amount Increases. For an increase in the Face Amount, we require that
satisfactory evidence of insurability be submitted. If approved, the increase
will become effective on the Monthly Anniversary on or following receipt of the
satisfactory evidence of insurability. In addition, the Insured must have an
Attained Age of 80 or less on the effective date of the increase. The amount of
the increase may not be less than $5,000. The Face Amount may not be increased
more than the maximum Face Amount for that Policy, generally $500,000. However,
in connection with a particular Group Contract or employer-sponsored insurance
program, we may establish a substantially higher Face Amount for Policies
issued under that Contract or program. Although an increase need not
necessarily be accompanied by additional premium, the Cash Surrender Value in
effect immediately after the increase must be sufficient to cover the next
monthly deduction. (See "Charges and Deductions--Monthly Deduction.") An
increase in the Face Amount may result in certain additional charges. (See
"Charges and Deductions.")
Cancellation of an Increase. An increase in Face Amount may be cancelled within
the later of:
. 20 days from the date the Owner received the new Policy specifications
page for the increase;
. within 10 days of mailing the right to cancellation notice to the Owner;
or
. within 45 days after the application for an increase was signed.
Upon cancellation, any additional charges, which would not have been assessed
without the increase, will be refunded to the Owner if requested. If a request
for a refund is not made, the charges will be restored to the Policy's Cash
Value and allocated to Divisions in the same manner as they were deducted. Any
contingent deferred sales charge will also be reduced to the amount that would
have been in effect absent the increase. Premiums paid following an increase in
Face Amount and prior to the time the right to cancel the increase expires will
become part of the Policy's Cash Value and will not be subject to refund. (See
"Policy Rights and Privileges--Right to Examine Policy.")
Methods of Affecting Insurance Protection. An Owner may increase or decrease
the pure insurance protection provided by a Policy--the difference between the
death benefit and the Cash Value--in several ways as insurance needs change.
Examples include increasing or decreasing the Face Amount, changing the level
of premium payments, and, to a lesser extent, making partial withdrawals from
the Policy. Although the consequences of each of these methods will depend upon
the individual circumstances, they may be generally summarized as follows:
(a) A decrease in the Face Amount will, subject to the applicable
percentage limitations (see "Policy Benefits--Death Benefit"), decrease the
pure insurance protection and the cost of insurance charges under the
Policy without reducing the Cash Value.
(b) An increase in the Face Amount may increase the amount of pure
insurance protection, depending on the amount of Cash Value and the
resultant applicable percentage limitation. If the insurance protection is
increased, the Policy charges generally will increase as well.
(c) An increased level of premium payments will reduce the pure insurance
protection if Option A is in effect. However, when the applicable
percentage of Cash Value exceeds either the Face Amount (if Option A is in
effect) or the Cash Value plus the Face Amount (if Option B is in effect),
increased premium payments will increase the pure insurance protection.
Increased premiums should also increase the amount of funds available to
keep the Policy in force.
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<PAGE>
(d) A reduced level of premium payments generally will increase the amount
of pure insurance protection, depending on the applicable percentage
limitations. If the reduced level of premium payments is insufficient to
cover monthly deductions or to offset negative investment performance, Cash
Value may also decrease, which in turn will increase the possibility that
the Policy will lapse. (See "Payment and Allocation of Premiums--Policy
Lapse and Reinstatement.")
(e) A partial withdrawal will reduce the death benefit. (See "Policy Rights
and Privileges--Surrender and Partial Withdrawals.") However, it only
affects the amount of pure insurance protection and cost of insurance
charges if the death benefit before or after the withdrawal is based on the
applicable percentage of Cash Value, because otherwise the decrease in the
death benefit is offset by the amount of Cash Value withdrawn. The primary
use of a partial withdrawal is to withdraw Cash Value.
Payment of Death Benefit Proceeds. Death benefit proceeds under the Policy
ordinarily will be paid within seven days after we receive all documentation
required. Payment may, however, be postponed in certain circumstances. (See
"General Matters Relating to the Policy--Postponement of Payments.") The Owner
may decide the form in which the proceeds will be paid. During the Insured's
lifetime, the Owner may arrange for the death benefit proceeds to be paid in a
single sum or under one or more of the optional methods of settlement described
below. 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 outstanding Indebtedness. (See "General Matters
Relating to the Policy--Additional Insurance Benefits," and "Charges and
Deductions.")
When no election for an optional method of settlement is in force when the
Insured dies, the Beneficiary may select one or more of the optional methods of
settlement at any time before death benefit proceeds are paid. (See "Policy
Rights and Privileges--Payment of Policy Benefits.")
An election or change of method of settlement must be in writing. A change in
Beneficiary revokes any previous settlement election. Once payments have begun,
the settlement option may not be changed.
Cash Value
The Cash Value of the Policy is equal to the total of the Policy's Cash Value
in the Separate Account and the Loan Account. The Policy's Cash Value in the
Separate Account will reflect:
. the investment performance of the chosen Divisions;
. the frequency and amount of net premiums paid;
. transfers;
. partial withdrawals;
. Policy Loans;
. Loan account interest rate credited; 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 and Privileges--Surrender and Partial
Withdrawals.") There is no guaranteed minimum Cash Value.
Determination of Cash Value. Cash Value is determined on a daily basis. 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 of the
monthly deductions due from the Issue Date through the Investment Start Date
allocated to that Division. Depending upon the length of time between the Issue
Date and the Investment Start Date, this amount
22
<PAGE>
may be more than the amount of one monthly deduction. (See "Payment and
Allocation of Premiums.") Thereafter, on each Valuation Date, the Cash Value in
a Division 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 another Division during
the current Valuation Period; plus
(5) That portion of the interest credited on outstanding Policy Loans which
is allocated to the Division during the current Valuation Period; minus
(6) Any amounts transferred from the Division during the current Valuation
Period (including amounts securing Policy Loans) plus transfer charges if
any; minus
(7) Any partial withdrawals plus any partial withdrawal transaction charge,
from the Division during the current Valuation Period; minus
(8) Any contingent deferred sales charges incurred during the current
Valuation Period in connection with a partial withdrawal or decrease in
Face Amount allocated to the Division; 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.")
The Policy's Cash Value in the Separate Account equals the sum of the Policy's
Cash Values in each Division.
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
(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 or other economic
burden resulting from the application of tax laws, determined by the
Company to be properly attributable to the Divisions or the Policy, 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 not to exceed .0024547% of the net assets for each day in the
Valuation Period. This corresponds to 0.90% per year for mortality and
expense risks; divided by
(6) The value of the assets at the end of the preceding Valuation Period.
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<PAGE>
The Company may use an equivalent method to determine Cash Value in each
Division on each Valuation Date in lieu of the Net Investment Factor method.
This method directly determines the units of Cash Value in each Division and
the corresponding unit value. Unit value is obtained as follows:
(1) The value of assets in a Division are obtained by multiplying shares
outstanding by the net asset value as of the Valuation Date; minus
(2) A reduction based upon a charge not to exceed .0024547% of the net
assets for each day in the Valuation Period is made (This corresponds to
0.90% per year for mortality and expense risk charge); divided by
(3) Aggregate units outstanding in the Division at the end of the preceding
Valuation Period.
POLICY RIGHTS AND PRIVILEGES
Exercising Rights and Privileges Under the Policies
Owners of Policies issued under a Group Contract may exercise their rights and
privileges under the Policies (i.e., make transfers, change premium
allocations, borrow, etc.) by directly notifying us in writing at our Home
Office. We will send all reports and other notices described herein or in the
Policy directly to the Owner.
Loans
Loan Privileges. After the first Policy Anniversary, the Owner may, by written
request directly to us, borrow an amount up to the Loan Value of the Policy,
with the Policy serving as sole security for such loan. The Loan Value is equal
to (a) minus (b) minus (c) where
. (a) is 85 percent of the Cash Value of the Policy on the date the Policy
Loan is requested;
. (b) is the amount of any outstanding Indebtedness; and
. (c) is any contingent deferred sales charges.
Loan interest is due and payable in arrears on each Policy Anniversary or on a
pro rata basis for such shorter period as the loan may exist. The minimum
amount that may be borrowed is $100. 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 we receive
the loan request at our Home Office, although payments may be postponed under
certain circumstances. (See "General Matters Relating to the Policy--
Postponement of Payments.")
When a Policy Loan is made, Cash Value equal to the amount of the loan and loan
interest due will be transferred to the Loan Account as security for the loan.
Unless the Owner requests a different allocation, amounts will be transferred
from the Divisions of the Separate Account in the same proportion that the
Policy's Cash Value in each Division bears to the Policy's total Cash Value
(not including the Cash Value in the Loan Account) at the end of the Valuation
Period during which the request for a Policy Loan is received. This will reduce
the Policy's Cash Value in the Separate Account. These transactions will not be
considered transfers for purposes of the limitations on transfers between
Divisions.
Loan Account Interest Rate Credited. Cash Value transferred to the Loan Account
to secure a Policy Loan will accrue interest daily at an annual rate not less
than 5%. The rate is declared by action of our management as authorized by our
Board of Directors. The Loan Account interest credited will be transferred to
the Divisions: (1) each Policy Anniversary; (2) when a new loan is made; (3)
when a loan is partially or fully repaid; and (4) when an amount is needed to
meet a monthly deduction.
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<PAGE>
Interest Rate Charged for Policy Loans. The interest rate charged will be at an
annual rate of 8%. Interest charged will be due and payable annually in arrears
on each Policy Anniversary or for the duration of the Policy Loan, if shorter.
If the Owner does not pay the interest charged when it is due, an amount of
Cash Value equal to that which is due will be transferred to the Loan Account.
(See "Policy Rights and Privileges Loans--Effect of Policy Loans.") The amount
transferred will be deducted from the Divisions in the same proportion that the
portion of the Cash Value in each Division bears to the total Cash Value of the
Policy (not including the Cash Value in the Loan Account.
Effect of Policy Loans. A loan taken from, or secured by, a Policy may have
federal income tax consequences. (See "Federal Tax Matters.")
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.
This is because the collateral for the Policy 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 interest credited is less than the
investment performance of the selected Division, the Policy values will be
lower as a result of the loan. Conversely, if the Loan Account interest
credited is higher than the investment performance of the Division, the Policy
values may be higher.
In addition, if the Indebtedness exceeds the Cash Value on any Monthly
Anniversary, the Policy may lapse, subject to a grace period. (See "Charges and
Deductions.") A sufficient payment must be made within the later of:
(1) the grace period of 62 days from the Monthly Anniversary immediately
before the date Indebtedness exceeds the Cash Value; or
(2) 31 days after notice that the Policy will terminate without a
sufficient payment has been mailed.
If a sufficient payment is not received, the Policy will lapse and terminate
without value. A lapsed Policy may later be reinstated. (See "Payment and
Allocation of Premiums--Policy Lapse and Reinstatement.")
All outstanding Indebtedness will be deducted from the proceeds payable upon
the death of the Insured, surrender, or the maturity of the Policy.
Repayment of Indebtedness. A Policy Loan may be repaid in whole or in part at
any time prior to the death of the Insured and as long as a Policy is in
effect. All repayments should be made directly to us. Amounts paid while a
Policy Loan is outstanding will be treated as premiums unless the Owner
requests in writing that the payments be treated as repayment of Indebtedness.
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 in the
same proportion that Cash Value in the Loan Account bears to the Cash Value in
each Loan Subaccount. A Loan Subaccount exists for each Division. Amounts
transferred to the Loan Account to secure Indebtedness are allocated to the
appropriate Loan Subaccount to reflect their origin.
Surrender and Partial Withdrawals
During the lifetime of the Insured and while a Policy is in force, the Owner
may surrender, or make a partial withdrawal of the Policy by sending a written
request to us. Any restrictions are described below. The amount available upon
surrender is the Cash Surrender Value (described below) at the end of the
Valuation Period during which the surrender request is received by us. Amounts
payable upon surrender or a partial withdrawal ordinarily will be paid within
seven days of receipt of the written request. (See "General Matters Relating to
the Policy--Postponement of Payments.") Surrenders and partial withdrawals may
have federal income tax consequences. (See "Federal Tax Matters.")
Surrender. To effect a surrender, the Policy must be returned to us along with
the request, or the request must be accompanied by a completed affidavit of
lost Policy. Upon request, we can provide a lost Policy Certificate.
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<PAGE>
Upon surrender, we will pay the Cash Surrender Value to the Owner. The Cash
Surrender Value equals the Cash Value on the date of surrender, less any
Indebtedness and contingent deferred sales charge. (See "Charges and
Deductions--Sales Charges--Contingent Deferred Sales Charge.") Surrender
proceeds will be paid in a single sum. 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.
Partial Withdrawals. After the first Policy Year, an Owner may make up to one
partial withdrawal each Policy Month from the Separate Account. The minimum
amount of a partial withdrawal, net of any transaction charges and any
applicable contingent deferred sales charges, is $500. The minimum amount that
can be withdrawn from a Division is $50, or the Policy's Cash Value in a
Division, if smaller. The maximum amount that may be withdrawn, including the
partial withdrawal transaction charge, is the Loan Value. The partial
withdrawal transaction charge is equal to the lesser of $25 or 2% of the amount
withdrawn. The Owner may allocate the amount withdrawn, subject to the above
conditions, among the Divisions. If no allocation is specified, then the
partial withdrawal will be allocated among the Divisions in the same proportion
that the Policy's Cash Value in each Division bears to the total Cash Value of
the Policy (not including the Cash Value in the Loan Account) on the date the
request for the partial withdrawal is received.
A contingent deferred sales chare may be imposed on a partial withdrawal if the
partial withdrawal results in a decrease in the Face Amount and if the decrease
is made against coverage that has been in effect for less than ten years. A
partial withdrawal will decrease the Face Amount in two situations. First, if
the death benefit Option A is in effect and the death benefit equals the Face
Amount then the partial withdrawal will decrease the Face Amount, and, thus,
the death benefit by an amount equal to the partial withdrawal plus the partial
withdrawal transaction charge and any applicable contingent deferred sales
charge. Second, if the death benefit equals a percentage of Cash Value (whether
Option A or Option B is in effect), then a partial withdrawal will decrease the
Face Amount by the amount that the partial withdrawal plus the partial
withdrawal transaction charge and any applicable contingent deferred sales
charge exceeds the difference between the death benefit and the Face Amount.
The death benefit also will be reduced in this circumstance. If Option B is in
effect and the death benefit equals the Face Amount plus the Cash Value, the
partial withdrawal will not reduce the Face Amount, but it will reduce the Cash
Value and, thus, the death benefit by the amount of the partial withdrawal plus
the partial withdrawal transaction charge. In this last situation, no
contingent deferred sales charge will be deducted.
The Face Amount will be decreased in the following order: (1) the Face Amount
at issue; and (2) any increases in the same order in which they were issued.
The amount of any contingent deferred sales charge deducted will be that which
is in effect for the Face Amount at issue or the increase being decreased.
Where the decrease causes a partial reduction in an increase or the Face Amount
at issue, a proportionate share of the contingent deferred sales charge for
that increase or the Face Amount at issue will be deducted. This charge is
described in more detail under "Charges and Deductions--Sales Charges--
Contingent Deferred Sales Charge."
Generally, the partial withdrawal transaction charge and any contingent
deferred sales charge imposed in connection with a partial withdrawal will be
allocated among the Divisions in the same proportion as the partial withdrawal
is allocated. If, following a partial withdrawal, insufficient funds remain in
a Division to pay the partial withdrawal transaction charge and any contingent
deferred sales charges allocated to a Division, the unpaid charges will be
allocated equally among the remaining Divisions. In addition, an Owner may
request that the partial withdrawal transaction charge and any contingent
deferred sales charges applicable to an amount withdrawn from a Division be
paid from the Owner's Cash Value in another Division. No amount may be
withdrawn that would result in there being insufficient Cash Value to meet any
contingent deferred sales charges that would be payable upon the surrender of
the remaining Cash Value immediately following the partial withdrawal.
The Face Amount remaining in force after a partial withdrawal may not be less
than $25,000. Any request for a partial withdrawal that would reduce the Face
Amount below this amount will not be approved.
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<PAGE>
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 "Policy Benefits--Death Benefit--Methods of Affecting Insurance
Protection.")
Transfers
Under the Company's current rules, a Policy's Cash Value, (not including
amounts credited to the Loan Account,) may be transferred among the Divisions
available with the Policy. Requests for transfers from or among Divisions must
be made in writing directly to us and may be made once each Policy Month.
Transfers must be in amounts of at least $250 or, if smaller, the Policy's Cash
Value in a Division. We 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 Day will be considered a single
transfer request. Each transfer must meet the minimum requirement of $250 or
the entire Cash Value in a Division. Where a single transfer request calls for
more than one transfer, and not all of the transfers would meet the minimum
requirements, we 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 month or
year.
Although we currently intend to continue to permit transfers for the
foreseeable future, the Policy provides that we may modify the transfer
privilege, by changing the minimum amount transferable, by altering the
frequency of transfers, by imposing a transfer charge, by prohibiting
transfers, or in such other manner as we may determine.
Right to Examine Policy
The Owner may cancel a Policy within 10 days of after receiving it or such
longer period if required by state law. If a Policy is cancelled within this
time period, a refund will be paid. The refund will equal all premiums paid
under the Policy.
To cancel the Policy, the Owner should mail or deliver the Policy directly to
us. A refund of premiums paid by check may be delayed until the check has
cleared the Owner's bank. (See "General Matters Relating to the Policy--
Postponement of Payments.")
As noted above, a request for an increase in Face Amount (see "Policy
Benefits--Death Benefit") also may be cancelled. The request for cancellation
must be made within the latest of:
. 20 days from the date the Owner received the new Policy specifications
pages for the increase;
. 10 days of mailing the right to cancellation notice to the Owner; or
. 45 days after the Owner signed the application for the increase.
Upon cancellation of an increase, the Owner may request that we refund the
amount of the additional charges deducted in connection with the increase. This
amount will equal the amount by which the monthly deductions since the increase
went into effect exceeded the monthly deductions which would have been made
absent the increase. (See "Charges and Deductions--Monthly Deduction.") If no
request is made, we will increase the Policy's Cash Value by the amount of
these additional charges. This amount will be allocated among the Divisions in
the same manner as it was deducted. The contingent deferred sales charge also
will be reduced to the amount that would have been in effect absent the
increase (see "Charges and Deductions--Sales Charges --Contingent Deferred
Sales Charge.")
Conversion Right to a Fixed Benefit Policy
Once during the first 24 Policy Months following the Issue Date of the Policy,
the Owner may, upon written request, convert a Policy still in force to a life
insurance policy that provides for benefits that do not vary with
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<PAGE>
the investment return of the Divisions. In the event a Certificate has been
amended to operate as an Individual Policy following an Insured's change in
eligibility under a Group Contract, the conversion right will be measured from
the Issue Date of the original Certificate. (See "Policy Rights and
Privileges--Eligibility Change Conversion.") No evidence of insurability will
be required when this right is exercised. However, we will require that the
Policy be in force and that the Owner repay any existing Indebtedness. At the
time of the conversion, the new Policy will have, at the Owner's option, either
the same death benefit or the same net amount at risk as the original Policy.
The new Policy will also have the same Issue Date and Issue Age as the original
Policy. The premiums for the new Policy will be based on our rates in effect
for the same Issue Age and rate class as the original Policy.
Eligibility Change Conversion
If an Insured's eligibility under a Group Contract or employer-sponsored
insurance program ends due to its termination or due to the termination of the
employee's employment, the Insured's coverage will continue unless the Policy
is no longer in force. Even if the Policy is not in force due to lapse, the
right to reinstate and thus to convert a lapsed Policy will not be affected by
the change in the employee's eligibility during the reinstatement period.
If a Certificate was issued under the Group Contract, the Certificate will be
amended automatically so that it will continue in force as an Individual
Policy. The rights, benefits, and guaranteed charges will not be altered by
this amendment. The amendment will be mailed to the Owner within 31 days (a)
after we receive written notice that the employee's employment ended or (b)
after the termination of the Group Contract. If, at the time the conversion
occurs, the Policy is in a grace period (see "Payment and Allocation of
Premiums--Policy Lapse and Reinstatement"), any premium necessary to prevent
the Policy from lapsing must be paid us before the new Individual Policy will
be mailed. A new planned premium schedule will be established which will have
the same planned annual premium utilized under the Group Contract. The new
planned payment intervals will be no more frequent than quarterly. The Company
may allow payment of planned premium through periodic (usually monthly)
authorized electronic funds transfer. Of course, unscheduled premium payments
can be made at any time. (See "Payment and Allocation of Premiums--Premiums.")
If an Individual Policy was issued under the Group Contract or other employer-
sponsored insurance program including a Corporate Program or Executive Program,
the Policy will continue in force following the change in eligibility. The
rights, benefits, and guaranteed charges under the Policy will remain the same
following this change in eligibility.
When an employee's spouse is the Insured under a Policy, the spouse's insurance
coverage also will continue in the event the employee is no longer eligible. If
a Certificate was originally issued to the employee's spouse, the Certificate
will be amended automatically as described above. If an Individual Policy was
originally issued, the Individual Policy will continue as described above. In
addition, if an Associated Company ceases be to under common control with the
Contractholder, the Insureds of the Associated Company (i.e., employees of the
Associated Company and their spouses) may continue their insurance in the
manner described above.
Payment of Benefits at Maturity
If the Insured is living and the Policy is in force, the Company will pay the
Cash Surrender Value of the Policy to the Owner on the Maturity Date. An Owner
may elect to have amounts payable on the Maturity Date paid in a single sum or
under a settlement option. (See "Policy Rights and Privileges--Payment of
Policy Benefits.") Amounts payable on the Maturity Date ordinarily will be paid
within seven days of that date, although payment may be postponed under certain
circumstances. (See "General Matters Relating to the Policy--Postponement of
Payments.") A Policy will mature if and when the Insured reaches Attained Age
95.
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Payment of Policy Benefits
A lump sum payment will be made. Provisions for settlement of proceeds
different from a lump sum payment may only be made upon written our agreement.
Settlement Options. We may offer settlement options that apply to the payment
of death benefit proceeds, as well as to benefits payable at maturity. Once a
settlement option is in effect, there will no longer be value in the Separate
Account.
Accelerated Death Benefits. We offer certain riders which permit the Owner to
elect to receive an accelerated payment of the Policy's death benefit in a
reduced amount under certain circumstances. (See "General Matters Relating to
the Policy--Additional Insurance Benefits.")
CHARGES AND DEDUCTIONS
We will deduct charges in connection with the Policies to compensate us for
providing the insurance benefits set forth in the Policies and any additional
benefits added by rider, administering the Policies, incurring expenses in
distributing the Policies, and assuming certain risks in connection with the
Policies. We may realize a profit on one or more of these charges. We may use
any such profit for any corporate purpose, including, among other things,
payments of sales and distribution expenses.
Sales Charges
Sales charges may be assessed under the Policies. The sales charge, if any,
will be a deferred charge ("contingent deferred sales charge"), or a
combination of a front-end charge ("premium expense charge") and a contingent
deferred sales charge. Whether a premium expense charge will be deducted
depends on whether a Policy is deemed to be an individual contract under OBRA.
The amount of the contingent deferred sales charge will depend primarily on the
first year commissions paid to the broker-dealers distributing the Policies and
the determination of contract type under OBRA. The contingent deferred sales
loads applicable to a particular Policy will depend on the commission rates
agreed to by the contractholder or employer and the broker-dealer. The rates
typically reflect the services rendered by the broker-dealer. There are four
possible combinations of first year commissions and contract categories for
federal tax purposes under OBRA and four corresponding sales charge
configurations which are set forth in the Schedule of Sales Charges below. No
other charges or combination of charges are permitted.
SCHEDULE OF SALES CHARGES
<TABLE>
<CAPTION>
Sales Charges
OBRA Contract -------------
1st Year Commission Category CDSL/1/ PE/2/
- ------------------- ------------- ------- -----
<S> <C> <C> <C>
0%................................................. Group 0% 0%
0%................................................. Individual 0% 1%
15%................................................. Group 30% 0%
14%................................................. Individual 28% 1%
</TABLE>
- --------
/1 /Contingent deferred sales charges (percentage of first year premiums).
/2 /Premium expense charge (percentage of each premium paid).
The sales charge will not change in the event that an Insured is no longer
eligible under a Group contract or employer-sponsored insurance program, but
continues coverage on an individual basis.
As the foregoing schedule indicates the total sales charges imposed on premiums
paid during the first Policy Year following the Issue Date will not exceed 30%
of the premiums actually paid up to the guideline annual
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<PAGE>
premium for the Face Amount at issue of a particular Policy. Likewise, the
total sales charge on premiums associated with an increase paid during the
first 12 policy Months after the effective date of the increase will not exceed
30% of premiums paid up to the guideline annual premium for the increase. In no
event will the total sales charges on premiums paid up to 20 times the
guideline annual premium for the increase of Face Amount at issue exceed 9% of
those premiums.
The guideline annual premium depends upon the Insured's Attained Age (on the
Issue Date or on the effective date of requested increase). The guideline
annual premium will be fixed an determined on the Issue Date or the effective
date of any requested increase in Face Amount and will be set forth in the
Policy's specifications pages and in the new specifications pages issued upon
an increase.
Because additional premium payments are not required to fund a requested
increase in Face Amount, a special rule applies to determine the amount of
premiums associated with the increase. In general, the premiums associated with
the increase will equal the sum of a proportionate share of the Cash surrender
Value on the effective date of the increase, before any deductions are made,
plus a proportionate share of any premium payments actually made on or after
the effective date of the increase. This means that, in effect a portion of the
existing Cash Value will be deemed to be a premium payment for the increase,
and subsequent premium payments will be prorated. The proportion of existing
Cash Value and subsequent premium payments associated with the increase will be
based on the relative guideline annual premium payments for the increase and
for the Policy's initial Face Amount.
Premium Expense Charge. Prior to allocation of net premiums among the divisions
premium payments will be reduced by premium expense charge equal to a
percentage of each premium paid as set forth on the specifications pages of the
Policy. The charge will either be ("0") or 1% of the premium depending on
whether the Policy is determined to be a group or individual contract under
OBRA.
In addition, as a result of OBRA, insurance companies are generally required to
capitalize and amortize certain policy acquisition expenses over a ten-year
period rather than currently deducting such expenses. A higher capitalization
expense applies to the deferred acquisition expenses of Policies that are
deemed to be individual contracts under OBRA and will result in a significantly
higher corporate income tax liability for the Company in early Policy Years.
Thus, under Policies that are deemed to be individual contracts under OBRA, we
make an additional charge of 1% of each premium payment to compensate us for
the anticipated higher corporate income taxes that result from the sale of such
a Policy. Among other possible employer-sponsored programs, Corporate Program
Policies are deemed to be individual contracts.
The net premium payment is calculated as the premium payment less:
. the premium expense charge less;
. any charge to compensate the Company for anticipated higher corporate
income taxes resulting from the sale of a Policy; and
. the premium tax charge (described below).
Contingent Deferred Sales Charge. During the first ten Policy Years, we may
assess a charge upon surrender or lapse of the Policy, a requested decrease in
Face Amount, or a partial withdrawal that causes the Face Amount to decrease.
The amount of the charge will depend on a number of factors, including:
. the commission rate paid to the broker-dealer distributing the Policy,
. the allocation of the total sales load between the premium expense
charge, and the contingent deferred sales charges as seen in the chart
above,
. whether the event is a full surrender or lapse or a decrease in Face
Amount,
. the amount of premiums received by the company, and
. the Policy Year in which the surrender or other event takes place.
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<PAGE>
As seen in the in the above Schedule of Charges, if no commissions are paid, no
contingent deferred sales charge will be charged.
If a contingent deferred sales charge is calculated for a Policy, we will also
calculate an additional charge for each increase in Face Amount. The additional
charge will be charge upon surrender, lapse, or decrease in Face Amount
following the increase. The additional charge will apply for the first ten
years following the effective date of the increase in Face Amount and will
depend on factors similar to those affecting the amount of the basic contingent
deferred sales charge.
Calculation of charge. The contingent deferred sales charge is calculated
separately for the initial Face Amount and for any increase in Face Amount.
Assuming no increases in Face Amount have yet become effective, if a Policy
with a contingent deferred sales charge is surrendered, the charge will be
equal to a percentage of premiums paid during the first Policy Year up to the
guideline annual premium for the initial Face Amount. The percentage either 30%
or 28% of premiums actually paid during the first Policy Year, will be set
forth in the Policy's specifications pages. The mount of the charge will
decrease each year after the first Policy Year by 1/10 of the total charge
until it reaches zero at the end of ten Policy Years (see table below).
If an increase in Face Amount has gone into effect and the Policy is
surrendered within the first 12 Policy Months after the effective date of
increase, the additional charge, if any, associated with the increase will
equal a percentage of premiums associated with the increase which are received
within the 12 Policy Months of the increase, up to the guideline premium for
the increase. The percentage charged will be the same as that foe the initial
Face Amount and will be set forth in the specifications pages issued in
connection with the increase The charge applicable to an increase in Face
Amount will decrease by 1/10 of the total charge each year after the first year
that the increase is in effect until it reaches zero at the end of ten year, as
shown below.
The timing of premium payment s may affect the amount of the contingent
deferred sales charge under a Policy, as the charge is based only on premiums
actually paid in the first Policy Year or in the first 12 Policy Months after
an increase in Face Amount.
Contingent Deferred Sales Charge Percentage Table
<TABLE>
<CAPTION>
Policy Year/1/ Percentage of the CDSL payable:
-------------- -------------------------------
<S> <C>
1.............. 100%
2.............. 90%
3.............. 80%
4.............. 70%
5.............. 60%
6.............. 50%
7.............. 40%
8.............. 30%
9.............. 20%
10.............. 10%
11 and later.... 0%
</TABLE>
- --------
/1/For requested increases, years are measured from the effective date of the
increase.
Charge for Decreases. If there had been no prior requested increase in Face
Amount, the amount of the contingent deferred sales charge deducted upon a
decrease in Face Amount will equal a fraction of the charge that would be
deducted if the Policy were surrendered at that time. The fraction will be
determined by dividing the amount of the decrease by the Policy's Face Amount
before the decrease and multiplying the result by the charge.
If there had been a prior increase in Face Amount, the amount of the charge
will depend on whether the initial Face Amount or subsequent increases in Face
Amount are being decreased, which in turn will depend on
31
<PAGE>
whether the decrease arises from a partial withdrawal or a requested decrease
in Face Amount. (See "Policy Rights and Privileges surrender and Partial
Withdrawals", and "Policy Benefits Death Benefit Change in Face Amount.") Where
the decrease causes a partial reduction in an increase or in the initial Face
Amount a proportionate share of the contingent deferred sales charge for that
increase or the initial Face Amount will be deducted.
Premium Tax Charge
Various states and subdivisions impose a tax on premiums received by insurance
companies. Premium taxes vary from jurisdiction to jurisdiction. To cover these
premium taxes, premium payments will be reduced by a premium tax charge of 2%
from all Policies. However, we may charge 2 1/4 percent for premium taxes on
premiums paid in connection with Policies issued under an Executive Program.
Monthly Deduction
Charges will be deducted monthly from the Cash Value of each Policy ("monthly
deduction") to compensate us for (a) certain administrative costs; (b)
insurance underwriting and acquisition expenses in connection with issuing a
Policy; (c) the cost of insurance; and (d) the cost of optional benefits added
by rider. The monthly deduction will be deducted on the Investment Start Date
and on each succeeding Monthly Anniversary. It will be allocated among each
Division in the same proportion that a Policy's Cash Value in each Division
bears to the total Cash Value of the Policy (not including the Cash Value in
the Loan Account,) on the date the deduction is made. Because portions of the
monthly deduction, such as the cost of insurance, can vary from month to month,
the monthly deduction itself will vary in amount from month to month.
Monthly Administrative Charge. We are responsible for the administration of the
Policies and the Separate Account. Administrative expenses include premium
billing and collection, recordkeeping, processing death benefit claims, cash
surrenders, partial withdrawals, Policy changes, reporting and overhead costs,
processing applications, and establishing Policy records. We assess a monthly
administration charge from each Policy. The amount of this charge is set forth
in the specifications pages of the Policy and depends on the number of
employees eligible to be covered at issue of a Group Contract or an employer-
sponsored insurance program. The following table sets forth the range of
monthly administrative charges under the Policy:
<TABLE>
<CAPTION>
Subsequent
Eligible Employees First Year Years
------------------ ---------- ----------
<S> <C> <C>
250-499................................................ $5.00 $2.50
500-999................................................ $4.75 $2.25
1000+.................................................. $4.50 $2.00
</TABLE>
For Group Contracts or other employer-sponsored insurance programs (1) with
fewer than 250 eligible employees, (2) with additional administrative costs, or
(3) that are offered as Executive Programs or Corporate Programs, the monthly
administrative charge may be higher, but will not exceed $6.00 per month during
the first Policy Year and $3.50 per month in renewal years.
These charges are guaranteed not to increase over the life of the Policy. The
administrative charge will not change in the event that the Insured is no
longer eligible for group coverage, but continues coverage on an individual
basis. In addition, when we believe that lower administrative costs will be
incurred in connection with a particular Group Contract or employer-sponsored
insurance program we may modify the above schedule for that Group Contract or
other employer-sponsored insurance program. The amount of the administrative
charge applicable to a particular Policy will be set forth in specifications
pages for that Policy.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the next Policy Month. Because the cost of insurance depends
upon a number of variables, the cost will vary for each Policy Month. The cost
of insurance is determined separately for the initial Face Amount and for any
increases in Face Amount. We will determine the monthly cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk for each Policy Month.
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<PAGE>
Cost of Insurance Rates. The cost of insurance rates are determined at the
beginning of each Policy Year for the initial Face Amount and each increase in
Face Amount. We will determine the current cost of insurance rates based on our
expectations as to future mortality experience. We currently issue the Policies
on a guaranteed issue or simplified underwriting basis without regard to the
sex of the Insured. Whether a Policy is issued on a guaranteed issue or
simplified underwriting basis does not affect the cost of insurance charge
determined for that Policy.
The current cost of insurance rates will be based on the Attained Age of the
Insured, the rate class of the Insured, and possibly the gender mix (i.e., the
proportion of men and women covered under a particular Group Contract or
employer-sponsored program). The cost of insurance rates generally increase as
the Insured's Attained Age increases. An Insured's rate class is generally
based on the number of eligible employees as well as other factors that may
affect the mortality risk we assume in connection with a particular Group
Contract or employer-sponsored insurance program. All other factors being
equal, the cost of insurance rates generally decrease by rate class as the
number of eligible employees in the rate class increase. We reserve the right
to change criteria on which a rate class will be based in the future.
If gender mix is a factor, we will estimate the gender mix of the pool of
Insureds under a Group Contract or employer-sponsored insurance program upon
issuance of the Contract. Each year on the Group Contract or employer-sponsored
insurance program's anniversary, we may adjust the rate to reflect the actual
gender mix for the particular group. In the event that the Insured's
eligibility under a Group Contract (or other employer-sponsored insurance
program) ceases, the cost of insurance rate will continue to reflect the gender
mix of the pool of Insureds at the time the Insured's eligibility ceased.
However, at some time in the future, we reserve the right to base the gender
mix and rate class on the group consisting of those Insureds who are no longer
under a Group Contract or employer-sponsored program.
The current cost of insurance rates will not be greater than the guaranteed
cost of insurance rates set forth in the Policy. These guaranteed rates are
125% of the maximum rates that could be charged based on the 1980 Commissioners
Standard Ordinary Mortality Table C ("1980 CSO Table"). The guaranteed rates
are higher than 100% of the maximum rates in the 1980 CSO Table because we use
guaranteed or simplified underwriting procedures whereby the insured is not
required to submit to a medical or paramedical examination. The current cost of
insurance rates are generally lower than 100% of the 1980 CSO Table. Any change
in the actual cost of insurance rates, will apply to all persons of the same
Attained Age and rate class whose Face Amounts have been in force for the same
length of time. Any change in the actual cost of insurance rates will not
include changes made to adjust for changes in the gender mix of the pool of
Insureds under a particular Group Contract or employer-sponsored insurance
program. (For purposes of computing guideline premiums under Section 7702 of
the Internal Revenue Code of 1986, as amended, the Company will use 100% of the
1980 CSO Table.)
Net Amount at Risk. The net amount at risk for a Policy Month is (a) the death
benefit at the beginning of the Policy Month divided by 1.0040741), less (b)
the Cash Value at the beginning of the Policy Month. Dividing the death benefit
by 1.0040741 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 5%.
The net amount at risk may be affected by changes in the Cash Value or changes
in the Face Amount of the Policy. If there is an increase in the Face Amount
and the rate class applicable to the increase is different from that for the
initial Face Amount, we will calculate the net amount at risk separately for
each rate class. When we determine the net amounts at risk for each rate class,
when Option A is in effect, we will consider the Cash Value first to be a part
of the initial Face Amount. If the Cash Value is greater than the initial Face
Amount, we will consider the excess Cash Value a part of each increase in
order, starting with the first increase. If Option B is in effect, we will
determine the net amount at risk for each rate class by the Face Amount
associated with that rate class. In calculating the cost of insurance charge,
the cost of insurance rate for a Face Amount is applied to the net amount at
risk for the corresponding rate class.
Because the calculation of the net amount at risk is different under Option A
and Option B when more than one rate class is in effect, a change in the death
benefit option may result in a different net amount at risk for each
33
<PAGE>
rate class. Since the cost of insurance is calculated separately for each rate
class, any change in the net amount at risk resulting from a change in the
death benefit option may affect the total cost of insurance paid by the Owner.
Partial withdrawals and decreases in Face Amount will affect the manner in
which the net amount at risk for each rate class is calculated. (See "Policy
Benefits--Death Benefit," and "Policy Rights and Privileges--Surrender and
Partial Withdrawals.")
Additional Insurance Benefits. The monthly deduction will include charges for
any additional benefits provided by rider. (See "General Matters Relating to
the Policy--Additional Insurance Benefits.")
Partial Withdrawal Transaction Charge
A transaction charge which is the lesser of $25 or 2% of the amount withdrawn
will be assessed on each partial withdrawal, to cover administrative costs
incurred in processing the partial withdrawal.
Separate Account Charges
Mortality and Expense Risk Charge. The Company will deduct a daily charge from
the Separate Account at the rate not to exceed .0024547% of the net assets of
each Division of the Separate Account. This equals an annual rate of .90% of
those net assets. This deduction is guaranteed not to increase for the duration
of the Policy. We may realize a profit from this charge and may use this profit
to finance distribution expenses.
The mortality risk we assume is that an Insured may die sooner than anticipated
and that we 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.
Federal Taxes. Currently no charge is made to the Separate Account for federal
income taxes that may be incurred by the Separate Account. We may make such a
charge in the future. Charges for other taxes incurred by the Account may also
be made. (See "Federal Tax Matters.")
Expenses of the Funds. The value of the net assets of the Separate Account will
reflect the investment advisory fee and other expenses incurred by the Funds.
(See "Summary of the Policy Separate Account Charges--Annual Expenses of the
Funds" and "The Company, the Separate Accounts and The Funds--The Funds.")
GENERAL MATTERS RELATING TO THE POLICY
Postponement of Payments
Payment of any amount due from the Separate Account because of surrender,
partial withdrawals, election of an accelerated death benefit under a rider,
death of the Insured, or the Maturity Date, as well as 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.
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until such time as the check has cleared the Owner's bank.
34
<PAGE>
The Contract
The Policy, the attached application, any riders, endorsements, any application
for an increase in Face Amount, and any application for reinstatement together
make the entire contract between the Owner and us. Apart from the rights and
benefits described in the Certificate or Individual Policy and incorporated by
reference into the Group Contract, the Owner has no rights under the Group
Contract. All statements made by the Insured in the application are considered
representations and not warranties, except in the case of fraud. Only
statements 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
approved in writing 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 Insured will be the Owner of the Policy unless another person is shown as
the Owner in the application. Ownership may be changed as described below. The
Owner is entitled to all rights provided by the Policy, prior to its Maturity
Date. After the Maturity Date, the Owner cannot change the payee nor the mode
of payment, unless otherwise provided in the Policy. Any person whose rights of
ownership depend upon some future event will not possess any present rights of
ownership. If there is more than one Owner at a given time, all must exercise
the rights of ownership. If the Owner should die, and the Owner is not the
Insured, the Owner's interest will go to his or her estate unless otherwise
provided.
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 Insured. If there is more than
one Beneficiary at the death of the Insured, each will receive equal payments
unless otherwise provided by the Owner. If no Beneficiary is living at the
death of the Insured, the proceeds will be payable to the Owner or, if the
Owner is not living, to the Owner's estate.
Change of Owner or Beneficiary
The Owner may change the ownership and/or Beneficiary designation by written
request in a form acceptable to us at any time during the Insured's lifetime.
The Company may require that the Policy be returned for endorsement of any
change. The change will take effect as of the date the request is signed,
whether or not the Insured is living when the request is received by us. We
will not be liable for any payment made or action taken before we receive the
written request for change. If the Owner is also a Beneficiary of the Policy at
the time of the Insured's death, the Owner may, within 60 days of the Insured's
death, designate another person to receive the Policy proceeds. Changing the
Owner may have adverse tax consequences.
Policy Changes
We reserve the right to limit the number of Policy changes to one per Policy
Year and to restrict such changes in the first Policy Year. Currently, no
change may be made during the first Policy Year. For this purpose, changes
include increases or decreases in Face Amount and changes in the death benefit
option. No change will be permitted that would result in the death benefit
under a Policy being included in gross income due to not satisfying the
requirements of 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.
35
<PAGE>
Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment thereunder
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 the Insured. An increase in Face Amount or
addition of a rider after the Issue Date is incontestable after such increase
or addition has been in force for two years from its effective date during the
lifetime of the Insured. Any reinstatement of a Policy is incontestable, except
for nonpayment of premiums, only after it has been in force during the lifetime
of the Insured for two years after the effective date of the reinstatement.
Assignment
We will be bound by an assignment of a Policy only if: (a) it is in writing;
(b) the original instrument or a certified copy is filed with us at our Home
Office; and (c) we send an acknowledged copy to the Owner. We are 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, we may require proof of the interest of the claimant. A
valid assignment will take precedence over any claim of a Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the Policy. If the
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 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. If the Insured, while sane or insane, dies by suicide within two
years after the effective date of any increase in Face Amount, the death
benefit for that increase will be limited to the amount of the monthly
deductions for the increase.
If the Insured is a Missouri citizen when the Policy is issued, this provision
does not apply on the Issue Date of the Policy, or on the effective date of any
increase in Face Amount, unless the Insured intended suicide at the time of
application for the Policy or any increase in Face Amount.
Misstatement of Age and Corrections
If the age of the Insured 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.
Any payment or Policy changes we make in good faith, relying on our records or
evidence supplied with respect to such payment, will fully discharge our duty.
We reserve 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. However, some Group
Contracts or employer-sponsored insurance programs may not offer each of the
additional benefits described below. Certain riders may not be available in all
states. In addition, should it be determined that the tax status of a Policy as
life insurance is adversely affected by the addition of any of these riders, we
will cease offering such riders. 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 will be deducted as part of the monthly
deduction. (See "Charges and Deductions--Monthly Deduction.")
36
<PAGE>
Waiver of Monthly Deductions Rider. Provides for the waiver of the monthly
deductions while the Insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled
before age 65.
Accidental Death Benefit Rider. Provides additional insurance if the Insured's
death results from accidental bodily injury, as defined in the rider. Under the
terms of the rider, the additional benefits provided in the Policy will be paid
upon receipt of proof by us that death resulted directly from accidental injury
and independently of all other causes; occurred within 120 days from the date
of injury; and occurred before the Policy Anniversary nearest age 70 of the
Insured.
Children's Life Insurance Rider. Provides for term insurance on the Insured's
children, as defined in the rider. To be eligible for insurance under the
rider, the child to be insured must not be confined in a hospital at the time
the application is signed. Under the terms of the rider, the death benefit will
be payable to the named Beneficiary upon the death of any insured child. Upon
receipt of proof of the Insured's death before the rider terminates, the rider
will be continued on a fully paid-up term insurance basis.
HIV Acceleration of Death Benefits Rider. Provides for the Owner's election an
accelerated payment, prior to the death of the Insured upon receipt of
satisfactory evidence that the Insured has tested seropositive for the human
immunodeficiency virus ("HIV") after both the Policy and rider are issued. We
will pay the Policy's death benefit (less any Indebtedness and any term
insurance added by riders), calculated on the date that we receive satisfactory
evidence that the Insured has tested seropositive for HIV, reduced by a $100
administrative processing fee. We will pay the accelerated benefit to the Owner
in a single payment in full settlement of the obligations under the Policy. The
rider may be added to the Policy only after the Insured satisfactorily meets
certain underwriting requirements which will generally include a negative HIV
test result to a blood or other screening test acceptable to us.
The federal income tax consequences associated with (i) adding the HIV
Acceleration of Death Benefit Rider or (ii) receiving the benefit provided
under the rider are uncertain. Accordingly, we urge you to consult a tax
advisor about such consequences before adding the HIV Acceleration of Death
Benefit Rider to your Policy or requesting a benefit under the rider.
Accelerated Death Benefit Settlement Option Rider. Provides for the accelerated
payment of a portion of death benefit proceeds in a single sum to the Owner if
the Insured is terminally ill or permanently confined to a nursing home. Under
the rider, which is available at no additional cost, the Owner may make a
voluntary election to completely settle the Policy in return for accelerated
payment of a reduced death benefit. The Owner may make such an election under
the rider if evidence, including a certification from a licensed physician, is
provided to us that the Insured (1) has a life expectancy of 12 months or less
or (2) is permanently confined to a qualified nursing home and is expected to
remain there until death. Any irrevocable Beneficiary and assignees of record
must provide written authorization in order for the Owner to receive the
accelerated benefit.
The amount of the death benefit payable under the rider will equal the Cash
Surrender Value under the Policy on the date we receive satisfactory evidence
of either (1) or (2), above, (less any Indebtedness and any term insurance
added by other riders) plus the product of the applicable "benefit factor"
multiplied by the difference of (a) minus (b), where (a) equals the Policy's
death benefit proceeds, and (b) equals the Policy's Cash Surrender Value. The
"benefit factor", in the case of terminal illness, is 0.85 and, in the case of
permanent nursing home confinement, is 0.70.
Pursuant to the Health Insurance Portability and Accountability Act of 1996, we
believe that for federal income tax purposes an accelerated death benefit
payment made under the Accelerated Death Benefit Settlement Option Rider should
be fully excludable from the gross income of the Beneficiary, as long as the
Beneficiary is the Insured under the Policy. However, you should consult a
qualified tax advisor about the consequences of adding this Rider to a Policy
or requesting an accelerated death benefit payment under this Rider.
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<PAGE>
Records and Reports
We 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
without comment periodic reports for the Funds and a list of the portfolio
securities held in each Fund. Receipt of premium payments directly from the
Owner, transfers, partial withdrawals, Policy Loans, loan repayments, changes
in death benefit options, increases or decreases in Face Amount, surrenders and
reinstatements will be confirmed promptly following each transaction.
An Owner may request in writing a projection of illustrated future Cash
Surrender Values and death benefits. This projection will be furnished by us
for a nominal fee.
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, a Missouri
general business corporation, which is also a parent company of the Company.
GenAmerica Corporation is wholly owned by Metropolitan Life Insurance Company,
a New York insurance company. Walnut Street 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's Internal Revenue
Service employer identification No. is 43-1333368. It is a Missouri corporation
formed May 4, 1984. Walnut Street's address is 400 South 4th Street, Suite
1000, St. Louis, MO. 63102. The Policies will be sold by broker-dealers who
have entered into written sales agreements with Walnut Street. Sales of the
Policies may take place in all states (except New York) and the District of
Columbia.
Broker-dealers will receive commissions based upon a commission schedule in the
sales agreement with the Company and Walnut Street. Broker-dealers compensate
their registered representative agents. First-year commissions are based on a
percentage of first-year premiums. The first-year commissions are either zero
("0,") 14, or 15 percent. Renewal Commissions are not paid.
GENERAL PROVISIONS OF THE GROUP CONTRACT
Issuance
The Group Contract will be issued upon receipt of a signed application for
Group Insurance signed by a duly authorized officer of the employer and
acceptance by a duly authorized officer of the Company at its Home Office.
Premium Payments
The Contractholder will give planned premium payments for Insureds of the
Contractholder or an Associated Company in an amount authorized by the employee
to be deducted from his wages. All planned premiums under a Group Contract must
be given in advance. The planned premium payment interval is agreed to by the
Contractholder and us. Prior to each planned payment interval, we will furnish
the Contractholder with a statement of the planned premium payments to be made
under the Group Contract or such other notification as has been agreed to by
the Contractholder and us.
Grace Period
If the Contractholder does not give planned premium payments in a timely
fashion, the Group Contract will be in default. A grace period of 31 days
begins on the date that the planned premiums were scheduled to be given.
38
<PAGE>
If the Contractholder does not give premiums prior to the end of the grace
period, the Group Contract will terminate. However, the Individual Insurance
will continue following the Group Contract's termination, provided such
insurance is not surrendered or cancelled by the Owner. (See "Policy Rights and
Privileges--Eligibility Change Conversion.")
Termination
Except as described in "Grace Period" above, the Group Contract will be
terminated immediately upon default. In addition, we may end a Group Contract
or any of its provisions on 31 days' notice. If the Group Contract terminates,
any Policies in effect will remain in force on an individual basis, unless such
insurance is surrendered or cancelled by the Owner. New Policies will be issued
as described in "Policy Rights and Privileges--Eligibility Change Conversion."
Right to Examine Group Contract
The Contractholder may terminate the Group Contract within 20 days after
receiving it, within 45 days after the application was signed or within 10 days
of mailing a notice of the cancellation right, whichever is latest. To cancel
the Group Contract, the Contractholder should mail or deliver the Group
Contract to us.
Entire Contract
The Group Contract, with the attached copy of the Contractholder's application
and other attached papers, if any, is the entire contract between the
Contractholder and us. All statements made by the Contractholder, any Owner or
any Insured will be deemed representations and not warranties. Misstatements
will not be used in any contest or to reduce claim under the Group Contract,
unless it is in writing. A copy of the application containing such misstatement
must have been given to the Contractholder or to the Insured or to his
Beneficiary, if any.
Incontestability
We cannot contest the Group Contract after it has been in force for two years
from the date of issue.
Ownership of Group Contract
The Contractholder owns the Group Contract. The Group Contract may be changed
or ended by agreement between us and the Contractholder without the consent of,
or notice to, any person claiming rights or benefits under the Group Contract.
However, the Contractholder does not have any ownership interest in the
Policies issued under the Group Contract. The rights and benefits under the
Policies inure to the benefit of the Owners, Insureds, and Beneficiaries as set
forth herein and in the Policies.
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 tax 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 our understanding of the present
federal income tax laws. No representation is made as to the likelihood of
continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
39
<PAGE>
Tax Status of the Policy
In order to qualify as a life insurance contract for federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policy should satisfy the applicable requirements. If it is subsequently
determined that a Policy does not satisfy the applicable requirements, we may
take appropriate steps to bring the Policy into compliance with such
requirements and we reserve the right to restrict Policy transactions in order
to do so.
In certain circumstances, owners of variable life insurance contracts have been
considered for federal income tax purposes to be the owners of the assets of
the variable account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
the variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Owners investment
control over Variable Account assets, we reserve the right to modify the
Policies as necessary to prevent a Owner from being treated as the owner of the
Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Variable Account be
"adequately diversified" in order for the Policies to be treated as life
insurance contracts for federal income tax purposes. It is intended that the
Variable Account, through its decisions, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Owner or beneficiary. A tax advisor should
be consulted on these consequences.
Generally, the Owner will not be deemed to be in constructive receipt of the
Policy cash value until there is a distribution. When distributions from a
Policy occur, or when loans are taken out from or secured by a Policy, the tax
consequences depend on whether the Policy is classified as a "modified
endowment contract."
Modified Endowment Contracts. Under the Internal Revenue Code, certain life
insurance contracts are classified as "modified endowment contracts," with less
favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policies as to premiums and benefits, the individual
circumstances of each Policy will determine whether it is classified as a
modified endowment contract. The rules are too complex to be summarized here,
but generally depend on the amount of premiums paid during the first seven
Policy years. Certain changes in a Policy after it is issued could also cause
it to be classified as a modified endowment contract. A current or prospective
Owner should consult with a competent advisor to determine whether a Policy
transaction will cause the Policy to be classified as a modified endowment
contract.
Distributions Other Than Death Benefits from Modified Endowment Contracts.
Policies classified as modified endowment contracts are subject to the
following tax rules:
(1) All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a modified endowment contract will
be treated first as distributions of gain taxable as ordinary income
and as tax-free recovery of the Owner's investment in the Policy only
after all gain has been distributed.
40
<PAGE>
(2) Loans taken from or secured by a Policy classified as a modified
endowment contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject to
tax except where the distribution or loan is made when the Owner has
attained age 59 1/2 or is disabled, or where the distribution 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 or designated
beneficiary.
If a Policy becomes a modified endowment contract, distributions that occur
during the contract year will be taxed as distributions from a modified
endowment contract. In addition, distributions from a Policy within two years
before it becomes a modified endowment contract will be taxed in this manner.
This means that a distribution made from a Policy that is not a modified
endowment contract could later become taxable as a distribution from a modified
endowment contract.
Distributions Other Than Death Benefits from Policies that are not Modified
Endowment Contracts. Distributions other than death benefits from a Policy that
is not classified as a modified endowment contract are generally treated first
as a recovery of the Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable the Policy to continue to
qualify as a life insurance contract for federal income tax purposes if Policy
benefits are reduced during the first 15 Policy years may be treated in whole
or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a modified endowment contract are
generally not treated as distributions.
Finally, neither distributions from nor loans from or secured by a Policy that
is not a modified endowment contract are subject to the 10 percent additional
income tax.
Investment in the Policy. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
Policy Loans. In general, interest on a Policy loan will not be deductible. If
a Policy loan is outstanding when a Policy is canceled or lapses, the amount of
the outstanding indebtedness will be added to the amount distributed and will
be taxed accordingly. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.
Multiple Policies. All modified endowment contracts that are issued by us (or
our affiliates) to the same Owner during any calendar year are treated as one
modified endowment contract for purposes of determining the amount includible
in the Owner's income when a taxable distribution occurs.
Accelerated Death Benefit Settlement Option Rider. We believe that payments
received under the Accelerated Death Benefit Settlement Option Rider should be
fully excludable from the gross income of the beneficiary if the beneficiary is
the insured under the Policy. However, you should consult a qualified tax
adviser about the consequences of adding this rider to a Policy or requesting
payment under this rider.
HIV Acceleration of Death Benefit Rider. The tax consequences association with
the HIV Acceleration of Death Benefit Rider are uncertain and a tax advisor
should be consulted.
Business Uses of Policy. Businesses can use the Policies in various
arrangements, including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and nonexempt welfare benefit plans, retiree medical benefit plans and
others. The tax consequences of such plans may vary depending on the particular
facts and circumstances. If you are purchasing the Policy for
41
<PAGE>
any arrangement the value of which depends in part on its tax consequences, you
should consult a qualified tax adviser. 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.
Other Tax Considerations. The transfer of the Policy or designation of a
beneficiary may have federal, state, and/or local transfer and inheritance tax
consequences, including the imposition of gift, estate, and generation-skipping
transfer taxes. For example, the transfer of the Policy to, or the designation
as a beneficiary of, or the payment of proceeds to, a person who is assigned to
a generation which is two or more generations below the generation assignment
of the owner may have generation skipping transfer tax consequences under
federal tax law. The individual situation of each owner or beneficiary will
determine the extent, if any, to which federal, state, and local transfer and
inheritance taxes may be imposed and how ownership or receipt of Policy
proceeds will be treated for purposes of federal, state and local estate,
inheritance, generation skipping and other taxes.
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. Consult a tax adviser with respect to
legislative developments and their effect on the Policy.
Our Income Taxes
Under current federal income tax law, we are not taxed on the Separate
Account's operations. Thus, currently we do not deduct a charge from the
Separate Account for federal income taxes. We reserve the right to charge the
Separate Account for any future federal income taxes or economic burdens we may
incur.
Under current laws in several states, we may incur state and local taxes (in
addition to premium taxes). These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
The Company holds assets of the Separate Account. The assets are kept
physically segregated and held separate and apart from our general assets. We
maintain 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 Financial Institution Bonds issued by St. Paul Fire and Marine
Company 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
To the extent required by law, the Company will vote the shares held in the
Separate Account at regular and special shareholder meetings of the underlying
Funds in accordance with 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 underlying Funds in its own right,
it may elect to do so.
The Owners of Policies ordinarily are the persons having a voting interest in
the Divisions of the Separate Account. The number of votes which an Owner has
the right to instruct will be calculated separately for each Division. The
number of votes which each Owner has the right to instruct will be determined
by dividing a Policy's Cash Value in a Division by the net asset value per
share of the corresponding Fund in which the Division invests. Fractional
shares will be counted. The number of votes of the Fund which the Owner has
right to instruct will be determined as of the date coincident with the date
established by that Fund for
42
<PAGE>
determining shareholders eligible to vote at the meeting of the underlying
Funds. Voting instructions will be solicited by written communications prior to
such meeting in accordance with procedures established by the underlying Funds.
Because the Funds serve as investment vehicles for this Policy as well as for
other variable life insurance policies sold by insurers other than the Company
and funded through other separate investment accounts, persons owning the other
policies will enjoy similar voting rights. We will vote Fund shares held in the
Separate Account for which no timely voting instructions are received and Fund
shares that we own as a consequence of accrued charges under the Policies, in
proportion to the voting instructions which are received with respect to all
Policies participating in a Fund. Each person having a voting interest in a
Division will receive 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 or one or more of the Funds 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 by 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 we determine that
the change would have an adverse effect on its general assets in that the
proposed investment policy for a Fund may result in overly speculative or
unsound investments. In the event we do disregard voting instructions, a
summary of that action and the reasons for such action will be included in the
next annual report to Owners.
IMSA
The Company is a member of the Insurance Market place Standards Association
("IMSA"), and as such may include the IMSA logo and information about IMSA
membership in its advertisements. Companies that belong to IMSA subscribe to a
set of ethical standards covering the various aspects of sales and service for
individually sold life insurance and annuities.
STATE REGULATION OF THE COMPANY
We are a stock life insurance company organized under the laws of Missouri and
subject to regulation by the Missouri Division of Insurance. An annual
statement is filed with the Director of Insurance on or before March 1 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 our liabilities and reserves and the liabilities and
reserves of the Separate Account and certifies their adequacy. 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, we are 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.
43
<PAGE>
MANAGEMENT OF THE COMPANY
<TABLE>
<CAPTION>
Principal Occupation(s) During Past Five
Name Years/1/
------------------------------------ ----------------------------------------
<C> <S>
Executive Officers/2/
Carl H. Anderson/4/ President and Chief Executive Officer
since June 1986. Vice President, New
Ventures, since June 1986, General
American Life Insurance Co., St. Louis,
MO (GenAm).
Matthew K. Duffy/4/ Vice President and Chief Financial
Officer since June 1996. Formerly
Director of Accounting, Prudential
Insurance Company of America, March
1987--June 1996.
E. Thomas Hughes, Jr./4 Treasurer since December 1994. Corporate
/ General American Life Actuary and Treasurer, GenAm since
Insurance Company October 1994.
700 Market Street
St. Louis, MO 63101
Matthew P. McCauley/4 Vice President and General Counsel since
/ General American Life 1984. Secretary since August 1981. Vice
Insurance Company President and Associate General Counsel,
700 Market Street GenAm, since December 30, 1995.
St. Louis, MO 63101
Craig K. Nordyke/4/ Executive Vice President and Chief
Actuary since November, 1996. Vice
President and Chief Actuary August
1990--November 1996.
John R. Tremmel Vice President--Operations and System
Development since January 1999. Formerly
Chief Operating Officer, ISP Alliance,
April 1998 December 1998. Vice President
and General Manager of National
Operations Centers, Norell Corporation,
January 1995--March 1998. Senior Vice
President, Citicorp Insurance Group,
September 1986--December 1995.
Directors/3/
Richard A. Liddy Chairman and Chief Executive Officer,
GenAm, since January 2000. Chairman,
President, and Chief Executive Officer,
GenAm, May 1992--January 2000.
Warren J. Winer Executive Vice President--Group, GenAm,
since September, 1995. Formerly,
Managing Director, Wm. M. Mercer, July
1993--August 1995.
Bernard H. Wolzenski Executive Vice President--Individual,
GenAm, since October 1991.
A. Greig Woodring President and CEO, Reinsurance Group of
America, Inc., since May 1993, and
Executive Vice President--Reinsurance,
GenAm, since January 1990.
</TABLE>
- --------
/1 /All positions listed are with the Company unless otherwise indicated.
/2 /The principal business address of each person listed is Paragon Life
Insurance Company, 100 South Brentwood, St. Louis, MO 63105 unless otherwise
noted.
/3 /The principal business address of each person listed is General American
Life Insurance Company, 700 Market Street, St. Louis, MO 63101, except A.
Greig Woodring--Reinsurance Group of America, 1370 Timberlake Manor Parkway,
Chesterfield, MO 63017.
/4 /Indicates Executive Officers who are also Directors.
44
<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 Policies, including the validity of
the Policies and the Company's right to issue the Policies and the Group
Contract under Missouri insurance law, and all legal matters relating to the
Parent Company's resolution concerning Policies issued by Paragon have been
passed upon by Matthew P. McCauley, Esquire, General Counsel of Paragon Life
Insurance Company.
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. The Company 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 financial statements of the Company and the Separate Account included in
this Prospectus and in the registration statement have been included in
reliance upon the reports of KPMG LLP, independent certified public
accountants, appearing elsewhere herein, and upon 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 the Company,
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
Policies 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.
FINANCIAL STATEMENTS
The financial statements of the Company which are included in this Prospectus
should be distinguished from the financial statements for the Separate Account
included in this Prospectus, and should be considered only as bearing on the
ability of the Company 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.
45
<PAGE>
DEFINITIONS
Attained Age--The Issue Age of the Insured plus the number of completed Policy
Years.
Associated Companies--The companies listed in a Group Contract's specifications
pages that are under common control through stock ownership, contract or
otherwise, with the Contractholder.
Beneficiary--The person(s) named in an Individual Insurance Policy or by later
designation to receive Policy proceeds in the event of the 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 in the Loan Account.
Cash Surrender Value--The Cash Value of a Policy on the date of surrender, less
any Indebtedness.
Certificate--A document issued to Owners of Policies issued under Group
Contracts, setting forth or summarizing the Owner's rights and benefits.
Contractholder--The employer, association, sponsoring organization or trust
that is issued a Group Contract.
Division--A subaccount of the Separate Account. Each Division invests
exclusively in an available underlying Fund.
Employee--A person who is employed and paid for services by an employer on a
regular basis. To qualify as an employee, a person ordinarily must work for an
employer at least 30 hours per week. The Company may waive or modify this
requirement at its discretion. An employee may also include an independent
contractor acting in many respects as an employee with a sponsoring employer.
An employee may include a partner in a partnership if the employer is a
partnership.
Executive Program--A category of Policies issued under Group Contracts or
employer-sponsored insurance programs that have a maximum Face Amount available
for each Policy generally in excess of $500,000.
Face Amount--The minimum death benefit under the Policy so long as the Policy
remains in force.
Group Contract--A group flexible premium variable life insurance contract
issued to the Contractholder by the Company.
Home Office--The service office of the Company, the mailing address of which is
100 South Brentwood, St. Louis, Missouri 63105.
Indebtedness--The sum of all unpaid Policy Loans and accrued interest charged
on loans.
Individual Insurance--Insurance provided under a Group Contract or under an
Individual Policy issued in connection with an employer-sponsored insurance
program on an employee or an employee's spouse.
Insured--The person whose life is insured under a Policy. The term may include
both an employee and an employee's spouse.
Investment Start Date--The date the initial premium is applied to the Divisions
of the Separate Account. This date is the later of the Issue Date or the date
the initial premium is received at the Company's Home Office.
Issue Age--The Insured's Age at his or her last birthday as of the date the
Policy is issued.
Issue Date--The effective date of coverage under a Policy. The Issue Date is
the date from which Policy Anniversaries, Policy Years, and Policy Months are
measured.
46
<PAGE>
Loan Account--The account of the Company to which amounts securing Policy Loans
are allocated. It is a part of the Company's general assets.
Loan Value--The maximum amount that may be borrowed under a Policy after the
first Policy Anniversary.
Maturity Date--The Policy Anniversary on which the Insured reaches Attained Age
95.
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 any premium expense charge and any charge for
premium taxes.
Owner--The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy--Either the Certificate or the Individual Policy offered by the Company
and described in this Prospectus. Under Group Contracts, the Policy may be
issued on the employee or on the employee's spouse.
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.
Separate Account--The Separate Account B, a separate investment account
established by the Company to receive and invest the net premiums paid under
the Policy.
Spouse--An employee's legal spouse. The term does not include a spouse who is
legally separated from the employee.
Valuation Date--Each day that the New York Stock Exchange is open for trading,
except on the day after Thanksgiving when the Company is closed.
Valuation Period--The period between two successive Valuation Dates, commencing
at the close of business of a Valuation Date and ending at the close of
business of the next succeeding Valuation Date.
47
<PAGE>
INDEPENDENT AUDITORS' 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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.
March 10, 2000
KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG
International, a Swiss association.
F-1
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Balance Sheets
December 31, 1999 and 1998
(in thousands of dollars)
<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Assets
Fixed maturities, available
for sale................... $ 81,421 83,384
Policy loans................ 16,954 14,135
Cash and cash equivalents... 10,591 7,439
-------- -------
Total cash and invested
assets................. 108,966 104,958
-------- -------
Reinsurance recoverables.... 1,314 1,170
Deposits relating to
reinsured policyholder
account balances........... 7,020 6,688
Accrued investment income... 1,853 1,545
Deferred policy acquisition
costs...................... 24,357 20,602
Fixed assets and leasehold
improvements, net.......... 1,031 4,504
Other assets................ 262 105
Separate account assets..... 255,190 168,222
-------- -------
Total assets............ $399,993 307,794
======== =======
Liabilities and
Stockholder's Equity
Policyholder account
balances................... 101,665 93,334
Policy and contract claims.. 1,691 1,672
Federal income taxes
payable.................... 1,007 281
Other liabilities and
accrued expenses........... 3,734 3,943
Payable to affiliates....... 3,803 2,062
Due to separate account..... 192 183
Deferred tax liability...... 3,070 5,591
Separate account
liabilities................ 255,126 168,222
-------- -------
Total liabilities....... $370,288 275,288
-------- -------
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 (loss)
income................... (2,748) 2,809
Retained earnings......... 12,453 9,697
-------- -------
Total stockholder's
equity................. $ 29,705 32,506
-------- -------
Total liabilities and
stockholder's equity... $399,993 307,794
======== =======
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Operations and Comprehensive Income
Years ended December 31, 1999, 1998 and 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Revenues:
Policy contract charges............................... $24,577 20,437 16,417
Net investment income................................. 7,726 6,983 6,288
Commissions and expense allowances on reinsurance
ceded................................................ 292 124 10
Net realized investment gains......................... 57 53 69
------- ------ ------
Total revenues...................................... 32,652 27,597 22,784
======= ====== ======
Benefits and expenses:
Policy benefits....................................... 4,616 4,774 3,876
Interest credited to policyholder account balances.... 5,524 5,228 4,738
Commissions, net of capitalized costs................. 445 167 227
General and administration expenses, net of
capitalized costs.................................... 11,394 9,042 7,743
Policy administration system expenses................. 4,787 469 --
Amortization of deferred policy acquisition costs..... 1,631 1,150 424
------- ------ ------
Total benefits and expenses......................... 28,397 20,830 17,008
======= ====== ======
Income before federal income tax expense............ 4,255 6,766 5,775
Federal income tax expense.............................. 1,499 2,368 1,885
------- ------ ------
Net income.............................................. $ 2,756 4,398 3,890
Other comprehensive (loss) income....................... (5,557) 851 1,636
------- ------ ------
Comprehensive (loss) income............................. $(2,801) 5,249 5,526
======= ====== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Stockholder's Equity
Years ended December 31, 1999, 1998, and 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in comprehensive Retained stockholder's
Stock capital income earnings equity
------ ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
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
Net income............ -- -- -- 2,756 2,756
Other comprehensive
loss................. -- -- (5,557) -- (5,557)
------ ------ ------ ------ ------
Balance at December 31,
1999................... $2,050 17,950 (2,748) 12,453 29,705
====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PARAGON LIFE INSURANCE COMPANY
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(in thousands of dollars)
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 2,756 4,398 3,890
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Reinsurance recoverables..................... (144) 563 (892)
Deposits relating to reinsured policyholder
account balances............................ (332) (272) (342)
Accrued investment income.................... (308) (168) (79)
Federal income tax payable................... 726 118 (648)
Other assets................................. 3,316 (1,821) (1,280)
Policy and contract claims................... 19 587 (23)
Other liabilities and accrued expenses....... (209) 457 782
Payable to affiliates........................ 1,741 442 (669)
Company ownership of separate account........ (64) -- --
Due to separate account...................... 9 122 (34)
Deferred tax expense........................... 469 740 732
Policy acquisition costs deferred.............. (4,185) (3,808) (2,972)
Amortization of deferred policy acquisition
costs......................................... 1,631 1,150 424
Interest credited to policyholder accounts..... 5,524 5,228 4,738
Net gain on sales and calls of fixed
maturities.................................... (57) (53) (69)
-------- ------- -------
Net cash provided by operating activities.......... 10,892 7,683 3,558
-------- ------- -------
Cash flows from investing activities:
Purchase of fixed maturities..................... (12,423) (14,915) (12,557)
Sale or maturity of fixed maturities............. 4,695 8,632 5,255
Increase in policy loans, net.................... (2,819) (2,648) (1,923)
-------- ------- -------
Net cash used in investing activities (10,547) (8,931) (9,225)
-------- ------- -------
Cash flows from financing activities:
Net policyholder account deposits................ 2,807 2,954 2,294
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 3,152 1,706 (3,373)
Cash and cash equivalents at beginning of year..... 7,439 5,733 9,106
-------- ------- -------
Cash and cash equivalents at end of year........... $ 10,591 7,439 5,733
-------- ------- -------
Income taxes paid.................................. $ (346) (1,460) (1,801)
======== ======= =======
</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, 1999
and 1998, 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>
PARGON 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 1999, 1998 and 1997. The
actual crediting rate ranged from 6.1% to 6.5% in 1999, and was 6.5% in 1998
and 1997.
(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.
(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>
PARGON 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) Subsequent Event
(i) On January 6, 2000, the Company's ultimate parent, GenAmerica
Corporation, was purchased by Metropolitan Life Insurance Company.
(ii) Subsequent to December 31, 1999 a significant customer notified
Paragon of its intent to terminate its group contract, effective April 30,
2000. This group represents 29% and 8% of Paragon's policies inforce and
separate account assets, as of December 31, 1999.
(2) Investments
The amortized cost and estimated fair value of fixed maturities at December
31, 1999 and 1998 are as follows (000's):
<TABLE>
<CAPTION>
1999
-----------------------------------------
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Treasury securities........ $ 8,728 53 (162) 8,619
Corporate securities............ 70,312 276 (4,830) 65,758
Mortgage-backed securities...... 6,911 36 (394) 6,553
Asset-backed securities......... 500 -- (9) 491
-------- --- ------ ------
$ 86,451 365 (5,395) 81,421
======== === ====== ======
</TABLE>
F-8
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
<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) 68,880
Mortgage-backed securities...... 6,854 193 (25) 7,022
Asset-backed securities......... 500 10 -- 510
------- ----- ---- ------
$78,666 4,951 (233) 83,384
======= ===== ==== ======
</TABLE>
The amortized cost and estimated fair value of fixed maturities at December
31, 1999, 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............................... $ 471 480
Due after one year through five years................. 22,034 21,893
Due after five years through ten years................ 8,853 8,317
Due after ten years through twenty years.............. 48,182 44,178
Mortgage-backed securities............................ 6,911 6,553
-------- ------
$ 86,451 81,421
======== ======
</TABLE>
Proceeds from sales of fixed maturities during 1999, 1998 and 1997 were
$4,695,414, $4,068,639 and $1,328,585 respectively. Gross gains of $56,686,
$53,180 and $68,876 were realized on those sales in 1999, 1998 and 1997,
respectively.
The sources of net investment income follow (000s):
<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Fixed Maturities...................................... $ 6,077 5,603 4,941
Short-term investments................................ 486 535 608
Policy loans and other................................ 1,244 924 807
------- ----- -----
$ 7,807 7,062 6,356
Investment expenses................................... (81) (79) (68)
------- ----- -----
Net investment income............................. $ 7,726 6,983 6,288
======= ===== =====
</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>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized appreciation (depreciation):
Fixed maturities available-for-sale............ $(5,030) 4,717 3,373
Deferred policy acquisition costs.............. 803 (396) (361)
Deferred income taxes............................ 1,479 (1,512) (1,054)
------- ------ ------
Net unrealized appreciation (depreciation)....... $(2,748) 2,809 1,958
======= ====== ======
</TABLE>
The Company has fixed maturities on deposit with various state insurance
departments with an amortized cost of approximately $4,082,871 and $4,120,850
at December 31, 1999 and 1998 respectively.
F-9
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
(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.
Premiums and related reinsurance amounts for the years ended December 31,
1999, 1998 and 1997 as they relate to transactions with affiliates are
summarized as follows (000's):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Reinsurance transactions with affiliates:
Premiums for reinsurance ceded.................... $16,869 14,723 13,001
Policy benefits ceded............................. 16,823 17,071 14,070
Commissions and expenses ceded.................... 292 123 195
Reinsurance recoverables.......................... 1,268 1,109 1,661
</TABLE>
Ceded premiums and benefits to nonaffiliates for 1999, 1998 and 1997 were
insignificant.
(4) Deferred Policy Acquisition Costs
A summary of the policy acquisition costs deferred and amortized is as
follows (000's):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year.................... $20,602 17,980 15,776
Policy acquisition costs deferred............... 4,185 3,808 2,972
Policy acquisition costs amortized.............. (1,631) (1,150) (424)
Deferred policy acquisition costs relating to
change in unrealized (gain) loss on investments
available for sale............................. 1,201 (36) (344)
------- ------ ------
Balance at end of year.......................... $24,357 20,602 17,980
======= ====== ======
</TABLE>
(5) Administration System Write-off
In 1999 Paragon expensed $4,787,275 relating to the termination of a system
development project for policy administration. The one-time write-off in 1999
of previously capitalized amounts was $3,963,450 and other costs incurred in
1999 relating to the project were $823,825. Other costs incurred and expensed
in 1998 and 1997 were $468,794 and $0, respectively.
(6) 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>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Current tax expense................................... $ 1,030 1,628 1,153
Deferred tax expense.................................. 469 740 732
------- ----- -----
Federal income tax expense............................ $ 1,499 2,368 1,885
======= ===== =====
</TABLE>
F-10
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
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>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Computed "expected" tax expense...................... $ 1,489 2,368 2,022
Other, net........................................... 10 0 (137)
------- ----- -----
Federal income tax expense........................... $ 1,499 2,368 1,885
======= ===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1999, 1998 and
1997 are presented below (000's):
<TABLE>
<CAPTION>
1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Deferred tax assets:
Unearned reinsurance allowances..................... $ 194 218 217
Policy and contract liabilities..................... 583 709 1,031
Tax capitalization of acquisition costs............. 2,559 2,147 1,755
Other, net.......................................... 359 58 76
Unrealized Loss on investments, net................. 1,479 -- --
------- ----- -----
Total deferred tax assets......................... $ 5,174 3,132 3,079
======= ===== =====
Deferred tax liabilities:
Unrealized gain on investments, net................. $ -- 1,512 1,054
Deferred policy acquisition costs................... 8,244 7,211 6,419
------- ----- -----
Total deferred tax liabilities.................... $ 8,244 8,723 7,473
------- ----- -----
Net deferred tax liabilities...................... $ 3,070 5,591 4,394
======= ===== =====
</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.
(7) 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 1999, 1998 and
1997 were $2,247,302, $1,513,433 and $1,348,198, respectively. See Note 3 for
reinsurance transactions with affiliates.
(8) 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 1999, 1998 or 1997 due to overfunding of the plan.
F-11
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
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
$0, $188,316 and $198,972 for 1999, 1998 and 1997, respectively.
As a result of the Metropolitan Life Insurance purchase, Paragon implemented
a new bonus program covering all associates employed from October 1, 1999
through March 31, 2000 with at least 1000 hours of service during 1999. Total
expense to the Company for this program was $422,700 in 1999.
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.
(9) 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; (7)
presentation of indirect cash flows; (8) exclusion of comprehensive income
disclosures; and (9) recognition of deposits and withdrawals on universal life
policies as revenues and expenses.
The stockholder's equity (surplus) and net income of the Company at December
31, 1999, 1998 and 1997, as determined using statutory accounting practices, is
summarized as follows (000's):
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Statutory surplus as reported to regulatory
authorities...................................... $13,545 10,500 10,725
Net income as reported to regulatory authorities.. $ 300 1,596 1,397
</TABLE>
(10) 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 1999 without prior
notice or approval is $300,406. Paragon did not pay dividends in 1999, 1998 or
1997.
(11) 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
F-12
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
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, 1999, 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.
(12) 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:
2000............................................................ $ 750
2001............................................................ 321
2002............................................................ 130
2003............................................................ 99
-------
$ 1,300
=======
</TABLE>
Rent expense totaled $507,512, $489,999, and $433,864 in 1999, 1998 and 1997,
respectively.
(13) 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, 1999, 1998 and 1997 (000s):
<TABLE>
<CAPTION>
1999
-------------------------------
Tax
Before-Tax (Expense) Net-of-Tax
Amount Benefit Amount
---------- -------- ----------
<S> <C> <C> <C>
Unrealized holding losses arising during
period.................................. $(8,492) 2,972 (5,520)
Less: reclassification adjustment for
gains realized in net income............ (57) 20 (37)
------- ----- ------
Other comprehensive loss................. (8,549) 2,992 (5,557)
======= ===== ======
</TABLE>
F-13
<PAGE>
PARGON LIFE INSURANCE COMPANY
Notes to Financial Statements--(Continued)
<TABLE>
<CAPTION>
1998
-------------------------------
Tax
Before-Tax (Expense) Net-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
====== ==== ===
</TABLE>
<TABLE>
<CAPTION>
1997
-------------------------------
Tax
Before-Tax (Expense) Net-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
====== ==== =====
</TABLE>
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Paragon Life Insurance Company and
Policyholders of Separate Account A:
We have audited the accompanying statements of net assets, including the
schedule of investments, of the Cash Management, High-Yield Bond, Growth-
Income, Growth, U.S. Government/AAA-Rated, Asset Allocation, International,
Global Growth, Bond and Global Small Capitalization Divisions of Paragon
Separate Account A as of December 31, 1999, and related statements of
operations and changes in net assets for each of the periods in the three year
period then ended. These financial statements are the responsibility of the
management of Paragon Separate Account A. 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. Our
procedures included confirmation of investments owned at December 31, 1999 by
correspondence with the American Variable Insurance Series Mutual Funds. 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 the Cash Management, High-
Yield Bond, Growth-Income, Growth, U.S. Government/AAA-Rated, Asset Allocation,
International, Global Growth, Bond and Global Small Capitalization Divisions of
Paragon Separate Account A as of December 31, 1999, and the results of their
operations and changes in their net assets for each of the periods in the three
year period then ended, in conformity with generally accepted accounting
principles.
March 10, 2000
KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG
International, a Swiss association.
F-15
<PAGE>
PARAGON SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
December 31, 1999
<TABLE>
<CAPTION>
Cash High-Yield Growth- U.S. Gov/ Asset Global
Management Bond Income Growth AAA-Rated Allocation International Growth Bond
Division Division Division Division Division Division Division Division Division
---------- ---------- ---------- ---------- --------- ---------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets:
Investments in
American
Variable
Insurance Series,
at Market Value
(See Schedule
of
Investments)... $2,759,617 3,779,681 27,935,557 59,076,119 3,008,228 6,976,657 19,360,734 1,081,082 189,460
Receivable from
Paragon Life
Insurance
Company........ 2,988 9,074 36,886 77,148 10,508 11,802 13,945 2,466 1,474
---------- --------- ---------- ---------- --------- --------- ---------- --------- -------
Total Net
Assets......... $2,762,605 3,788,755 27,972,443 59,153,267 3,018,736 6,988,459 19,374,679 1,083,548 190,934
========== ========= ========== ========== ========= ========= ========== ========= =======
Net Assets,
representing:
Equity of
Contract
Owners......... $2,762,149 3,788,058 27,967,346 59,142,618 3,018,181 6,987,190 19,371,206 1,083,358 190,899
Equity of
Paragon Life
Insurance
Company........ 456 697 5,097 10,649 555 1,269 3,473 190 35
---------- --------- ---------- ---------- --------- --------- ---------- --------- -------
$2,762,605 3,788,755 27,972,443 59,153,267 3,018,736 6,988,459 19,374,679 1,083,548 190,934
========== ========= ========== ========== ========= ========= ========== ========= =======
Total Units Held. 167,819 122,353 359,601 409,886 154,481 234,568 494,132 46,328 16,907
Net Asset Value
Per Unit........ $ 16.46 30.96 77.77 144.29 19.54 29.79 39.20 23.38 11.29
Cost of
Investments..... $2,784,329 4,084,441 27,157,632 38,491,888 3,187,236 6,559,850 11,694,224 754,306 198,810
========== ========= ========== ========== ========= ========= ========== ========= =======
<CAPTION>
Global Small
Capitalization
Division
--------------
<S> <C>
Net Assets:
Investments in
American
Variable
Insurance Series,
at Market Value
(See Schedule
of
Investments)... 512,562
Receivable from
Paragon Life
Insurance
Company........ 452
--------------
Total Net
Assets......... 513,014
==============
Net Assets,
representing:
Equity of
Contract
Owners......... 512,930
Equity of
Paragon Life
Insurance
Company........ 84
--------------
513,014
==============
Total Units Held. 26,425
Net Asset Value
Per Unit........ 19.41
Cost of
Investments..... 413,704
==============
</TABLE>
See Accompanying Notes to Financial Statements.
F-16
<PAGE>
PARAGON SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
Page 1 of 2
For the years ended December 31, 1999, 1998, and 1997, except for the Global
Growth Division and Bond Division which are for the period from May 1, 1997
(Inception) to December 31, 1997, and the Global Small Capitalization Division
which is for the period May 15, 1998 (Inception) through December 31, 1998
<TABLE>
<CAPTION>
Cash Management Division High-Yield Bond Division Growth-Income Division
--------------------------- --------------------------- --------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
--------- ------- ------- -------- -------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Income........ $ 115,490 96,495 74,007 364,194 305,497 264,042 473,123 381,934 350,104
Expenses:
Mortality and Expense
Charge................. 19,014 13,584 10,690 27,659 25,250 22,441 199,439 160,445 133,938
--------- ------- ------- -------- -------- ------- ---------- --------- ---------
Net Investment Income
(Expense)............ 96,476 82,911 63,317 336,535 280,247 241,601 273,684 221,489 216,166
Net Realized Gain on In-
vestments:
Realized Gain from Dis-
tributions............. -- -- -- -- 49,339 34,716 4,499,088 3,510,810 1,872,910
Proceeds from Sales.... 1,005,867 628,387 443,594 582,087 463,409 274,962 3,021,189 1,511,189 1,769,273
Cost of Investments
Sold................... 1,012,535 638,944 412,545 623,671 456,240 212,893 2,532,037 1,164,554 1,078,967
--------- ------- ------- -------- -------- ------- ---------- --------- ---------
Net Realized Gain
(Loss) on Invest-
ments................ (6,668) (10,557) 31,049 (41,584) 56,508 96,785 4,988,240 3,857,445 2,563,216
Net Unrealized Gain
(Loss) on Investments:
Unrealized Gain (Loss)
Beginning of Year...... (37,429) (46,116) (11,937) (189,935) 159,157 173,880 3,336,423 3,787,828 2,714,233
Unrealized Gain (Loss)
End of Year............ (24,712) (37,429) (46,116) (304,760) (189,935) 159,157 777,925 3,336,423 3,787,828
--------- ------- ------- -------- -------- ------- ---------- --------- ---------
Net Unrealized Gain
(Loss) on Investments.. 12,717 8,687 (34,179) (114,824) (349,092) (14,723) (2,558,498) (451,405) 1,073,595
--------- ------- ------- -------- -------- ------- ---------- --------- ---------
Net Gain (Loss) on
Investments.......... 6,049 (1,870) (3,130) (156,408) (292,584) 82,062 2,429,742 3,406,040 3,636,811
Increase (Decrease) in
Assets Resulting from
Operations.............. $ 102,525 81,041 60,187 180,127 (12,337) 323,663 2,703,426 3,627,529 3,852,977
========= ======= ======= ======== ======== ======= ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/
Growth Division AAA-Rated Division Asset Allocation Division
--------------------------------- --------------------------- ---------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------- --------- --------- -------- -------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Income........ $ 83,136 115,480 134,259 192,900 165,217 147,633 243,309 223,957 174,754
Expenses:
Mortality and Expense
Charge................. 328,963 215,716 173,987 22,747 19,492 16,289 51,814 44,638 36,970
----------- --------- --------- -------- -------- ------- --------- ------- -------
Net Investment Income
(Expense)............ (245,827) (100,236) (39,728) 170,153 145,725 131,344 191,495 179,319 137,784
Net Realized Gain on In-
vestments:
Realized Gain from Dis-
tributions............. 7,940,743 4,926,240 3,088,079 -- -- -- 436,651 461,427 288,742
Proceeds from Sales.... 4,078,426 2,408,576 2,854,025 403,213 419,091 363,960 1,089,565 522,616 593,825
Cost of Investments
Sold................... 2,741,360 1,811,155 1,752,513 414,626 416,180 314,641 950,757 435,583 405,749
----------- --------- --------- -------- -------- ------- --------- ------- -------
Net Realized Gain
(Loss) on Invest-
ments................ 9,277,809 5,523,661 4,189,591 (11,413) 2,911 49,319 575,659 548,460 476,818
Net Unrealized Gain
(Loss) on Investments:
Unrealized Gain (Loss)
Beginning of Year...... 8,529,513 4,617,293 2,937,160 19,560 (27,162) (6,315) 747,636 772,040 527,649
Unrealized Gain (Loss)
End of Year............ 20,584,231 8,529,513 4,617,293 (179,008) 19,560 (27,162) 416,807 747,636 772,040
----------- --------- --------- -------- -------- ------- --------- ------- -------
Net Unrealized Gain
(Loss) on Investments.. 12,054,718 3,912,220 1,680,133 (198,568) 46,722 (20,847) (330,829) (24,404) 244,391
----------- --------- --------- -------- -------- ------- --------- ------- -------
Net Gain (Loss) on
Investments.......... 21,332,527 9,435,881 5,869,724 (209,981) 49,633 28,472 244,830 524,056 721,209
Increase (Decrease) in
Assets Resulting from
Operations.............. $21,086,700 9,335,645 5,829,996 (39,828) 195,358 159,816 436,325 703,375 858,993
=========== ========= ========= ======== ======== ======= ========= ======= =======
</TABLE>
See Accompanying Notes to Financial Statements.
F-17
<PAGE>
PARAGON SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS--(Continued)
Page 2 of 2
For the years ended December 31, 1999, 1998, and 1997, except for the Global
Growth Division and Bond Division which are for the period from May 1, 1997
(Inception) to December 31, 1997, and the Global Small Capitalization Division
which is for the period May 15, 1998 (Inception) through December 31, 1998
<TABLE>
<CAPTION>
Global Small
Global Growth Capitalization
International Division Division Bond Division Division
------------------------------ --------------------- ----------------------- ---------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
---------- --------- --------- ------- ------ ----- ------- ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividend Income........ $ 234,405 131,756 175,293 7,917 1,621 29 13,952 9,392 926 708 268
Expenses:
Mortality and Expense
Charge................. 98,243 72,947 66,681 3,817 940 12 1,480 922 9 1,281 118
---------- --------- --------- ------- ------ ----- ------- ------ ------ ------- ------
Net Investment Income
(Expense)............ 136,162 58,809 106,612 4,100 681 17 12,472 8,470 917 (573) 150
Net Realized Gain on In-
vestments:
Realized Gain from Dis-
tributions............. 1,690,422 194,147 895,572 42,478 6,913 20 -- 1,020 739 40,508 939
Proceeds from Sales.... 1,813,710 1,525,220 1,324,190 38,390 63,152 5,402 103,342 12,969 -- 40,096 2,973
Cost of Investments
Sold................... 1,137,843 1,342,843 980,764 31,886 60,867 5,506 106,752 13,407 -- 32,054 3,061
---------- --------- --------- ------- ------ ----- ------- ------ ------ ------- ------
Net Realized Gain
(Loss) on Invest-
ments................ 2,166,289 376,524 1,238,996 48,962 9,196 (84) (3,410) 582 739 48,550 851
Net Unrealized Gain
(Loss) on Investments:
Unrealized Gain (Loss)
Beginning of Year...... 1,665,020 254,538 959,525 22,248 (155) -- (4,405) (1,574) -- 12,850 --
Unrealized Gain (Loss)
End of Year............ 7,666,510 1,665,020 254,538 326,776 22,248 (155) (9,350) (4,405) (1,574) 98,858 12,850
---------- --------- --------- ------- ------ ----- ------- ------ ------ ------- ------
Net Unrealized Gain
(Loss) on Investments.. 6,001,490 1,410,482 (704,987) 304,528 22,403 (155) (4,945) (2,831) (1,574) 86,008 12,850
---------- --------- --------- ------- ------ ----- ------- ------ ------ ------- ------
Net Gain (Loss) on
Investments.......... 8,167,779 1,787,006 534,011 353,510 31,601 (239) (8,355) (2,249) (835) 134,558 13,701
Increase (Decrease) in
Assets Resulting from
Operations.............. $8,303,941 1,845,815 642,623 357,610 32,282 (222) 4,117 6,221 82 133,985 13,851
========== ========= ========= ======= ====== ===== ======= ====== ====== ======= ======
</TABLE>
See Accompanying Notes to Financial Statements.
F-18
<PAGE>
PARAGON SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1999, 1998, and 1997, except for the Global
Growth Division and Bond Division which are for the period from May 1, 1997
(Inception) to December 31, 1997, and the Global Small Capitalization Division
which is for the period May 15, 1998 (Inception) through December 31, 1998
<TABLE>
<CAPTION>
Cash Management Division High-Yield Bond Division Growth-Income Division
-------------------------------- ------------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---------- --------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income
(Expense).............. $ 96,476 82,911 63,317 336,535 280,247 241,601 273,684 221,489 216,166
Net Realized Gain
(Loss) on Investment... (6,668) (10,557) 31,049 (41,584) 56,508 96,785 4,988,240 3,857,445 2,563,216
Net Unrealized Gain
(Loss) on Investments.. 12,717 8,687 (34,179) (114,824) (349,092) (14,723) (2,558,498) (451,405) 1,073,595
---------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Increase (Decrease)
in Net Assets Result-
ing from Operations... 102,525 81,041 60,187 180,127 (12,337) 323,663 2.703,426 3,627,529 3,852,977
Net Deposits into
Separate Account...... 495,973 596,074 69,053 25,491 239,057 459,664 302,305 1,503,802 1,497,701
---------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Increase in Net As-
sets................. 598,498 677,115 129,240 205,618 226,720 783,327 3,005,731 5,131,331 5,350,678
Net Assets, Beginning of
Year.................... 2,164,107 1,486,992 1,357,752 3,583,137 3,356,417 2,573,090 24,966,712 19,835,381 14,484,703
---------- --------- --------- --------- --------- --------- ---------- ---------- ----------
Net Assets, End of Year. $2,762,605 2,164,107 1,486,992 3,788,755 3,583,137 3,356,417 27,972,443 24,966,712 19,835,381
========== ========= ========= ========= ========= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/
Growth Division AAA-Rated Division Asset Allocation Division
----------------------------------- ------------------------------ -------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------- ---------- ---------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment Income
(Expense)............. $ (245,827) (100,236) (39,728) 170,153 145,725 131,344 191,495 179,319 137,784
Net Realized Gain
(Loss) on Investment.. 9,277,809 5,523,661 4,189,591 (11,413) 2,911 49,319 575,659 548,460 476,818
Net Unrealized Gain
(Loss) on Invest-
ments................. 12,054,718 3,912,220 1,680,133 (198,568) 46,722 (20,847) (330,829) (24,404) 244,391
----------- ---------- ---------- --------- --------- --------- --------- --------- ---------
Increase (Decrease)
in Net Assets Re-
sulting from Opera-
tions................ 21,086,700 9,335,645 5,829,996 (39,828) 195,358 159,816 436,325 703,375 858,993
Net Deposits into
Separate Account..... 1,094,698 1,824,078 864,930 9,536 508,935 158,596 (256,535) 702,411 389,338
----------- ---------- ---------- --------- --------- --------- --------- --------- ---------
Increase in Net
Assets.............. 22,181,398 11,159,723 6,694,926 (30,292) 704,293 318,412 179,790 1,405,786 1,248,331
Net Assets, Beginning
of Year................ 36,971,869 25,812,144 19,117,218 3,049,028 2,344,735 2,026,323 6,808,669 5,402,883 4,154,552
----------- ---------- ---------- --------- --------- --------- --------- --------- ---------
Net Assets, End of
Year................... $59,153,267 36,971,869 25,812,144 3,018,736 3,049,028 2,344,735 6,988,459 6,808,669 5,402,883
=========== ========== ========== ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Global Small
Global Growth Capitalization
International Division Division Bond Division Division
-------------------------------- ----------------------- ------------------------ ---------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
----------- ---------- --------- --------- ------- ----- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operations:
Net Investment In-
come (Expense)..... $ 136,162 58,809 108,612 4,100 681 17 12,472 8,470 917 (573) 150
Net Realized Gain
(Loss) on Invest-
ment............... 2,166,289 376,524 1,238,998 48,982 9,198 (84) (3,410) 582 739 48,550 851
Net Unrealized
Gain (Loss) on In-
vestments.......... 6,001,490 1,410,482 (704,987) 304,528 22,403 (155) (4,945) (2,831) (1,574) 86,008 12,850
----------- ---------- --------- --------- ------- ----- ------- ------- ------ ------- ------
Increase (De-
crease) in Net
Assets Resulting
from Operations... 8,303,941 1,845,815 642,623 357,610 32,282 (222) 4,117 6,221 82 133,985 13,851
Net Deposits into
Separate Account.. 157,446 313,448 722,256 508,572 179,878 5,428 (35,581) 151,370 64,725 306,127 59,051
----------- ---------- --------- --------- ------- ----- ------- ------- ------ ------- ------
Increase in Net
Assets........... 8,461,387 2,159,263 1,364,879 866,182 212,160 5,206 (31,464) 157,591 64,807 440,112 72,902
Net Assets, Begin-
ning of Year........ 10,913,292 8,754,029 7,389,150 217,366 5,206 -- 222,398 64,807 -- 72,902 --
----------- ---------- --------- --------- ------- ----- ------- ------- ------ ------- ------
Net Assets, End of
Year................ $19,374,679 10,913,292 8,754,029 1,083,548 217,366 5,206 190,934 222,398 64,807 513,014 72,902
=========== ========== ========= ========= ======= ===== ======= ======= ====== ======= ======
</TABLE>
See Accompanying Notes to Financial Statements.
F-19
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements
December 31, 1999
(1) Organization
Paragon Life Insurance Company (Paragon) established Paragon Separate Account
A on October 30, 1987. Paragon Separate Account A (the Separate Account)
commenced operations on October 24, 1989 and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Separate Account receives
and invests net premiums for flexible premium group variable life insurance
policies that are issued by Paragon. The Separate Account is divided into ten
divisions, which invest exclusively in shares of a single fund of American
Variable Insurance Series (American Series), an open-end, diversified
management investment company. These funds are the Cash Management, High-Yield
Bond, Growth-Income, Growth, U.S. Government AAA-Rated, Asset Allocation,
International, Global Growth, Bond and Global Small Capitalization (the
Divisions). Policyholders have the option of directing their premium payments
into any or all of the Divisions.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
Investments
The Separate Account's investments in the Funds of the American Series are
valued daily based on the net asset values of the respective fund shares held.
The average cost method is used in determining the cost of shares sold on
withdrawals by the Separate Account. Share transactions are recorded consistent
with trade date accounting. All dividends received are immediately reinvested
on the ex-dividend date.
Federal Income Taxes
The operations of the Separate Account are treated as part of Paragon for
income tax purposes. Under existing Federal income tax law, capital gains from
sales of investments of the Separate Account are not taxable. Therefore, no
Federal income tax has been provided.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions with respect to amounts reported in the financial statements.
Actual results could differ from those estimates.
(3) Policy Charges
Charges are deducted from the policies and the Separate Account to compensate
Paragon for providing the insurance benefits set forth in the contracts 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 Charge
Certain policies include a provision that premium payments may be reduced by
a premium expense charge. The premium expense charge, if any, is determined by
the costs associated with distributing the policy and is equal to 1%, 2.5% or
3.5% of the premium paid. The premium expense charge compensates Paragon for
F-20
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements--(Continued)
(3) Policy Charges--Continued
providing the insurance benefits set forth in the policies, incurring expenses
of distributing the policies, and assuming certain risks in connection with the
policies. In addition, some polices have a premium tax assessment equal to 2%
to 2.25% to reimburse Paragon for premium taxes incurred. The premium payment
less premium expense and premium tax charges equals the net premium that is
invested in the underlying separate account.
Monthly Expense Charge
Paragon has responsibility for the administration of the policies and the
Separate Account. As reimbursement for expenses related to the acquisition and
maintenance of each policy and the Separate Account, Paragon assesses a monthly
administration charge to each policy. This charge, which varies due to the size
of the group, has a maximum of $6.00 per month during the first 12 policy
months and $3.50 per month thereafter.
Cost of Insurance
The cost of insurance is deducted on each monthly anniversary for the
following policy month. Because the cost of insurance depends upon a number of
variables, the cost varies for each policy month. The cost of insurance is
determined separately for the initial face amount and for any subsequent
increase in face amount. Paragon determines the monthly cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk for each policy month.
Optional Rider Benefits Charge
The optional rider benefits charge is a monthly deduction for any additional
benefits provided by policy riders.
Surrender or Contingent Deferred Sales Charge
During the first policy year, or after issue or an increase, certain policies
include a provision for a charge upon surrender or lapse of the policy, a
requested decrease in face amount, or a partial withdrawal that causes the face
amount to decrease. The amount assessed under the policy terms, if any, depends
upon the cost associated with distributing the particular policies. The amount
of any charge depends on a number of factors, including whether the event is a
full surrender or lapse or only a decrease in face amount, the amount of
premiums received by Paragon, and the policy year up to eleven years after the
initial charge in which the surrender or other event takes place.
Mortality and Expense Charge
In addition to the above contract charges, a daily charge is made against the
operations of each division for the mortality and expense risks assumed by
Paragon. Paragon deducts a daily charge from the Separate Account at the rate
of .0000206% of the net assets of each division of the Separate Account which
equals an annual rate of .75% of those net assets. The mortality risk assumed
by Paragon is that insureds may die sooner than anticipated and that,
therefore, Paragon 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.
F-21
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements--(Continued)
(4) Purchases and Sales of American Series Shares
For the Years ended December 31, 1999, 1998, and 1997, except for the Global
Growth Division and Bond Division which are for the period from May 1, 1997
(Inception) to December 31, 1997, and the Global Small Capitalization Division
which are for the period May 15, 1998 (Inception) through December 31, 1998,
purchases and proceeds from the sales of the American Series were as follows:
<TABLE>
<CAPTION>
Cash Management Division High-Yield Division Growth-Income Division
---------------------------- ----------------------- -----------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---------- --------- ------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $1,482,069 1,211,759 501,797 584,077 664,784 716,910 3,137,946 2,826,253 3,148,883
Sales................... $1,005,867 628,387 443,594 582,087 463,409 274,962 3,021,189 1,511,189 1,769,273
========== ========= ======= ======= ======= ======= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/
Growth Division AAA-Rated Division Asset Allocation Division
------------------------------ ----------------------- ---------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---------- --------- --------- ------- ------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $4,831,538 3,933,913 3,567,101 389,407 898,768 512,847 776,736 1,176,859 934,034
Sales................... $4,078,426 2,408,576 2,854,025 403,213 419,091 363,960 1,089,565 522,616 593,825
========== ========= ========= ======= ======= ======= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Global Small
Global Growth Corporation
International Division Division Bond Division Division
------------------------------ ---------------------- ---------------------- --------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
---------- --------- --------- ------- ------- ------ ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases............... $1,866,011 1,701,386 2,043,240 542,031 240,471 11,085 66,106 162,110 64,725 344,832 61,565
Sales................... $1,813,710 1,525,220 1,324,190 38,390 63,152 5,402 103,342 12,969 0 40,096 2,973
========== ========= ========= ======= ======= ====== ======= ======= ====== ======= ======
</TABLE>
The purchases above do not include dividends and realized gains from
distributions that have been reinvested into the respective divisions.
F-22
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements--(Continued)
Note 5--Accumulation of Unit Activity
The following is a reconciliation of the accumulation of unit activity for
the Years ended December 31, 1999, 1998, and 1997 except for the Global Growth
Division and Bond Division which are for the period from May 1, 1997
(Inception) to December 31, 1997, and the Global Small Capitalization Division
which is for the period May 15, 1998 (Inception) through December 31, 1998.
<TABLE>
<CAPTION>
High-
Cash Management Division Yield Bond Division Growth-Income Division
-------------------------- ----------------------- ---------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- -------- -------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Increase in Units
Deposits............... 93,130 78,771 34,468 19,790 23,162 25,785 43,326 45,271 59,235
Withdrawals............ 62,101 40,080 29,861 18,983 15,117 9,362 38,900 21,620 30,135
-------- -------- -------- ------- ------- ------- -------- -------- --------
Net Increase in Units.. 31,029 38,691 4,607 807 8,045 16,423 4,426 23,651 29,100
Outstanding Units,
Beginning of Year....... 136,790 98,099 93,492 121,546 113,501 97,078 355,175 331,524 302,424
-------- -------- -------- ------- ------- ------- -------- -------- --------
Outstanding Units, End
of Year................. 167,819 136,790 98,099 122,353 121,546 113,501 359,601 355,175 331,524
======== ======== ======== ======= ======= ======= ======== ======== ========
<CAPTION>
U.S. Government/
Growth Division AAA-Rated Division Asset Allocation Division
-------------------------- ----------------------- ---------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- -------- -------- ------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Increase in Units
Deposits............... 45,334 53,606 59,854 20,540 48,167 29,124 27,915 45,193 41,817
Withdrawals............ 36,311 29,276 43,445 20,135 21,317 20,299 36,665 18,678 24,483
-------- -------- -------- ------- ------- ------- -------- -------- --------
Net Increase in Units.. 9,023 24,330 16,409 405 26,850 8,825 (8,750) 26,515 17,334
Outstanding Units,
Beginning of Year....... 400,863 376,533 360,124 154,076 127,226 118,401 243,318 216,803 199,469
-------- -------- -------- ------- ------- ------- -------- -------- --------
Outstanding Units, End
of Year................. 409,886 400,863 376,533 154,481 154,076 127,226 234,568 243,318 216,803
======== ======== ======== ======= ======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Global Small
Global Growth Capitalization
International Division Division Bond Division Division
----------------------- ------------------- -------------------- ---------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
------- ------- ------- ------ ------ ----- ------ ------ ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Increase in Units
Deposits............... 73,275 85,032 110,855 32,866 20,277 1,004 6,032 15,192 6,056 22,912 7,474
Withdrawals............ 66,636 68,041 70,268 2,223 5,073 523 9,223 1,149 1 3,634 327
------- ------- ------- ------ ------ ----- ------ ------ ----- ------- ------
Net Increase in Units.. 6,639 16,991 40,587 30,643 15,204 481 (3,191) 14,043 6,055 19,278 7,147
Outstanding Units,
Beginning of Year....... 487,493 470,502 429,915 15,685 481 -- 20,098 6,055 -- 7,147 --
------- ------- ------- ------ ------ ----- ------ ------ ----- ------- ------
Outstanding Units, End
of Year................. 494,132 487,493 470,502 46,328 15,685 481 16,907 20,098 6,055 26,425 7,147
======= ======= ======= ====== ====== ===== ====== ====== ===== ======= ======
</TABLE>
F-23
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements--(Continued)
Page 1 of 2
Note 6--Reconciliation of Gross and Net Deposits into the Separate Account
Deposits into the Separate Account purchase shares in the American Series.
Net deposits represent the amount available for investment in such shares
after deduction of premium expense charges, monthly expense charges, cost of
insurance and the cost of rider charges. The following is a summary of net
deposits made for the years ended December 31, 1999, 1998, and 1997, except
for the Global Growth Division and Bond Division which are for the period from
May 1, 1997 (Inception) to December 31, 1997, and the Global Small
Capitalization Division which is for the period May 15, 1998 (Inception)
through December 31, 1998.
<TABLE>
<CAPTION>
Cash Management Division High-Yield Bond Division Growth-Income Division
----------------------------- ---------------------------- ----------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
--------- -------- -------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gross Deposits.... $ 662,254 900,694 480,549 757,715 939,255 851,440 4,105,126 4,415,471 4,234,060
Surrenders and
Withdrawals............. (403,468) (248,642) (255,218) (237,513) (349,977) (164,731) (1,418,560) (1,194,511) (1,323,100)
Transfers Between Funds
and General Account..... 529,957 222,269 103,215 (248,946) (66,499) 34,786 (1,035,081) (362,418) (135,707)
--------- -------- -------- -------- -------- -------- ---------- ---------- ----------
Total Gross Deposits
net of Surrenders,
Withdrawals, and
Transfers.............. 788,743 874,321 328,546 271,256 522,779 721,495 1,651,485 2,858,542 2,775,253
Deductions:
Premium Expense
Charges................ 16,902 23,179 12,315 19,339 24,171 21,821 104,770 113,631 108,510
Monthly Expense
Charges................ 10,381 9,831 5,351 8,520 10,004 9,481 46,827 47,835 47,147
Cost of Insurance and
Optional Benefits...... 265,487 245,237 241,827 217,906 249,547 230,529 1,197,583 1,193,274 1,121,895
--------- -------- -------- -------- -------- -------- ---------- ---------- ----------
Total Deductions..... 292,770 278,247 259,493 245,765 283,722 261,831 1,349,180 1,354,740 1,277,552
--------- -------- -------- -------- -------- -------- ---------- ---------- ----------
Net Deposits from
Policyholders........... $ 495,973 596,074 69,053 25,491 239,057 459,664 302,305 1,503,802 1,497,701
========= ======== ======== ======== ======== ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
U.S. Government/
Growth Division AAA-Rated Division Asset Allocation Division
----------------------------------- ---------------------------- -------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----------- ---------- ---------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gross Deposits.... $ 5,805,189 5,752,879 5,579,506 563,306 830,396 604,392 1,137,178 1,402,869 1,203,831
Surrenders and
Withdrawals............. (2,864,964) (1,839,538) (2,433,049) (251,185) (255,904) (253,307) (483,502) (286,876) (368,203)
Transfers Between Funds
and General Account..... 42,059 (340,651) (680,220) (97,150) 151,445 17,632 (554,944) (26,637) (92,300)
----------- ---------- ---------- -------- -------- -------- --------- --------- ---------
Total Gross Deposits
net of Surrenders,
Withdrawals, and
Transfers.............. 2,982,284 3,572,690 2,466,237 214,971 725,937 368,717 98,732 1,089,356 743,328
Deductions:
Premium Expense
Charges................ 148,159 148,049 142,991 14,376 21,369 15,489 29,023 36,102 30,852
Monthly Expense
Charges................ 65,455 61,689 62,129 7,190 7,540 6,730 12,277 13,522 13,405
Cost of Insurance and
Optional Benefits...... 1,673,972 1,538,874 1,396,187 183,869 188,093 187,902 313,967 337,321 309,733
----------- ---------- ---------- -------- -------- -------- --------- --------- ---------
Total Deductions..... 1,887,586 1,748,612 1,601,307 205,435 217,002 210,121 355,267 386,945 353,990
----------- ---------- ---------- -------- -------- -------- --------- --------- ---------
Net Deposits from
Policyholders........... $ 1,094,698 1,824,078 864,930 9,536 508,935 158,596 (256,535) 702,411 389,338
=========== ========== ========== ======== ======== ======== ========= ========= =========
</TABLE>
F-24
<PAGE>
PARAGON SEPARATE ACCOUNT A
Notes to Financial Statements--(Continued)
Page 2 of 2
Note 6--Reconciliation of Gross and Net Deposits into the Separate Account
Deposits into the Separate Account purchase shares in the American Series.
Net deposits represent the amount available for investment in such shares
after deduction of premium expense charges, monthly expense charges, cost of
insurance and the cost of rider charges. The following is a summary of net
deposits made for the years ended December 31, 1999, 1998, and 1997, except
for the Global Growth Division and Bond Division which are for the period from
May 1, 1997 (Inception) to December 31, 1997, and the Global Small
Capitalization Division which is for the period May 15, 1998 (Inception)
through December 31, 1998.
<TABLE>
<CAPTION>
Global Small
Global Growth Capitalization
International Division Division Bond Division Division
-------------------------------- ----------------------- ------------------------ ---------------
1999 1998 1997 1999 1998 1997 1999 1998 1997 1999 1998
---------- --------- --------- ------- ------- ----- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Gross Deposits.. $2,011,778 2,441,558 2,486,717 248,542 81,931 2,352 79,818 60,770 -- 132,488 16,691
Surrenders and
Withdrawals........... (825,357) (600,534) (825,714) (22,028) (26,996) (133) (74,358) (21,833) -- (6,034) (4,977)
Transfers Between
Funds and General
Account............... (447,726) (907,398) (286,533) 317,972 134,522 3,026 (24,218) 122,776 64,725 193,956 48,497
---------- --------- --------- ------- ------- ----- ------- ------- ------ ------- ------
Total Gross Deposits
net of Surrenders,
Withdrawals,
and Transfers........ 738,695 933,626 1,374,470 544,486 189,457 5,245 (18,758) 161,713 64,725 320,410 60,211
Deductions:
Premium Expense
Charges.............. 51,344 62,833 63,729 6,342 2,108 60 2,038 1,564 -- 3,383 430
Monthly Expense
Charges.............. 19,940 21,481 27,690 1,113 288 26 556 338 -- 410 28
Cost of Insurance
and Optional
Benefits............. 509,965 535,864 560,795 28,459 7,183 (269) 14,229 8,441 -- 10,490 702
---------- --------- --------- ------- ------- ----- ------- ------- ------ ------- ------
Total Deductions... 581,249 620,178 652,214 35,914 9,579 (183) 16,823 10,343 -- 14,283 1,160
---------- --------- --------- ------- ------- ----- ------- ------- ------ ------- ------
Net Deposits from
Policyholders......... $ 157,446 313,448 722,256 508,572 179,878 5,428 (35,581) 151,370 64,725 306,127 59,051
========== ========= ========= ======= ======= ===== ======= ======= ====== ======= ======
</TABLE>
F-25
<PAGE>
PARAGON SEPARATE ACCOUNT A
Note to Financial Statements--(Continued)
Note 7--Subsequent Event
On January 6, 2000, Paragon Life Insurance Co.'s ultimate parent, GenAmerica
Corporation, was purchased by Metropolitan Life Insurance Company.
F-26
<PAGE>
PARAGON SEPARATE ACCOUNT A
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
Number Market
of Shares Value Cost
--------- ----------- -----------
<S> <C> <C> <C>
American Variable Insurance Series:
Cash Management Division.................... 249,739 $ 2,759,617 $ 2,784,329
High-Yield Bond Division.................... 296,446 3,779,681 4,084,441
Growth-Income Division...................... 844,485 27,935,557 27,157,632
Growth Division............................. 836,535 59,076,119 38,491,888
U.S. Government/AAA-Rated Division.......... 284,870 3,008,228 3,187,236
Asset Allocation Division................... 462,950 6,976,657 6,559,850
International Division...................... 724,036 19,360,734 11,694,224
Global Growth Division...................... 50,471 1,081,082 754,306
Bond Fund................................... 19,452 189,460 198,810
Global Small Capitalization................. 29,508 512,562 413,704
</TABLE>
See Accompanying Independent Auditors' Report.
F-27
<PAGE>
APPENDIX A
Illustrations of Death Benefits and Cash Values
The following tables illustrate how the Cash Value, Cash Surrender 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, Cash Surrender
Value, and Death Benefit of a Policy issued to an Insured 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%. In addition, the Cash Values, Cash Surrender
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 tables illustrate a Policy issued to an Insured, age 40, in a group that
is 75% male, 25% female and had 2,500 eligible employees. The tables show the
results for each of the possible sales charges under the Policies: assuming a
group contract determination under OBRA (1) if the sales charges are assumed to
be zero ("0"); and (2) if the sales charges are assumed to be a contingent
deferred sales charge of 30% and a premium expense charge of zero ("0"). In
each situation the monthly administrative charge is assumed to be $4.50 during
the first Policy Year and $2.00 in subsequent Policy Years. If a particular
Policy has different sales or administrative charges or if a particular group
is larger or smaller or has a different gender mix, the Cash Values, Cash
Surrender Values and Death Benefits would vary from those shown in the tables.
The illustrations reflect the deduction of a 2 percent premium tax charge.
The Cash Value column under the "Guaranteed" heading shows the accumulated
value of the premiums paid reflecting deduction of the charges described above
(except for the contingent deferred sales charge) and monthly charges for the
cost of insurance based on the guaranteed rate which 125% of the maximum
allowed under the 1980 Commissioners Standard Ordinary Mortality Table C. The
"Cash Surrender Value" column under the "Guaranteed" heading shows the
projected Cash Surrender Values of the Policy, which are calculated by taking
the Cash Value under the "Guaranteed" heading and deducting each of the
contingent deferred sales charges available under the Policies. The "Cash
Value" column under the "Current" heading shows the accumulated value of the
premiums paid reflecting deduction of the charges described above (except for
of the contingent deferred sales charge) and monthly charges for the cost of
insurance at the current level for a group that is 75 percent male, 25 percent
female, which is less than or equal to 125% of the maximum allowed by the 1980
Commissioners Standard Ordinary Mortality Table C. The "Cash Surrender Value"
column under the "Current" heading shows the projected Cash Surrender Value of
the Policy, which is calculated by taking the Cash Value under the "Current"
heading and deducting each of the contingent deferred sales charges available
under the Policies. The illustrations of Death Benefits reflect the above
assumptions. The Death Benefits also vary between tables depending upon whether
Level Type (Option A) or Increasing Type (Option B) Death Benefits are
illustrated.
The amounts shown for the Cash Value, Cash Surrender Value, and Death Benefit
reflect the fact that the investment rate of return is lower than the gross
after-tax return on the assets held in a Division of the Separate Account. The
charges include a .90% charge for mortality and expense risk, an investment
advisory fee of .538%, representing the average of the fees incurred in 1999 by
the Funds in which the Divisions invest (the actual investment advisory fee is
shown in the Fund prospectus) and a .022% charge that is an estimate of the
Funds' expenses based on the average of the actual expenses incurred in fiscal
year 1999. After deduction for these amounts, the illustrated gross annual
investment rates of return of 0%, 6% and 12% correspond to approximate net
annual rates of -1.460%, 4.540%, and 10.540%, respectively.
The hypothetical values shown in the tables reflect all fees and charges
under the Policy, including the premium expense charge, the premium tax charge,
and all components of the monthly deduction. They do not reflect any charges
for federal income taxes against the Separate Account, since the Company is not
currently
A-1
<PAGE>
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 illustrated. (See "Federal Tax Matters.") Additionally, the
hypothetical values shown in the tables assume that the Policy for which values
are illustrated is not deemed an individual policy under OBRA, and therefore
the values do not reflect the additional 1% premium expense charge for the
Company's increased federal tax liabilities.
The tables illustrate the Policy values that would result based upon the
investment rates of return if premiums are paid as indicated, and if no Policy
loans have been made. The tables are also based on the assumptions that the
Owner has not requested an increase or 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 Insured's age, group size and gender mix, the Face Amount and
premium requested, the proposed frequency of premium payments, and any
available riders requested.
A-2
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM: $1200.00
PREMIUM EXPENSE CHARGE: 0.00% (Monthly Premium:
CONTINGENT DEFERRED SALES CHARGE: 0.00% $100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -1.460%)
----------------------------------------------------------------
GUARANTEED* CURRENT**
----------------------------- --------------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ----- ----- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 827 $ 827 $80,000 $ 987 $ 987 $80,000
2 2,526 1,651 1,651 80,000 1,976 1,976 80,000
3 3,884 2,440 2,440 80,000 2,939 2,939 80,000
4 5,311 3,194 3,194 80,000 3,875 3,875 80,000
5 6,809 3,914 3,914 80,000 4,780 4,780 80,000
6 8,381 4,597 4,597 80,000 5,656 5,656 80,000
7 10,033 5,243 5,243 80,000 6,501 6,501 80,000
8 11,766 5,851 5,851 80,000 7,313 7,313 80,000
9 13,587 6,419 6,419 80,000 8,090 8,090 80,000
10 15,499 6,945 6,945 80,000 8,832 8,832 80,000
11 17,506 7,425 7,425 80,000 9,538 9,538 80,000
12 19,614 7,856 7,856 80,000 10,204 10,204 80,000
13 21,826 8,231 8,231 80,000 10,831 10,831 80,000
14 24,150 8,545 8,545 80,000 11,416 11,416 80,000
15 26,590 8,794 8,794 80,000 11,959 11,959 80,000
16 29,152 8,977 8,977 80,000 12,450 12,450 80,000
17 31,841 9,089 9,089 80,000 12,889 12,889 80,000
18 34,666 9,130 9,130 80,000 13,275 13,275 80,000
19 37,631 9,096 9,096 80,000 13,600 13,600 80,000
20 40,745 8,979 8,979 80,000 13,859 13,859 80,000
25 58,812 6,660 6,660 80,000 13,839 13,839 80,000
30 81,869 0 0 80,000 10,270 10,270 80,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-3
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM: $1200.00
PREMIUM EXPENSE CHARGE: 0.00% (Monthly Premium:
CONTINGENT DEFERRED SALES CHARGE: 0.00% $100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT 4.540%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 854 $ 854 $80,000 $ 1,019 $ 1,019 $80,000
2 2,526 1,756 1,756 80,000 2,102 2,102 80,000
3 3,884 2,676 2,676 80,000 3,222 3,222 80,000
4 5,311 3,615 3,615 80,000 4,380 4,380 80,000
5 6,809 4,573 4,573 80,000 5,573 5,573 80,000
6 8,381 5,549 5,549 80,000 6,805 6,805 80,000
7 10,033 6,544 6,544 80,000 8,076 8,076 80,000
8 11,766 7,558 7,558 80,000 9,385 9,385 80,000
9 13,587 8,589 8,589 80,000 10,733 10,733 80,000
10 15,499 9,637 9,637 80,000 12,121 12,121 80,000
11 17,506 10,698 10,698 80,000 13,549 13,549 80,000
12 19,614 11,772 11,772 80,000 15,018 15,018 80,000
13 21,826 12,851 12,851 80,000 16,529 16,529 80,000
14 24,150 13,934 13,934 80,000 18,084 18,084 80,000
15 26,590 15,017 15,017 80,000 19,685 19,685 80,000
16 29,152 16,101 16,101 80,000 21,326 21,326 80,000
17 31,841 17,183 17,183 80,000 23,012 23,012 80,000
18 34,666 18,264 18,264 80,000 24,743 24,743 80,000
19 37,631 19,343 19,343 80,000 26,520 26,520 80,000
20 40,745 20,416 20,416 80,000 28,343 28,343 80,000
25 58,812 25,367 25,367 80,000 38,116 38,116 80,000
30 81,869 28,625 28,625 80,000 49,071 49,071 80,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-4
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 0.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN at 12.00% (NET RATE at 10.540%)
----------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- -------------------------------
PREM CASH CASH
at SURR CASH DEATH SURR CASH DEATH
YR 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 880 $ 880 $ 80,000 $ 1,050 $ 1,050 $ 80,000
2 2,526 1,864 1,864 80,000 2,230 2,230 80,000
3 3,884 2,927 2,927 80,000 3,522 3,522 80,000
4 5,311 4,080 4,080 80,000 4,937 4,937 80,000
5 6,809 5,332 5,332 80,000 6,485 6,485 80,000
6 8,381 6,692 6,692 80,000 8,181 8,181 80,000
7 10,033 8,172 8,172 80,000 10,040 10,040 80,000
8 11,766 9,784 9,784 80,000 12,078 12,078 80,000
9 13,587 11,543 11,543 80,000 14,313 14,313 80,000
10 15,499 13,463 13,463 80,000 16,767 16,767 80,000
11 17,506 15,561 15,561 80,000 19,464 19,464 80,000
12 19,614 17,854 17,854 80,000 22,430 22,430 80,000
13 21,826 20,364 20,364 80,000 25,695 25,695 80,000
14 24,150 23,112 23,112 80,000 29,296 29,296 80,000
15 26,590 26,129 26,129 80,000 33,271 33,271 80,000
16 29,152 29,448 29,448 80,000 37,659 37,659 80,000
17 31,841 33,110 33,110 80,000 42,515 42,515 80,000
18 34,666 37,163 37,163 80,000 47,897 47,897 80,000
19 37,631 41,659 41,659 80,000 53,871 53,871 80,000
20 40,745 46,659 46,659 80,000 60,513 60,513 81,087
25 58,812 81,664 81,664 99,630 105,503 105,503 128,713
30 81,869 138,411 138,411 160,556 177,815 177,815 206,265
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-5
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 30.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -1.460%)
-------------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- ---------------------------------
PREM CASH CASH
AT SURR CASH DEATH SURR CASH DEATH
YR 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- ------- ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 467 $ 827 $80,000 $ 627 $ 987 $80,000
2 2,526 1,327 1,651 80,000 1,652 1,976 80,000
3 3,884 2,152 2,440 80,000 2,651 2,939 80,000
4 5,311 2,942 3,194 80,000 3,623 3,875 80,000
5 6,809 3,698 3,914 80,000 4,564 4,780 80,000
6 8,381 4,417 4,597 80,000 5,476 5,656 80,000
7 10,033 5,099 5,243 80,000 6,357 6,501 80,000
8 11,766 5,743 5,851 80,000 7,205 7,313 80,000
9 13,587 6,347 6,419 80,000 8,018 8,090 80,000
10 15,499 6,909 6,945 80,000 8,796 8,832 80,000
11 17,506 7,425 7,425 80,000 9,538 9,538 80,000
12 19,614 7,856 7,856 80,000 10,204 10,204 80,000
13 21,826 8,231 8,231 80,000 10,831 10,831 80,000
14 24,150 8,545 8,545 80,000 11,416 11,416 80,000
15 26,590 8,794 8,794 80,000 11,959 11,959 80,000
16 29,152 8,977 8,977 80,000 12,450 12,450 80,000
17 31,841 9,089 9,089 80,000 12,889 12,889 80,000
18 34,666 9,130 9,130 80,000 13,275 13,275 80,000
19 37,631 9,096 9,096 80,000 13,600 13,600 80,000
20 40,745 8,979 8,979 80,000 13,859 13,859 80,000
25 58,812 6,660 6,660 80,000 13,839 13,839 80,000
30 81,869 0 0 0 10,270 10,270 80,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-6
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 2.50% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 25.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT 4.540%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 494 $ 854 $80,000 $ 659 $ 1,019 $80,000
2 2,526 1,432 1,756 80,000 1,778 2,102 80,000
3 3,884 2,388 2,676 80,000 2,934 3,222 80,000
4 5,311 3,363 3,615 80,000 4,128 4,380 80,000
5 6,809 4,357 4,573 80,000 5,357 5,573 80,000
6 8,381 5,369 5,549 80,000 6,625 6,805 80,000
7 10,033 6,400 6,544 80,000 7,932 8,076 80,000
8 11,766 7,450 7,558 80,000 9,277 9,385 80,000
9 13,587 8,517 8,589 80,000 10,661 10,733 80,000
10 15,499 9,601 9,637 80,000 12,085 12,121 80,000
11 17,506 10,698 10,698 80,000 13,549 13,549 80,000
12 19,614 11,772 11,772 80,000 15,018 15,018 80,000
13 21,826 12,851 12,851 80,000 16,529 16,529 80,000
14 24,150 13,934 13,934 80,000 18,084 18,084 80,000
15 26,590 15,017 15,017 80,000 19,685 19,685 80,000
16 29,152 16,101 16,101 80,000 21,326 21,326 80,000
17 31,841 17,183 17,183 80,000 23,012 23,012 80,000
18 34,666 18,264 18,264 80,000 24,743 24,743 80,000
19 37,631 19,343 19,343 80,000 26,520 26,520 80,000
20 40,745 20,416 20,416 80,000 28,343 28,343 80,000
25 58,812 25,367 25,367 80,000 38,116 38,116 80,000
30 81,869 28,625 28,625 80,000 49,071 49,071 80,000
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-7
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $80,000 AGE: 40
DEATH BENEFIT OPTION: A ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 30.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 12.00% (NET RATE AT 10.540%)
----------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- -------------------------------
PREM CASH CASH
AT SURR CASH DEATH SURR CASH DEATH
YR 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 520 $ 880 $ 80,000 $ 690 $ 1,050 $ 80,000
2 2,526 1,540 1,864 80,000 1,906 2,230 80,000
3 3,884 2,639 2,927 80,000 3,234 3,522 80,000
4 5,311 3,828 4,080 80,000 4,685 4,937 80,000
5 6,809 5,116 5,332 80,000 6,269 6,485 80,000
6 8,381 6,512 6,692 80,000 8,001 8,181 80,000
7 10,033 8,028 8,172 80,000 9,896 10,040 80,000
8 11,766 9,676 9,784 80,000 11,970 12,078 80,000
9 13,587 11,471 11,543 80,000 14,241 14,313 80,000
10 15,499 13,427 13,463 80,000 16,731 16,767 80,000
11 17,506 15,561 15,561 80,000 19,464 19,464 80,000
12 19,614 17,854 17,854 80,000 22,430 22,430 80,000
13 21,826 20,364 20,364 80,000 25,695 25,695 80,000
14 24,150 23,112 23,112 80,000 29,296 29,296 80,000
15 26,590 26,129 26,129 80,000 33,271 33,271 80,000
16 29,152 29,448 29,448 80,000 37,659 37,659 80,000
17 31,841 33,110 33,110 80,000 42,515 42,515 80,000
18 34,666 37,163 37,163 80,000 47,897 47,897 80,000
19 37,631 41,659 41,659 80,000 53,871 53,871 80,000
20 40,745 46,659 46,659 80,000 60,513 60,513 81,087
25 58,812 81,664 81,664 99,630 105,503 105,503 128,713
30 81,869 138,411 138,411 160,556 177,815 177,815 206,265
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-8
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 0.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -1.460%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 976 $ 976 $38,976 $ 1,052 $ 1,052 $39,052
2 2,526 1,957 1,957 39,957 2,113 2,113 40,113
3 3,884 2,910 2,910 40,910 3,151 3,151 41,151
4 5,311 3,837 3,837 41,837 4,166 4,166 42,166
5 6,809 4,736 4,736 42,736 5,157 5,157 43,157
6 8,381 5,608 5,608 43,608 6,124 6,124 44,124
7 10,033 6,451 6,451 44,451 7,067 7,067 45,067
8 11,766 7,266 7,266 45,266 7,984 7,984 45,984
9 13,587 8,051 8,051 46,051 8,874 8,874 46,874
10 15,499 8,805 8,805 46,805 9,737 9,737 47,737
11 17,506 9,526 9,526 47,526 10,572 10,572 48,572
12 19,614 10,212 10,212 48,212 11,378 11,378 49,378
13 21,826 10,861 10,861 48,861 12,154 12,154 50,154
14 24,150 11,469 11,469 49,469 12,899 12,899 50,899
15 26,590 12,035 12,035 50,035 13,612 13,612 51,612
16 29,152 12,557 12,557 50,557 14,289 14,289 52,289
17 31,841 13,035 13,035 51,035 14,928 14,928 52,928
18 34,666 13,468 13,468 51,468 15,530 15,530 53,530
19 37,631 13,854 13,854 51,854 16,090 16,090 54,090
20 40,745 14,191 14,191 52,191 16,604 16,604 54,604
25 58,812 14,916 14,916 52,916 18,334 18,334 56,334
30 81,869 13,457 13,457 51,457 18,015 18,015 56,015
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-9
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 0.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT 4.540%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 1,008 $ 1,008 $39,008 $ 1,087 $ 1,087 $39,087
2 2,526 2,081 2,081 40,081 2,247 2,247 40,247
3 3,884 3,189 3,189 41,189 3,453 3,453 41,453
4 5,311 4,335 4,335 42,335 4,705 4,705 42,705
5 6,809 5,518 5,518 43,518 6,005 6,005 44,005
6 8,381 6,740 6,740 44,740 7,354 7,354 45,354
7 10,033 8,002 8,002 46,002 8,754 8,754 46,754
8 11,766 9,304 9,304 47,304 10,205 10,205 48,205
9 13,587 10,646 10,646 48,646 11,708 11,708 49,708
10 15,499 12,030 12,030 50,030 13,265 13,265 51,265
11 17,506 13,454 13,454 51,454 14,876 14,876 52,876
12 19,614 14,917 14,917 52,917 16,543 16,543 54,543
13 21,826 16,418 16,418 54,418 18,267 18,267 56,267
14 24,150 17,956 17,956 55,956 20,049 20,049 58,049
15 26,590 19,528 19,528 57,528 21,890 21,890 59,890
16 29,152 21,136 21,136 59,136 23,788 23,788 61,788
17 31,841 22,779 22,779 60,779 25,744 25,744 63,744
18 34,666 24,457 24,457 62,457 27,760 27,760 65,760
19 37,631 26,170 26,170 64,170 29,833 29,833 67,833
20 40,745 27,916 27,916 65,916 31,962 31,962 69,962
25 58,812 36,926 36,926 74,926 43,332 43,332 81,332
30 81,869 45,726 45,726 83,726 55,336 55,336 93,336
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-10
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 0.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 12.00% (NET RATE AT 10.540%)
----------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- -------------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 1,039 $ 1,039 $ 39,039 $ 1,120 $ 1,120 $ 39,120
2 2,526 2,208 2,208 40,208 2,384 2,384 40,384
3 3,884 3,486 3,486 41,486 3,773 3,773 41,773
4 5,311 4,885 4,885 42,885 5,301 5,301 43,301
5 6,809 6,418 6,418 44,418 6,979 6,979 44,979
6 8,381 8,096 8,096 46,096 8,825 8,825 46,825
7 10,033 9,934 9,934 47,934 10,854 10,854 48,854
8 11,766 11,949 11,949 49,949 13,084 13,084 51,084
9 13,587 14,157 14,157 52,157 15,536 15,536 53,536
10 15,499 16,578 16,578 54,578 18,230 18,230 56,230
11 17,506 19,230 19,230 57,230 21,192 21,192 59,192
12 19,614 22,136 22,136 60,136 24,448 24,448 62,448
13 21,826 25,319 25,319 63,319 28,028 28,028 66,028
14 24,150 28,805 28,805 66,805 31,965 31,965 69,965
15 26,590 32,622 32,622 70,622 36,295 36,295 74,295
16 29,152 36,805 36,805 74,805 41,053 41,053 79,053
17 31,841 41,390 41,390 79,390 46,284 46,284 84,284
18 34,666 46,418 46,418 84,418 52,036 52,036 90,036
19 37,631 51,933 51,933 89,933 58,360 58,360 96,360
20 40,745 57,984 57,984 95,984 65,311 65,311 103,311
25 58,812 98,180 98,180 136,180 111,827 111,827 149,827
30 81,869 161,746 161,746 199,746 186,138 186,138 224,138
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-11
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 30.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 0.00% (NET RATE AT -1.460%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 616 $ 976 $38,976 $ 692 $ 1,052 $39,052
2 2,526 1,633 1,957 39,957 1,789 2,113 40,113
3 3,884 2,622 2,910 40,910 2,863 3,151 41,151
4 5,311 3,585 3,837 41,837 3,914 4,166 42,166
5 6,809 4,520 4,736 42,736 4,941 5,157 43,157
6 8,381 5,428 5,608 43,608 5,944 6,124 44,124
7 10,033 6,307 6,451 44,451 6,923 7,067 45,067
8 11,766 7,158 7,266 45,266 7,876 7,984 45,984
9 13,587 7,979 8,051 46,051 8,802 8,874 46,874
10 15,499 8,769 8,805 46,805 9,701 9,737 47,737
11 17,506 9,526 9,526 47,526 10,572 10,572 48,572
12 19,614 10,212 10,212 48,212 11,378 11,378 49,378
13 21,826 10,861 10,861 48,861 12,154 12,154 50,154
14 24,150 11,469 11,469 49,469 12,899 12,899 50,899
15 26,590 12,035 12,035 50,035 13,612 13,612 51,612
16 29,152 12,557 12,557 50,557 14,289 14,289 52,289
17 31,841 13,035 13,035 51,035 14,928 14,928 52,928
18 34,666 13,468 13,468 51,468 15,530 15,530 53,530
19 37,631 13,854 13,854 51,854 16,090 16,090 54,090
20 40,745 14,191 14,191 52,191 16,604 16,604 54,604
25 58,812 14,916 14,916 52,916 18,334 18,334 56,334
30 81,869 13,457 13,457 51,457 18,015 18,015 56,015
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-12
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 30.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 6.00% (NET RATE AT 4.540%)
----------------------------------------------------------
GUARANTEED* CURRENT**
---------------------------- ----------------------------
CASH CASH
PREM SURR CASH DEATH SURR CASH DEATH
YR AT 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 648 $ 1,008 $39,008 $ 727 $ 1,087 $39,087
2 2,526 1,757 2,081 40,081 1,923 2,247 40,247
3 3,884 2,901 3,189 41,189 3,165 3,453 41,453
4 5,311 4,083 4,335 42,335 4,453 4,705 42,705
5 6,809 5,302 5,518 43,518 5,789 6,005 44,005
6 8,381 6,560 6,740 44,740 7,174 7,354 45,354
7 10,033 7,858 8,002 46,002 8,610 8,754 46,754
8 11,766 9,196 9,304 47,304 10,097 10,205 48,205
9 13,587 10,574 10,646 48,646 11,636 11,708 49,708
10 15,499 11,994 12,030 50,030 13,229 13,265 51,265
11 17,506 13,454 13,454 51,454 14,876 14,876 52,876
12 19,614 14,917 14,917 52,917 16,543 16,543 54,543
13 21,826 16,418 16,418 54,418 18,267 18,267 56,267
14 24,150 17,956 17,956 55,956 20,049 20,049 58,049
15 26,590 19,528 19,528 57,528 21,890 21,890 59,890
16 29,152 21,136 21,136 59,136 23,788 23,788 61,788
17 31,841 22,779 22,779 60,779 25,744 25,744 63,744
18 34,666 24,457 24,457 62,457 27,760 27,760 65,760
19 37,631 26,170 26,170 64,170 29,833 29,833 67,833
20 40,745 27,916 27,916 65,916 31,962 31,962 69,962
25 58,812 36,926 36,926 74,926 43,332 43,332 81,332
30 81,869 45,726 45,726 83,726 55,336 55,336 93,336
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-13
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
FACE AMOUNT OF COVERAGE: $38,000 AGE: 40
DEATH BENEFIT OPTION: B ANNUAL PREMIUM:
PREMIUM EXPENSE CHARGE: 0.00% $1,200.00
CONTINGENT DEFERRED SALES CHARGE: 30.00% (Monthly Premium:
$100.00)
PREMIUM TAX: 2.00%
<TABLE>
<CAPTION>
FOR SEPARATE ACCOUNT A--A HYPOTHETICAL GROSS
ANNUAL RATE OF RETURN AT 12.00% (NET RATE AT 10.540%)
----------------------------------------------------------------
GUARANTEED* CURRENT**
------------------------------- -------------------------------
PREM CASH CASH
AT SURR CASH DEATH SURR CASH DEATH
YR 5.00% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
--- ------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 1,232 $ 679 $ 1,039 $ 39,039 $ 760 $ 1,120 $ 39,120
2 2,526 1,884 2,208 40,208 2,060 2,384 40,384
3 3,884 3,198 3,486 41,486 3,485 3,773 41,773
4 5,311 4,633 4,885 42,885 5,049 5,301 43,301
5 6,809 6,202 6,418 44,418 6,763 6,979 44,979
6 8,381 7,916 8,096 46,096 8,645 8,825 46,825
7 10,033 9,790 9,934 47,934 10,710 10,854 48,854
8 11,766 11,841 11,949 49,949 12,976 13,084 51,084
9 13,587 14,085 14,157 52,157 15,464 15,536 53,536
10 15,499 16,542 16,578 54,578 18,194 18,230 56,230
11 17,506 19,230 19,230 57,230 21,192 21,192 59,192
12 19,614 22,136 22,136 60,136 24,448 24,448 62,448
13 21,826 25,319 25,319 63,319 28,028 28,028 66,028
14 24,150 28,805 28,805 66,805 31,965 31,965 69,965
15 26,590 32,622 32,622 70,622 36,295 36,295 74,295
16 29,152 36,805 36,805 74,805 41,053 41,053 79,053
17 31,841 41,390 41,390 79,390 46,284 46,284 84,284
18 34,666 46,418 46,418 84,418 52,036 52,036 90,036
19 37,631 51,933 51,933 89,933 58,360 58,360 96,360
20 40,745 57,984 57,984 95,984 65,311 65,311 103,311
25 58,812 98,180 98,180 136,180 111,827 111,827 149,827
30 81,869 161,746 161,746 199,746 186,138 186,138 224,138
</TABLE>
- --------
*These values reflect investment results using guaranteed cost of insurance
rates.
**These values reflect investment results using current cost of insurance
rates.
The hypothetical investment rate of return shown above 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
Owner, and the investment results for the Funds. The Cash Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averaged the rate shown above over a period of years,
but also fluctuated above or below that average for individual years. No
representation can be made by the Company, Walnut Street Securities, the
investment management company, 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 years indicated and
assume any additional premiums shown are received monthly on the Policy
Anniversary and further assume there is no Policy Indebtedness outstanding.
A-14
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
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 Company's Bylaws 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
not 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 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 hereby represents that the fees and charges
deducted under the terms of the Contract are, in the aggregate, reasonable in
relationship to the services rendered, the expenses expected, and the risks
assumed by Paragon.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The Prospectus consisting of 88 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representation concerning fees and charges.
The signatures.
The following exhibits:
1. The following exhibits correspond to those required by 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) Proposed form of Underwriting Agreement. 1
(b) Proposed form of Selling Agreement. 2
(c) Commission Schedule. 1
(4) Not applicable.
(5) (a) Proposed form of Group Contract (30010). 1
(b) Proposed form of Individual Policy (30008) and Policy Riders
(3082600). 1
(c) Proposed form of Certificate (30009) and Certificate Riders
(3080800). 1
(6) (a) Amended Charter and Articles of Incorporation of the Company. 2
(b) By-Laws of the Company. 2
(7) Not applicable.
(8) Form of Participation Agreement with American Variable Insurance
Series. 1
(9) Not applicable.
(10) (a) Form of Application for Group Contract (10914). 1
II-3
<PAGE>
(b) Form of Application for Employee Insurance Guaranteed Issue
(Group Contract 10915). 1
(c) Form of Application for Employee Insurance (Simplified Issue)
(Group Contract 10921, 10920). 1
(d) Form of Application for Spouse Insurance (Group Contracts
10917). 1
(e) Form of Application for Employee Insurance Guaranteed Issue
(Individual Policy 10352, 33100). 1
(f) Form of Application for Employee Insurance (Simplified Issue)
(Individual Policy 10357). 1
(g) Proposed Form of Application for Spouse Insurance (Individual
Policy 10354). 1
(h) Proposed Form of Application Supplement (10349). 1
2. Memorandum describing the Company's issuance, transfer and redemption
procedures for the Policies and the Company's procedure for conversion to a
fixed benefit policy. 1
3. Opinion and Consent of Matthew P. McCauley, Esquire, General Counsel of
Paragon Life Insurance Company. 1
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. 1
8. a. The consent of KPMG LLP, Independent Certified Public Accountants. 1
b. Written consent of Sutherland Asbill & Brennan LLP. 1
9. 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. 1
II-4
<PAGE>
1 Filed herewith.
2 Incorporated by reference to the Pre-Effective Amendment No. 1 on Form S-6
found in file No. 333-80393, filed with the Securities and Exchange
Commission on September 1, 1999.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Paragon Life
Insurance Company and Separate Account A of Paragon Life Insurance Company
certify that they meet all of the requirements for effectiveness of this amended
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and have duly caused this amended 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 28th day of April, 2000.
(Seal) PARAGON LIFE INSURANCE COMPANY
Attest:/s/ Matthew P. McCauley By: /s/ Carl H. Anderson
-------------------- ------------------
Matthew P. McCauley, Carl H. Anderson, President
Secretary and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
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 4/28/00
-----------------
Carl H. Anderson President and Director
(Chief Executive Officer)
/s/ Matthew K. Duffy 4/28/00
-----------------
Matthew K. Duffy Vice President
and Chief Financial
Officer (Principal
Accounting Officer and
Principal Financial Officer)
and Director
- ----------------------
E. Thomas Hughes, Jr.* Director and Treasurer
- -----------------
Richard A. Liddy* Director
/s/ Matthew P. McCauley
- ----------------------- 4/28/00
Matthew P. McCauley Vice President,
General Counsel,
Secretary, and Director
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Craig K. Nordyke 4/28/00
- ----------------------
Craig K. Nordyke Executive Vice President, Chief Actuary,
and Director
- -----------------
Warren J. Winer* Director
- ----------------------
Bernard H. Wolzenski* Director
- ----------------------
A. Greig Woodring* Director
By:/s/ Craig K. Nordyke 4/28/00
-----------------
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 have been filed with the Securities and Exchange
Commission.
II-7
33-18341
<PAGE>
EXHIBIT INDEX
1. Resolution of the Board of Directors of the Company authorizing
establishment of The Separate Account.
2. Proposed form of Underwriting Agreement.
3. Commission Schedule.
4. Proposed Form of Group Contract.
5. Proposed Form of Policy and Policy Riders.
6. Proposed Form of Certificate and Certificate Riders.
7. Form of Participation Agreement with American Variable Insurance Series.
8. Form of Application for Group Contract (10914).
9. Form of Application for Employee Insurance GI (Group Contract, 10915).
10. Form of Application for Employee Insurance SI (Group Contract, 10921,
10920).
11. Form of Application for Spouse Insurance SI (Group Contract, 10917).
11a. Form of Application for Spouse Insurance (Individual Policy, 10354).
12. Form of Application for Employee Insurance GI (Individual Policy, 10352,
33100).
13. Form of Application for Employee Insurance SI (Individual Policy, 10357).
14. Proposed Form of Application Supplement (10349).
15. Issue, Transfer, and Redemption Memo.
16. Opinion and Consent of Matthew P. McCauley, Esquire, General Counsel of
Paragon Life Insurance Company.
17. Opinion and consent of Craig K. Nordyke, F.S.A., M.A.A.A., Executive Vice
President and Chief Actuary.
18. Written consent of KPMG LLP, Independent Certified Public Accountants.
19. Written consent of Sutherland Asbill & Brennan LLP.
20. Powers of Attorney.
<PAGE>
Exhibit 1
RESOLUTION OF THE BOARD OF DIRECTORS OF
THE COMPANY AUTHORIZING ESTABLISHMENT OF
THE SEPARATE ACCOUNT
<PAGE>
I, Helen Couranz, Secretary, General American Insurance Company, hereby
certify that the following is a true and correct excerpt from the minutes of the
meeting of the Board of Directors held on October 30, 1987:
RESOLUTIONS ESTABLISHING
GENERAL AMERICAN INSURANCE COMPANY
SEPARATE ACCOUNT A
BE IT RESOLVED, that General American Insurance Company (hereinafter "General
American" or "the Company"), pursuant to the provisions of Section 376.309 R.S.
Mo. (1959), hereby establishes a separate account designated "General American
Separate Account A" (hereinafter "Separate Account A") for the following use and
purposes, and subject to the conditions set forth below:
RESOLVED FURTHER, that Separate Account A shall be established for the purpose
of providing for the issuance by the Company of such variable life insurance of
such other contracts ("Contracts") as General American may designate for such
purpose, and shall constitute a separate account into which are allocated
amounts paid to or held by the Company under such Contracts; and
RESOLVED FURTHER, that the income, gains, and losses, whether or not realized,
from assets allocated to Separate Account A shall, in accordance with the
Contracts, be credited to or charged against such account without regard to
other income, gains, or losses of General American; and
RESOLVED FURTHER, that to the extent so provided under the Contracts, that
portion of the assets of Separate Account A equal to the reserves and other
contract liabilities of such Account shall not be chargeable with liabilities
arising out of any other business General American may conduct.
RESOLVED FURTHER, that the fundamental investment policy of Separate Account A
shall be it invest or reinvest its assets in securities issued by investment
companies registered under the Investment Company Act of 1940 as may be
specified in the respective Contracts; and
RESOLVED FURTHER, that specialized investment divisions may be established
within Separate Account A to which net payments under the Contracts will be
allocated in accordance with instructions received from contract holder, and
that General American is hereby authorized to create such divisions and to
increase, or decrease, the number of investment divisions as it deems necessary
or appropriate; and
RESOLVED FURTHER, that each such investment division shall invest only in the
shares of a single mutual fund or a single mutual fund portfolio of an
investment company organized as a series fund pursuant to the Investment Company
Act of 1940; and
<PAGE>
RESOLVED FURTHER, that the President, the Treasurer, or their delegates be, and
they hereby are, authorized to transfer funds from time to time between General
American's general account and Separate Account A to start Separate Account A or
as deemed necessary or appropriate and consistent with the terms of the
contracts; and
RESOLVED FURTHER, that the appropriate officers of the Company, with such
assistance from the Company's auditors, legal counsel, and others as they may
require, be, and they hereby are, authorized and directed to take all action
necessary to: (a) register Separate Account A as a unit investment trust under
the Investment Company Act of 1940, as amended; (b) register the Contracts in
such amounts, which may be an indefinite amount, as the officers of the Company
shall from time to time deem appropriate under the Securities Act of 1933; and
(c) take all other actions which are necessary in connection with the offering
of said Contracts for sale and the operation of Separate Account A in order to
comply with the Investment Company Act of 1940, the Securities Exchange Act of
1934, the Securities Act of 1933, and other applicable federal laws, including
the filing of any amendments to registration statements, and undertakings, and
any applications for exemptions from the Investment Company Act of 1940 or other
applicable federal laws as the officers of the Company shall deem necessary or
appropriate; and
RESOLVE FURTHER, that the President, the Treasurer, and the General Counsel, and
each of them with full power to act without the others, hereby are severally
authorized and empowered to prepare, execute, and cause to be filed with the
Securities and Exchange Commission on behalf of Separate Account A, and by the
Company as sponsor and depositor a Form of Notification of Registration
Statement under the Securities Act of 1933 registering the contracts, and any
and all amendments to the foregoing on behalf of Separate Account A and the
Company and on behalf of and as attorneys for the principal executive officer
and /or the principal financial officer and/or the principal accounting officer
and/or any other officer of the Company; and
RESOLVED FURTHER, that the General Counsel is hereby appointed as agent for
service under any such registration statement and is duly authorized to receive
commissions and notices form the Securities and Exchange Commission with respect
thereto; and
RESOLVED FURTHER, that the appropriate officers of the Company be, and they
hereby are, authorized on behalf of Separate Account A and on behalf of the
Company to take any and all action that they may deem necessary or advisable in
order to sell the Contracts, including any registrations, filings and
qualifications of General American, its officers, agents and employees, and the
Contracts under the insurance and securities laws of any of the states of the
United States of America or other jurisdictions, and in connection therewith to
prepare, execute, deliver and file all such applications, reports, covenants,
resolutions, applications for exemptions, consents to service of process, and
other instruments as may be required under such laws, and to take any and all
further actions which said officers of counsel of the Company may deem necessary
or desirable (including entering into whatever agreements and contracts may be
necessary) in order to
<PAGE>
maintain such registrations or qualifications for as long as officers seem it to
be in the best interest of Separate Account A and General American; and
RESOLVE FURTHER, that the President and the Vice President and General Counsel
of the Company be, and they hereby are, authorized in the names and on behalf of
Separate Account A and General American to execute and file irrevocable written
consents on the part of Separate Account A and of the Company to be used in such
states wherein such consents to service of process may be requisite under the
insurance or securities laws therein connection with said registration or
qualification of Contracts and to appoint the appropriate state official, or
such other person as may be allowed by said insurance or securities laws, agent
of Separate Account A and of General American for the purpose of receiving and
accepting process; and
RESOLVE FURTHER, that the President of the Company be, and hereby is, authorized
to establish procedures under which the Company will provide voting rights for
owners of such contracts with respect to securities owned by Separate Account A,
and
RESOLVED FURTHER, that the President of the Company is hereby authorized to
execute such agreement or agreements as deemed necessary and appropriate (i)
with Walnut Securities, Inc. (Walnut Street) or another qualified entity under
which Walnut Street or such other entity will be appointed principal underwriter
and distributor for the Contracts and (ii) with one or more qualified banks or
other qualified entities to provide administrative and/or custodial services in
connection with the establishment and maintenance of Separate Account A and the
design, issuance, and administration of the Contracts.
RESOLVE FURTHER, that, since it is expected the Separate Account A will invest
in the securities issued by one or more investment companies, the appropriate
officers of the Company are hereby authorized to execute whatever agreement or
agreements as may be necessary or appropriate to enable such investments to be
made.
RESOLVED FURTHER, that the appropriate officers of General American, and each of
them, are hereby authorized to execute and deliver all such documents and papers
and to do or cause to be done all such acts and things as they may deem
necessary or desirable to carry out the foregoing resolutions and the intent and
purposes thereof.
/s/ Helen Couranz
-------------------------
Helen Couranz
Dates at St. Louis, Missouri, this 2nd day of November, 1987.
<PAGE>
Exhibit 2
PROPOSED FORM OF UNDERWRITING AGREEMENT
<PAGE>
PARAGON LIFE INSURANCE COMPANY
PRINCIPAL UNDERWRITING AGREEMENT
This UNDERWRITING AGREEMENT made this 21/st/ day of April 1988, 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 A
(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 as of October 30, 1987, in order to set
aside and invest assets attributable to certain flexible premium life variable
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;
NOW, THEREFORE, the parties hereto agree as follow:
1. The Insurance Company grants to the Underwriter the right to be, and
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
<PAGE>
the securities 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 make recommendations to an applicant to purchase a Contract 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 the 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 of 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 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 other applicable laws and regulations. The books, accounts and records of
the Insurance Company, the
<PAGE>
Account, and the Underwriter as to all transactions hereunder shall be
maintained so as to 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 record shall be the property
of the Underwriter, and shall at all times be subject to such reasonable
periodic, special, or other examination by the SEC and all other regulatory
bodies having jurisdiction. The Insurance Company shall be responsible for
sending all required confirmations on customer transactions in compliance with
applicable regulations, as modified by an exemption of 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 jurisdictions.
12. The Insurance Company shall pay commissions as per Schedule A of this
Agreement to the Underwriter. The Underwriter shall have the responsibility for
paying (i) all commissions or other fees to its associated persons and (ii) any
compensation to other independent broker-dealers and their associated person due
under the terms of any sales agreements between the Underwriter 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. As of the date of issue of the first contract, the Insurance Company
shall start to reimburse the Underwriter for all costs and expenses incurred by
the Underwriter in furnishing the services, materials, and supplies required by
the terms of this Agreement. The rate of reimbursement shall be set in Schedule
A, and subject to annual renegotiations.
14. 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.
15. 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
condition of any exemptions therefrom.
16. (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
<PAGE>
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 consent of the Insurance Company. 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 obligations 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.
17. This Agreement shall be subject to the provisions of the Investment
Company Act and the 1934 Act and the rules, regulations, and ruling 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.
18. Each party to this Agreement expressly reserves unto itself the
ultimate authority and responsibility for conduct of its business.
19. 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.
20. Each party to this Agreement shall be liable for its own misconduct
and negligence.
21. Neither party to this Agreement shall attempt to immunize itself from
liability solely in reliance upon an opinion of that party's own counsel.
22. Neither party to this Agreement shall undertake any activity which
might conflict with its faithful discharge of the duties outlined in the
Agreement.
23. The statutes of limitations contained in the laws applicable to this
Agreement shall govern.
24. 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.
25. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Missouri.
<PAGE>
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.
WALNUT STREET SECURITIES, INC.
Attest:
/s/ Helen Couranz by: /s/ James A. Fulp
- ----------------------------------- ------------------------------------
Secretary President
PARAGON LIFE INSURANCE COMPANY
/s/ Helen Couranz by: /s/ Carl A. Anderson
- ----------------------------------- ------------------------------------
Secretary President
<PAGE>
PARAGON LIFE INSURANCE COMPANY
PRINCIPAL UNDERWRITING AGREEMENT
SCHEDULE A
Commissions are payable to the Underwriter based upon Case Commission Agreements
attached to agent contracts between registered representatives of the
Underwriter and the Insurance Company. The Insurance Company may be granted
authority by the Underwriter to pay commissions directly to the registered
representative on behalf of the Underwriter.
Reimbursement for expenses and costs of the Underwriter will be made by the
Insurance Company at the rate of $1,000.00 per month for the first twelve months
of the Underwriting Agreement's term. Thereafter reimbursement shall be at a
rate to be negotiated annually.
<PAGE>
Exhibit 3
COMMISSION SCHEDULE
<PAGE>
Commission Schedules
for
Flexible Premium Variable Life Insurance Policies
issued by
Paragon Life Insurance Company
Schedule 1
First Year Commission 0%
Renewal Commission 0%
Schedule 2
First Year Commission 15%
Renewal Commission 0%
Schedule 3
First Year Commission 15%
Renewal Commission 2%
(payable while policy is
serviced as a member of
the sponsoring employer)
<PAGE>
Exhibit 4
PROPOSED FORM OF GROUP CONTRACT
<PAGE>
GROUP CONTRACT NUMBER
CONTRACTHOLDER
RIGHT TO
EXAMINE CONTRACT
You may return this contract within twenty days after receiving it or within 45
days after the application is signed, whichever period ends later. It may be
delivered or mailed to us or the agent through whom it was purchased. The
contract shall then be deemed void from the start. Any premium paid will be
returned.
FLEXIBLE PREMIUM
VARIABLE LIFE
INSURANCE TO AGE 95
Flexible Premiums are payable during the lifetime of the insured to age 95. The
death benefit is payable at the death of the insured prior to age 95 and while
the contract is in force. Cash surrender value, if any, is payable at the
insured's age 95.
This contract is a legal contract between the contract holder and Paragon Life
Insurance Company. PLEASE READ YOUR CONTRACT CAREFULLY.
ISSUED BY: PARAGON LIFE INSURANCE COMPANY
A STOCK COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MISSOURI 63105
(314) 862-2211
30010 0.01
(488)
<PAGE>
ALPHABETIC GUIDE TO YOUR CONTRACT
Page
2.04 Agency
2.03 Authority
2.03 Certificate of Insurance
2.02 Conversion Privilege
2.01 Definitions
2.02 Effective Date of Dependent Term Insurance and
Additional Benefits
2.02 Effective Date of Individual Insurance
2.03 Entire Contract
2.02 Grace Period
2.03 Incontestability
2.04 Monies Payable
2.03 Ownership and Control of This Contract
2.02 Premiums
2.01 Premium Payments
2.03 Records Required
2.04 Sex and Number
2.02 Termination of Insurance
2.03 Termination of This Contract
The Certificate of Insurance will be attached to and made a part of this
Contract.
30010 0.02
(488)
<PAGE>
Contract Specifications
Contract Effective Date:
Contract Anniversary Date:
Contract Jurisdiction State:
Contract Execution Date:
Contractholder:
Associated Companies:
Eligible Class or Classes of Employees:
Individual Eligibility Date:
30014 1.01
<PAGE>
Contract Specifications (continued)
Employee Insurance Benefits:
For Employee:
Guaranteed Issue:
Simplified Issue:
For Spouse:
Simplified Issue:
Additional Benefits:
Premium Due Date:
Minimum Premium:
30114 1.02
<PAGE>
Contract Specifications (continued)
30114 1.03
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES RATES ARE PER $1000
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
18 0.15 19 0.16 20 0.16
21 0.16 22 0.16 23 0.16
24 0.16 25 0.16 26 0.16
27 0.16 28 0.16 29 0.16
30 0.17 31 0.17 32 0.18
33 0.19 34 0.20 35 0.21
36 0.22 37 0.24 38 0.26
39 0.28 40 0.30 41 0.33
42 0.36 43 0.39 44 0.42
45 0.45 46 0.48 47 0.52
48 0.56 49 0.60 50 0.65
51 0.70 52 0.77 53 0.84
54 0.91 55 0.99 56 1.07
57 1.16 58 1.24 59 1.34
60 1.45 61 1.58 62 1.72
63 1.89 64 2.08 65 2.28
66 2.49 67 2.70 68 2.93
69 3.19 70 3.48 71 3.81
72 4.21 73 4.66 74 5.16
75 5.71 76 6.28 77 6.88
78 7.52 79 8.20 80 8.97
81 9.84 82 10.83 83 11.94
84 13.15 85 14.44 86 15.80
87 17.21 88 18.70 89 20.26
90 21.93 91 23.73 92 25.76
93 28.15 94 31.31
</TABLE>
THESE RATES ARE FOR THE BASE COVERAGE AT ISSUE. They are based on 125 percent of
the 1980 Commissioners Standard Ordinary Mortality Table C Age Last Birthday
Any values guaranteed in this contract are based on these rates.
80114 1.04
<PAGE>
1. DEFINITIONS
We, Us and Our
The Paragon Life Insurance Company.
Employee
A person who is employed and paid for services by the employer on a regular
basis. In no event will the amount of time worked per week be less than 30
hours.
Insured
An employee or an employee's spouse who is insured for life insurance under this
contract.
Spouse
The employee's legal spouse and does not include a spouse who is legally
separated from the employee.
Actively at Work
The employee must work for his employer at his usual place of work or such other
places as required by his employer in the course of such work for the full
number of hours and full rate of pay, as set by the employment practices of his
employer. In no event will the amount of time worked per week be less than 30
hours.
Associated Company
Those companies listed on the contract specifications page that are under common
control through stock ownership, contract or otherwise, with the contractholder.
Employees of each Associated Company will be considered employees of the
contractholder.
Service with an Associated Company will be considered service with the
contractholder.
The records of an Associated Company which have a bearing on this contract will
be considered records of the contractholder.
If an Associated Company ceases to be under common control with the contract-
holder, the insureds of the Associated Company may continue the insurance as an
individual policy.
The inclusion of any Associated Company will not affect the ownership of this
contract by the contractholder or the rights of ownership of this contract by
the contractholder.
Individual Insurance
Insurance on the employee or the employee's spouse provided through this
contract.
Dependent Term Insurance
Insurance on the dependent of an employee provided by a rider to the
certificate.
2. PROVISIONS RELATING TO INDIVIDUAL AND DEPENDENT TERM INSURANCE
Premium Payments
Premium payments for individual and dependent term insurance coverage may be
made by the employee and/or the contractholder. The employee's premium paid
under this contract is the amount authorized by the employee to be deducted from
his wages. Premiums may be paid in addition to the authorized deductions as set
forth in the contract. The authorization for payroll deduction may be cancelled
at any time upon written request.
If for any reason, premiums for this coverage are no longer being deducted from
the employee's wages, the insurance under the certificate will be continued (in
the form of an individual policy as a result of the conversion privilege) and
planned premiums will be on a direct billed basis.
30204 2.01
(4/88)
<PAGE>
Eligibility for Individual Insurance
Within an eligible class, individual insurance is available only if the employee
is actively at work at the time of application for personal insurance.
Effective Date of Individual Insurance
Subject to the conditions listed below, the individual insurance, subject to
eligibility, will be made effective on the latest of the date on which:
1) the application for the certificate is signed;
2) the first premium for the individual insurance is paid to us; and
3) the information provided in the application for the certificate is
determined to be acceptable to us for issuance of coverage under our current
rules and practices.
If individual insurance ends at the request of the owner or, prior to the
maturity date, when a certificate's cash surrender value is insufficient to
cover the monthly deductions, individual insurance will be restored only as
stated in the certificate section titled "Reinstatement."
Effective Date of Dependent Term Insurance and Additional Benefits
Subject to the conditions listed below, the dependent term insurance and
additional benefits, subject to eligibility, will be made effective on the
latest of the date on which:
1) the individual insurance that such coverage is issued in connection with is
effective; and
2) the information provided in the application for the particular coverage is
determined to be acceptable to us for issuance of coverage under our current
rules and practices.
Termination of Insurance
Individual and dependent term insurance will terminate according to the terms of
the certificate.
Conversion Privilege
If an insured's eligibility under this contract ends due to the termination of
this contract or the employment of the employee, such insured's coverage, if not
already in the form of an individual policy, will automatically be converted by
amendment to an individual policy. Such individual policy will provide benefits
which are identical to those provided under the certificate.
An amendment to convert the certificate to an individual policy will be mailed:
1) within 31 days after we receive written notification that the employee's
employment ended, or after the termination date of the contract; and
2) once any planned premium necessary to prevent the policy from lapsing is
paid to us at our Home Office.
The planned premiums for this individual policy may be paid annually,
semiannually, quarterly or at other intervals we establish from time to time.
Additional premiums may be paid as set forth in the policy.
3. PREMIUMS
Premium Payment
All planned premiums must be remitted in advance by the contractholder to our
Home Office. This includes any adjustments in premiums.
Grace Period
If planned premium payments after the first such payment are not made in a
timely fashion, this contract will be in default. A grace period of 31 days will
be granted for the remittance of the planned premiums after the first payment.
This contract will be in force during the grace period. If such premium is not
paid in the grace period, the contract will terminate at the end of that period.
The contract will terminate before that date if the contractholder gives us
written notice in advance.
30204 2.02
(4/88)
<PAGE>
4. GENERAL PROVISIONS
Entire Contract
We have issued this contract in consideration of the application of the
contractholder and remittance of premiums by the contractholder. This contract,
with the attached copy of the contractholder's application and other attached
papers, if any, is the entire contract between the contractholder and us. All
statements made by the contractholder, any certificate owner or any insured will
be deemed representations and not warranties. Misstatements will not be used in
any contest or to reduce claim under this contract, unless it is in writing. A
copy of the application containing such misstatement must have been given to the
contractholder or to the insured or to his beneficiary, if any.
Authority
No agent may change this contract or waive any of its provisions. No change in
this contract, other than a change of rates, will be effective until the form
making such change is signed by our executive officer and accepted by the
contractholder.
Incontestability
We cannot contest this contract after it has been in force for two years from
the date of issue.
Ownership and Control of This Contract
The contractholder owns this contract. This contract may be changed or ended by
agreement between us and the contractholder without the consent of, or notice
to, any person claiming rights or benefits under this contract.
Records Required
The contractholder will promptly give us, at our Home Office, any facts that we
may need to administer the insurance under this contract and to determine the
premiums. All of the contractholder's records which have a bearing on this
insurance will be ready for us to inspect when and as often as we may, within
reason, require.
Clerical error by the contractholder or us will not make the insurance of an
ineligible person valid nor continue insurance which was ended by valid means.
Certificate of Insurance
We will issue to the contractholder, to give to each insured under this
contract, a certificate of insurance or an individual policy. If an individual
policy is issued, then all reference herein to a certificate will mean an
individual policy. The certificate will state the owner's rights and benefits
under the certificate and to whom benefits are payable. Also, stated are the
limits and requirements in this contract that may apply to the insured and his
insured dependents, if any.
The terms and provisions of the certificate, a copy of which is attached, are
incorporated herein by reference and made a part of this contract. The rights
and benefits of the insured under or owner of the certificate will not inure to
the benefit of the contractholder.
Termination of This Contract
Except as provided in the Grace Period section of this contract, this contract
will be terminated immediately upon default. We may end this contract or any of
its provisions by giving notice in writing to the contractholder at least 31
days prior to the termination date.
If this contract is terminated any insurance in effect will remain in force on
an individual basis, provided it is not cancelled or surrendered by the
certificate owner. Any planned premiums will no longer be deducted from the
employee's wages and will be remitted directly to us.
<PAGE>
Sex and Number
When used in this contract, the masculine includes the feminine, the singular
the plural, and the plural the singular.
Monies Payable
All monies payable by us as benefits under this contract will be paid, subject
to the laws which govern such payment, at our Home Office or authorized claim
offices. All monies payable to us or by us will be in the lawful currency of the
United States.
Agency
Neither us nor the contractholder is an agent of the other under this contract
for any purpose.
<PAGE>
Exhibit 5
PROPOSED FORM OF POLICY AND POLICY RIDERS
<PAGE>
** DATA PAGE **
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE UNDER THE CONDITIONS DESCRIBED ON PAGES 3.02 AND 3.03.
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.
This policy is a legal contract between the policy owner and Paragon Life
Insurance Company. PLEASE READ YOUR CONTRACT CAREFULLY.
ISSUED BY: PARAGON LIFE INSURANCE CO.
A STOCK COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MISSOURI 63105
(314) 862-2211
POLICY NUMBER:
INSURED:
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.
FLEXIBLE PREMIUM
VARIABLE LIFE
INSURANCE TO AGE 95
Flexible Premiums are payable during the lifetime of the insured to age 95. The
death benefit is payable at the death of the insured prior to age 95 and while
the policy is in force. Cash surrender value, if any, is payable at the
insured's age 95.
30008 0.01
(4/88)
<PAGE>
ALPHABETIC GUIDE TO YOUR CONTRACT
Page
6.04 Addition, Deletion or Substitution of
Investments
3.04 Allocation of Net Premiums
6.01 Assignments
4.05 Basis of Computation
6.01 Beneficiary
4.03 Cash Surrender Value
4.01 Cash Values
3.03 Change in Contract Type
3.03 Change in Face Amount
6.01 Change of Owner or Beneficiary
6.02 Claims of Creditors
6.01 Conformity with Statutes
6.02 Conversion Rights
3.02 Death Benefit
3.01 Definitions
3.04 Grace Period
6.03 Incontestability
7.01 Interest on Proceeds
3.01 Issue Date
4.03 Loan Account Cash Value
4.01 Loans
3.01 Maturity Date
6.02 Misstatement of Age and
Corrections
4.03 Monthly Cost of Insurance
4.03 Monthly Deduction
4.02 Net Investment Factor
3.04 Net Premium
6.01 Owner
4.04 Partial Withdrawals
7.01 Payment of Policy Benefits
3.04 Payment of Premiums
3.03 Policy Changes
3.02 Policy Proceeds
4.05 Postponement of Payments
3.05 Reinstatement
6.02 Right to Examine Increase in Face
Amount
6.02 Right to Examine Policy
4.02 Separate Account Cash Value
6.03 Separate Account Provisions
7.01 Settlement Options
6.02 Statements in Application
6.03 Suicide Exclusion
6.04 Transfers
Additional Benefit Riders, Modifications and Amendments, if any, and a
Copy of the Application are found following the final section.
30008 0.02
(4/88)
<PAGE>
POLICY SPECIFICATIONS
DESCRIPTION OF SEPARATE ACCOUNT A FUNDS
American Variable Insurance Series (the "Series") is an open-end diversified
management investment company which was incorporated in Massachusetts in 1983.
The Series offers seven separate funds which operate as distinct investment
vehicles. The names and investment objectives of the funds are as follows:
Cash Management Fund: The investment objective of this Fund is to seek high
current yield while preserving capital by investing in a diversified selection
of money market instruments.
High Yield Bond Fund: The investment objective of this Fund is to seek high
current income by investing primarily in intermediate and long-term corporate
obligations, with emphasis on higher yielding, higher risk, lower rated or
unrated securities.
Growth-Income Fund: The investment objective of this Fund is to seek growth of
capital and income by investing primarily in common stocks or other securities
with a view to appreciation and/or potential dividends.
Growth Fund: The investment objective of this Fund is to seek growth of capital
by investing primarily in common stocks or securities with common stock
characteristics, such as convertible preferred stocks, which demonstrate the
potential for appreciation.
U.S. Government/AAA-Rated Securities Fund: The investment objective of this Fund
is to seek a high level of current income consistent with prudent investment
risk and preservation of capital by investing primarily in a combination of
securities guaranteed by the U.S. Government and other debt securities rated AAA
or Aaa.
Asset Allocation Fund: The investment objective of this Fund is to seek total
return (including income and capital gains) and preservation of capital over the
long-term by investing in a diversified portfolio of securities that can include
common stocks and other equity-type securities (such as convertible bonds and
preferred stocks), bonds and other intermediate and long-term fixed-income
securities, and money market instruments (debt securities maturing in one year
or less).
International Fund: The investment objectives of this Fund is to seek long-term
growth of capital by investing primarily in securities of issuers domiciled
outside the United States. A major premise of the Fund's investment approach is
the belief that economic and political developments have helped create new
opportunities outside the U.S. In addition to investing directly in equity
securities, the Fund may invest in American Depository Receipts and European
Depository Receipts. When prevailing market, economic, political or currency
conditions warrant, the Fund may purchase fixed-income securities of issuers
domiciled outside the U.S. Under normal circumstances, the Fund will invest at
least 65% of its assets in equity securities of issuers domiciled outside the
U.S.
There can be no assurance that the investment objectives of these Funds, or any
other Funds that the Company may create, will be achieved.
30108 1.03
<PAGE>
SURRENDER CHARGE SCHEDULE
Insured: John Doe Policy #: 5,000,000
Amount of Effective Date
Insurance: $50,000 of Insurance: April 15, 1998
Surrender Charge 20% Guideline Annual $1,000.00
Factor: Premium:
POLICY SURRENDER
YEAR CHARGE PERCENTAGE
- --------------------------------------------------------------------------------
1 100%
2 90%
3 80%
4 70%
5 60%
6 50%
7 40%
8 30%
9 20%
10 10%
11+ 0%
If this amount of insurance is fully surrendered during the 10 years following
the effective date, the surrender charge is the appropriate percentage shown
above times the surrender charge amount defined in Section 5, Cash Values. If
this amount of insurance is decreased by some fraction of the total amount
during the 10 years following the effective date, the surrender charge amount
will be the previously defined surrender charge times the fraction. A new
Surrender Charge Schedule page will be mailed to you for the remaining coverage.
If the amount of insurance is increased, a surrender charge will apply during
the 10 years following the effective date of the increase. A new Surrender
Charge Schedule page for the increase will be mailed to you. The Surrender
Charge factor will not change for the increase.
30109
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
RATES ARE PER $1,000
INSURED:
POLICY NUMBER:
ISSUE DATE:
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
--- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
18 0.155 19 0.161 20 0.163
21 0.165 22 0.163 23 0.163
24 0.161 25 0.159 26 0.158
27 0.158 28 0.159 29 0.163
30 0.167 31 0.172 32 0.178
33 0.187 34 0.196 35 0.207
36 0.221 37 0.238 38 0.257
39 0.278 40 0.303 41 0.329
42 0.357 43 0.386 44 0.416
45 0.449 46 0.483 47 0.520
48 0.559 49 0.603 50 0.651
51 0.705 52 0.767 53 0.836
54 0.911 55 0.988 56 1.071
57 1.155 58 1.244 59 1.342
60 1.450 61 1.576 62 1.723
63 1.891 64 2.078 65 2.276
66 2.486 67 2.704 68 2.933
69 3.188 70 3.478 71 3.813
72 4.208 73 4.661 74 5.163
75 5.708 76 6.284 77 6.884
78 7.517 79 8.203 80 8.968
81 9.837 82 10.829 83 11.941
84 13.150 85 14.440 86 15.795
87 17.213 88 18.699 89 20.262
90 21.925 91 23.73 92 25.762
93 28.155 94 31.307
</TABLE>
THESE RATES ARE FOR THE BASE COVERAGE AT ISSUE. They are based on 125 percent of
the 1980 Commissioners Standard Ordinary Mortality Table C Last Birthday.
Any values guaranteed in this policy are based on these rates.
30110
<PAGE>
1. DEFINITIONS IN THIS POLICY
We, Us and Our
The Paragon Life Insurance Company.
You and Your
The owner of this policy. The owner is as shown in the application unless later
changed as provided in this policy. The owner may be someone other than the
insured.
In the application the words "You" and "Your" refer to the proposed insured
person(s).
Insured
The person whose life is insured under this policy. See the policy
specifications page.
Issue Age
The insured's age at his or her last birthday as of the issue date.
Attained Age
The issue age plus the number of completed policy years.
Issue Date
The effective date of the coverage under this policy. It is also the date from
which policy anniversaries, policy years, and policy months are measured.
Investment Start Date
The date the first premium is applied to 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 home office.
Maturity Date
The policy anniversary on which the insured attains age 95. If the insured is
living and the policy is in force on this date, the cash surrender value is
payable. It is possible that insurance coverage may not continue to the maturity
date even if planned premiums are paid in a timely manner.
Monthly Anniversary
The same date in each succeeding month as the issue date except that whenever
the monthly anniversary fails 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.
Business Day
Any day that we are open for business.
Separate Account
A separate investment account created by us to receive and invest net premiums
received for this policy. The particular Separate Account for this policy is
indicated on the policy specifications page.
Loan Account
The account to which we will transfer from the Divisions of the Separate Account
the amount of any policy loan.
Loan SubAccount
A Loan SubAccount exists for each Division of the Separate Account. Any cash
value transferred to the Loan Account will be allocated to the appropriate
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.
30303 3.01
(4/88)
<PAGE>
2. 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 month from the date of
death to the end of the month of death; less
3. Any loan and loan interest due.
Death Benefit
The death benefit depends upon the contract type in effect on the date of the
insured's death. The contract type in effect is shown on the policy
specifications page.
Level Contract Type: (Death benefit is level except when it equals a percentage
of cash value.)
The death benefit is the greater of:
1. The face amount; or
2. The applicable percentage of the cash value on the date of death as
described in Section 7702(d) of the Internal Revenue Code of 1986 or as set
forth in any applicable successor provision thereto.
Increasing Contract Type:
The death benefit is the greater of:
1. The face amount plus the cash value on the date of death; or
2. The applicable percentage of the cash value on the date of death as
described in Section 7702(d) of the Internal Revenue Code of 1986 or as set
forth in any applicable successor provision thereto.
Applicable Percentage
The percentages as currently described in Section 7702(d) of the Internal
Revenue Code of 1986 are as follows:
In the case of an insured with an attained age as of the beginning of the policy
year of:
More than: But not more than:
0 ............................. 40
40 ............................. 45
45 ............................. 50
50 ............................. 55
55 ............................. 60
60 ............................. 65
65 ............................. 70
70 ............................. 75
75 ............................. 90
90 ............................. 95
The applicable percentage will decrease by a ratable portion for each full year:
From: To:
250 ............................. 250
250 ............................. 215
215 ............................. 185
185 ............................. 150
150 ............................. 130
130 ............................. 120
120 ............................. 115
115 ............................. 105
105 ............................. 105
105 ............................. 100
30303 3.02
(4/88)
<PAGE>
Policy Changes
You may request policy changes at any time. We reserve the right to limit the
number of changes to one per policy year and to restrict the changes in the
first policy year. The types of changes allowed are explained below.
No change will be permitted that would result in the death benefit under this
policy being included in gross income due to not satisfying the requirements of
Section 7702 of the Internal Revenue Code of 1986 or as set forth in any
applicable successor provision thereto.
Change in Face Amount
The face amount may be changed by sending us a written request.
Any decrease in face amount will be subject to the following conditions:
1. The decrease will become effective on the monthly anniversary date on or
following our receipt of the request.
2. The decrease will reduce the face amount in the following order:
a. The face amount provided by the most recent increase;
b. Face amounts provided by the next most recent increases, successively;
and
c. The face amount when the policy was issued.
3. 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.
4. Any decrease must be at least $5,000.
Any increase in face amount will be subject to the following conditions:
1. Proof that the insured is insurable by our standards on the date of the
requested increase must be submitted.
2. The increase will become effective on the monthly anniversary date on or
following our receipt of such proof.
3. Any increase must be at least $5,000.
4. The insured must have an attained age not greater than age 80 on the date
of the requested increase.
We will amend your policy to show the effective date of the decrease or
increase.
Change in Contract Type
The contract type in effect may be changed by sending us a written request. The
effective date of change will be the monthly anniversary date on or following
the date we receive the request. On the effective date of this change the death
benefit payable does not change.
If the contract type in effect is increasing, it may be changed to level. The
face amount will be increased to equal the death benefit on the effective date
of change.
If the contract type in effect is level, it may be changed to increasing. Proof
that the insured is 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.
30303 3.03
(4/88)
<PAGE>
3. PREMIUMS AND GRACE PERIOD
Payment of Premiums
Your first premium is due as of the date of issue. While the insured is living,
premiums after the first must be paid at our home office. You may pay planned
premiums annually, semiannually, quarterly, or at other intervals we may
establish from time to time. This right is subject to our rates and minimum
premium requirements at the date of issue.
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 after the first may be paid in any amount and at any interval subject
to the following conditions:
1. No premium payment may be less than $20.00.
2. Total premiums paid in any policy year may not exceed the maximum premium
limit for that policy year. The maximum premium limit for a policy year is
the largest amount of premium which 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 referred to in Section 7702(c) of
the Internal Revenue Code of 1986, or as set forth in any applicable
successor provision thereto. The maximum premium limit for the following
policy year will be shown on your annual report.
Net Premium
The premium paid times the net premium percentage from the policy specifications
page is the net premium.
Allocation of Net Premiums
You determine the allocation of net premiums among the Divisions of the Separate
Account. The minimum percentage (other than zero) that may be allocated to any
Division of the Separate Account is 10%. Percentages must be in whole numbers.
The initial allocation is shown on the policy specifications page.
Your Right to Change Allocation
You may change the allocation of future net premiums among the Divisions of the
Separate 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.
Grace Period
We will allow a grace period of 62 days. The grace period will start on any
monthly anniversary date when the cash surrender value is not large enough to
cover the next monthly deduction. (Monthly deduction is defined in the Cash
Values Section.) At that time, we will send you and any assignee of record a
notice. The notice will indicate the minimum premium needed to keep the policy
in force and the date such payment is due.
If you do not pay a premium large enough to cover the monthly deduction by the
end of the grace period, your policy will lapse at the end of that 62 day
period. It will then terminate without cash value. If the insured dies during
the grace period, any past due monthly deductions will be deducted from the
death benefit.
30303 3.04
(4/88)
<PAGE>
Reinstatement
You may reinstate your lapsed policy within 5 years after the date of lapse.
This must be done before the insured's age 95. You must submit the following
items:
1. A written request for reinstatement.
2. Proof satisfactory to us that the insured is insurable by our standards.
3. A premium 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.
Reinstatement will not be effective until the date of application for
reinstatement is approved by us. There will be a full -monthly deduction for the
policy month that includes that date. The only accumulation value of this policy
upon reinstatement will be the amount provided by the premium then paid. The
application for reinstatement will be contestable for two years during the
lifetime of the insured from the date of its approval.
Any loan and loan interest due on the date of lapse may be paid or reinstated.
Any loan and loan interest reinstated will cause a cash value of an equal amount
to also be reinstated.
Any loan paid at the time of reinstatement will cause an increase in cash value
equal to the amount of the repaid loan.
The surrender charge at the time of reinstatement will be the surrender charge
in effect at the time of lapse. If only a portion of the coverage is reinstated
then only the applicable portion of the surrender charge will be reinstated. We
will amend your policy to show the new surrender charge. The cash value
following reinstatement will be increased by the amount of the surrender charge
imposed at the time of lapse.
30303 3.05
(4/88)
<PAGE>
4. LOANS
After the first policy anniversary, 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 $100. Your policy will be the
sole security for such loan. We have the right to require your policy for
endorsement.
The loan value is 85% of the cash value of your policy at the date of the loan
request, reduced by:
1. Any existing loans and loan interest due; and
2. Any surrender charges.
You may allocate the policy loan and any loan interest due on this loan among
the Divisions of the Separate Account. If you do not specify the allocation,
then the policy loan will be allocated among the Divisions of the Separate
Account in the same proportion that 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 and the loan interest due on this loan
allocated to each Division of the Separate Account will be transferred to the
Loan Account, reducing the cash value allocated to the Divisions of the Separate
Account accordingly.
Cash value held in the Loan Account for loan collateral will earn interest daily
at an annual rate of the Loan Account guaranteed interest rate shown on the
policy specifications page.
Interest payable on a loan accrues daily. Loan interest is due and payable in
arrears on each policy anniversary or on a pro rata basis for any shorter period
as the loan may exist. If you do not pay the interest when it is due, we will
add it to your existing loan if your policy has sufficient loan value. We will
charge the same rate of interest on this amount as on the policy loan. The total
loan rate will be 8.0% per year.
Loan Repayments
All funds received will be credited to your policy as a 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
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 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 as of
the date the original loan was made, unless you indicate a specific allocation
to the Divisions of the Separate Account. Unpaid loans and loan interest will be
deducted from any settlement of your policy.
If you fail to make repayment when the total loan and loan interest due would
exceed the cash value, less any surrender charges, your policy will be in
default. We will allow you a grace period for such payment of loans and loan
interest due. In such event that payment is not made, the policy terminates at
the end of the grace period. On the date of default, we will mail a notice to
your last known address, the last known address of the insured, and that of any
assignee of record. This grace period of 62 days will start on the monthly
anniversary immediately before the date the total loan and loan interest exceeds
the cash value less any surrender charges and any unpaid monthly expense
charges; or 31 days after such notice has been mailed, if later.
5. CASH VALUES
Cash Value
The cash value of your policy is equal to the total of:
- - The cash value in the Divisions of the Separate Account; plus
- - The cash value in the Loan Account.
30402 4.01
(4/88)
<PAGE>
You may borrow against the loan value of your policy. The interest rate used to
calculate the interest earned on the cash values in the Loan Account securing
any policy loan will be at an effective annual rate not less than the Loan
Account guaranteed interest rate shown on the policy specifications page.
Separate Account Cash Value
The cash value in each Division of the Separate Account on 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 a subsequent
valuation date 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 net amounts transferred to the Division 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 surrender charges incurred 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, 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 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:
- - 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, 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
- - A charge not to exceed .0024547% for each day in the valuation period. This
corresponds to 0.90% per year for mortality and expense risks; divided by
- - The value of the assets at the end of the preceding valuation period.
30402 4.02
(4/88)
<PAGE>
Loan Account Cash Value
The cash value of the Loan Account as of the Investment Start Date is zero.
The cash value of the Loan Account on any day after the Investment Start Date is
equal to:
- - The cash value of the Loan Account on the preceding business day, with
interest; plus
- - Any net amount transferred to the Loan Account from the Divisions of the
Separate Account on that day; minus
- - Any loan repayments on that day.
Monthly Cost of Insurance
The monthly cost of insurance for the following month is 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.
2. The death benefit at the beginning of the policy month divided by
1.0040741.
3. The cash value at the beginning of the policy month, before the deduction
of the monthly cost of insurance.
If the contract type is level and if there has been an increase in the face
amount, then the cash value will first be considered a part of the face amount
when the policy was issued. If the cash value is greater than the initial face
amount, it will then be considered a part of each increase in order, starting
with the first increase.
Monthly Cost of Insurance Rates
At the beginning of each policy year, the monthly cost of insurance rate is
determined using the insured's attained age. The monthly cost of insurance rate
is based on the attained age and rate class. For the initial face amount, we
will use the rate class on the date of issue. For each increase, we will use the
rate class applicable to the increase. If the death benefit equals a percentage
of the cash value, any increase in cash value will cause an automatic increase
in the death benefit. The rate class for such increase will be the same as that
used for the most recent increase that required proof that the insured was
insurable by our standards.
The monthly cost of insurance rates will never exceed the rates shown on the
Table of Guaranteed Monthly Cost of Insurance Rates page divided by 1,000. Any
change in the cost of insurance rates will apply to all persons of the same age,
and classification whose policies have been in force for the same length of
time.
First Year Monthly Expense Charge
The amount of additional monthly expense to be charged during the first policy
year is shown on the policy specifications page.
Monthly Expense Charge
The amount of the monthly expense charge is shown on the policy specifications
page.
Monthly Deduction
The monthly deduction is:
1. The monthly cost of insurance; plus
2. The monthly cost of insurance for any rider included with this policy; plus
3. The monthly expense charge; plus
4. For the first policy year, the first year monthly expense charge.
The monthly deduction for a policy month will be allocated among the Divisions
of the Separate Account in the same proportion that 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 monthly anniversary.
Cash Surrender Value
The cash surrender value of this policy is:
1. The cash value at the time of surrender; less
2. Any loan and loan interest due; less
3. Any surrender charge.
30402 4.03
(4/88)
<PAGE>
Surrender
You may surrender your policy for its cash surrender value at any time during
the lifetime of the insured by sending us a written request. The cash surrender
value will be determined as of the date we receive your written request. The
cash surrender value will not be reduced by any monthly deduction due, if any,
on that date for the following month.
Partial Withdrawals
After the first policy year, you can make a partial withdrawal of cash subject
to the following conditions:
- - You may make up to one partial withdrawal each policy month.
- - The minimum amount of your net partial withdrawal request from any one
Division must be at least $50.00 of a Division or your entire balance in
that Division, if smaller.
- - The total amount of your net partial withdrawal request at any one time
must be at least $500.
- - The amount of withdrawal obtained by partial withdrawal may not exceed the
loan value.
Allocation of Partial Withdrawals
You may allocate the partial withdrawal, subject to the above conditions, among
the Divisions of the Separate Account. If you do not specify the allocation,
then the partial withdrawal will be allocated among the Divisions of the
Separate Account in the same proportion that 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 contract type is level 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 plus the applicable surrender charge. The surrender charge
will be allocated among the Divisions of the Separate Account in the same
proportion that the partial withdrawal was allocated among the Divisions of the
Separate Account. 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 plus the applicable surrender charge exceeds the
difference between the death benefit and the face amount. The face amount will
be decreased in the following order:
1. The face amount at issue; and
2. Any increases in the same order in which they were issued.
No partial withdrawal will be processed which will result in the face amount
being decreased below the minimum face amount shown on the policy specifications
page.
We reserve the right to change the minimum amount or the number of times you may
make a partial withdrawal. Each partial withdrawal is subject to an
administrative charge equal to the lesser of $25.00 or 2% of the amount of the
partial withdrawal.
Surrender Charge
If the policy is surrendered, a surrender charge will be applied:
1. With respect to the initial face amount and the number of completed policy
years from the issue date; and
2. With respect to each increase in face amount and the number of completed
years from the effective date of that increase.
The surrender charge amount for the initial face amount for the first policy
year will be the lesser of:
1. The Surrender Charge Factor multiplied by actual premiums paid during the
first policy year to meet our minimum premium requirements; or
2. The Surrender Charge Factor multiplied by the guideline annual premium. The
guideline annual premium is shown on the surrender charge schedule page.
This amount as calculated at the end of the first policy year will be used to
determine the surrender charge for any decrease in the initial face amount or
full cash surrender of the initial face amount in subsequent years.
30402 4.04
(4/88)
<PAGE>
The surrender charge amount for an increase in face amount during the twelve
policy months following any increase will be the lesser of:
1. The Surrender Charge Factor multiplied by the premiums that are allocated
to that increase during the twelve policy months following the increase; or
2. The Surrender Charge Factor multiplied by the guideline annual premium for
the increase. The guideline annual premium for the increase will be shown
in the surrender charge schedule page for the increase.
This amount as calculated at the end of the first year following the effective
date of the increase will be used to determine the surrender charge for any
decrease in increased face amount or full cash surrender following the increase
in subsequent years.
The premium allocated to an increase for purposes of determining the surrender
charge will be based on the rules established by the Securities and Exchange
Commission and may include a part of the existing cash value.
The Surrender Charge Percentage for the initial face amount and any increase in
face amount is shown on the surrender charge schedule page for the respective
face amount. The Surrender Charge Percentage multiplied by the surrender charge
amount determines the appropriate surrender charge to be assessed.
The Surrender Charge Factor is shown on the surrender charge schedule page.
A surrender charge will apply to any decrease in face amount. A decrease in face
amount may decrease some of the initial face amount and some or all of any
increases in face amount as provided in Section 2. A partial withdrawal may
cause a decrease in face amount as provided above and, therefore, a surrender
charge may be taken. The amount of surrender charge applied because of a
decrease in face amount is defined on the surrender charge schedule page for the
face amount being decreased. The surrender charge for a decrease in face amount
is deducted from the cash value on the effective date of the decrease.
Postponement of Payments
We will usually pay any amounts payable on surrender, partial withdrawal or
policy loan allocated to the Divisions of the Separate Account within seven days
after written notice is received. We will usually pay any death benefit proceeds
within seven days after we receive due proof of claim. Payment of any amount
payable on surrender, partial withdrawal, policy loan or death may be postponed
whenever:
1. The New York Stock Exchange or our home office are closed (other than
customary weekend and holiday closing) or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange
Commission;
2. The Securities and Exchange Commission, by order, permits postponement for
the protection of policy owners; or
3. An emergency exists as determined by the Securities and Exchange
Commission, 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.
Transfers may also be postponed under the circumstances listed above.
Continuation of Insurance
If all premium payments cease, the insurance provided under 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
surrender value is sufficient to cover the monthly deductions. Any remaining
cash surrender value will be payable on the maturity date.
Basis of Computation
The minimum cash values and net single premiums, if any, are based on 1) 125
percent of the Commissioner's 1980 Standard Ordinary Mortality Table C age last
birthday; and 2) compound interest at 5% a year.
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.
30402 4.05
(4/88)
<PAGE>
6. PERSONS WITH AN INTEREST IN THE POLICY
Owner
The insured is the original owner of this policy unless someone else is shown as
owner in the application. You, as owner, are entitled to all rights provided by
this policy, prior to its maturity date. Ownership may be changed in accordance
with the Change of Owner or Beneficiary provision. After the maturity date, you
cannot change the payee nor the mode of payment, unless otherwise provided in
this policy. Any person whose rights of ownership depend upon some future event
will not possess any present rights of ownership. If there is more than one
owner at a given time, all must exercise the rights of ownership. If you should
die, and you are not the insured, your interest will go to your estate unless
otherwise provided.
Beneficiary
The original beneficiary is shown in the application. 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 insured. If there is more than one beneficiary at the death of the
insured, each will receive equal payments unless otherwise provided. If no
beneficiary is living at the death of the insured the proceeds will be payable
to you, if you are living, or to your estate.
Change of Owner or Beneficiary
During the insured's lifetime you may change the ownership and beneficiary
designations. You must make the change in written form satisfactory to us. If
acceptable to us it will take effect as of the time you signed the request,
whether or not the insured is living when we receive your request at our home
office. 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 insured's
death, you may designate some other person to receive the proceeds of the policy
within 60 days after the insured's death.
Assignments
We will not be bound by an assignment of the policy or of any interest in it
unless:
1. It is made as a written instrument,
2. You file the original instrument or a certified copy with us at our home
office, and
3. We send you an acknowledged copy.
We are not responsible for 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.
7. THE CONTRACT
The Contract
We have issued this policy in consideration of the application and payment of
premiums. The policy, the application for it, and any application for an
increase in face amount constitute the entire contract. Any application is
attached and made a part of the policy when the insurance applied for is
accepted. The policy may be changed by mutual agreement. Any change must be in
writing and approved by our 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 Statutes
If any provision in this policy is in conflict with the laws of the state which
govern this policy, the provision will be deemed to be amended to conform with
such laws.
30603 6.01
(4/88)
<PAGE>
Statements in Application
All statements made by the insured or on his or her behalf, or 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 deny a claim
unless made in the application.
Claims of Creditors
To the extent permitted by law, neither the policy nor any payment under it will
be subject to the claim of creditors or to any legal process.
Right to Examine Policy
You have the right to request us to cancel this policy and receive a refund. The
request must be made no later than:
- - 20 days after you received the policy; or
- - 45 days after the date you signed the application.
The refund will equal the premiums paid into this policy.
Right to Examine Increase in Face Amount
You have the right to request us to cancel an increase in face amount and
receive a refund. The request must be made no later than:
- - 20 days from the date you received the new policy specifications page for
the increase; or
- - 45 days after the date you signed the application for the increase.
The refund will equal the monthly deductions associated with that increase. If
you do request us to cancel the increase but do not request a refund, the
monthly deductions associated with that increase will be restored to the
policy's cash value. This amount will be allocated to the Divisions of the
Separate Account in the same manner as it was deducted.
Conversion Rights
Once during the first two policy years you have the right, upon written request,
to exchange this policy for a life insurance policy that provides for benefits
that do not vary with the investment return of the Divisions of the Separate
Account. No evidence of insurability will be required. However, we will require
that this policy be in force and that you repay any existing indebtedness. At
the time of the conversion, the new policy will have, at your option, either the
same death benefit or the same difference between death benefit and cash value
as this policy. The new policy will also have the same issue date and issue age
as this policy. The planned premiums for the new policy will be based on our
rates in effect for the same issue age and risk class as the original policy.
You also have the right once during the first two years following the effective
date of an increase in face amount to exchange the increased portion of this
policy for a life insurance policy that provides for fixed benefits. The
provisions applicable to the conversion of the entire policy described above are
also applicable to a conversion of an increase in face amount.
Date of Issue
The date of issue is the effective date of the coverage under this policy. It is
also the date from which policy anniversaries, policy years, and policy months
are measured.
Misstatement of Age and Corrections
If there is a misstatement of age in the application, the amount of the death
benefit will be that which would be purchased by the most recent mortality
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.
30603 6.02
(4/88)
<PAGE>
Incontestability
We cannot contest this policy after it has been in force during the lifetime of
the insured for two years from its issue date. We cannot contest an increase in
face amount with regard to material misstatements made concerning such increase
after it has been in force during the lifetime of the insured for two years from
its effective date. We cannot contest any reinstatement of this policy after it
has been in force during the lifetime of the insured for a period of two years
from the date we approve the reinstatement. This provision will not apply to any
rider which contains its own incontestability clause.
Suicide Exclusion
If the insured dies by suicide, while sane or insane, within two years from the
date of issue (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.
If the insured, while sane or insane, commits suicide within two years after the
effective date of any increase in face amount, the death benefit for that
increase will be limited to the monthly deductions for the increase.
This provision does not apply if this policy is issued to a Missouri citizen, or
on the effective date of any increase in face amount, unless the insured
intended suicide when this policy or any increase in face amount was applied
for.
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 Benefits and Values
You may make a written request to us for a projection of illustrative future
cash values and death benefits. This projection will be furnished to you for a
nominal fee.
8. SEPARATE ACCOUNT PROVISIONS
Separate Account
The variable benefits under this policy are provided through investments in the
Separate Account. 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 Company's general assets. 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.
Assets held by 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
the Company's general assets 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 which are shown on the policy
specifications page. The Separate Account will buy shares in the Funds
identified on the policy specifications page. Each Fund corresponds to a
different investment portfolio.
30603 6.03
(4/88)
<PAGE>
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.
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, commencing at the close of trading (currently 4:00 p.m. New
York time) each valuation date and ending at the close of trading (currently
4:00 p.m. New York time) on the next succeeding valuation date. A valuation date
is each day that the New York Stock Exchange and our home office 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 among the Divisions of the Separate Account.
These transfers will be subject to the following conditions:
- - We must receive a written request for transfer.
- - Transfers from or among the Divisions of the Separate Account may be made
at any time and must be at least $250.00 or the entire amount you have in a
Division, if smaller.
We may modify the transfer privilege at any time, including the minimum amount
transferable, the frequency, and the transfer charge, if any.
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 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 and to substitute
shares of another fund or of another registered open-end, 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 prior approval of the Securities and Exchange Commission, to the
extent required by 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,
each of which would invest in a new fund or in shares of another open-end
investment company and to make such Divisions available to such class or series
of policies as we deem appropriate. Subject to any required regulatory approval,
we also reserve the right to eliminate or combine existing Divisions of the
Separate Account or to transfer assets between Divisions.
Subject to obtaining any necessary regulatory or owner approval, 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.
30603 6.04
(4/88)
<PAGE>
9. PAYMENT OF POLICY BENEFITS
Payment
Payment will be made as provided on the face page.
If a beneficiary entitled to proceeds dies after the insured, and
1. no settlement option elected by you is in effect, and
2. the deceased beneficiary has not chosen an option or requested the proceeds
in cash,
his or her proceeds will be paid as though he or she died before the insured.
Interest on Proceeds
We will pay interest on single sum proceeds from the date of the insured's death
to the date of payment. Interest will be at an annual rate determined by us, but
never less than the Guaranteed Settlement Option rate.
Election of Settlement Options
Prior to the maturity of the policy, you may choose a settlement option. Upon
the death of the insured, the proceeds will be placed under the settlement
option chosen. You may change or revoke an option during the lifetime of the
insured. After the maturity of the policy, a person entitled to receive payment
in one sum may choose an option for his or her benefit, if you have not already
done so. With our consent, an option may be chosen for the benefit of another
payee.
For you to choose an option, we must receive your written request at our home
office prior to the insured's death. If the request is satisfactory to us, we
will issue a written agreement showing the option you elected. The effective
date of the election will be the date of the request, the date of issue of the
policy, or the date the person who is making the election signed the agreement,
whichever is the latest.
The Settlement Options are described below.
Settlement Options
(See Settlement Option Tables at the end of this section.) Upon the maturity of
the policy or upon death of the insured, the proceeds may be placed under any of
the following options:
Option A. Life Income.
We will pay equal monthly installments as long as the payee lives.
Option B. Life Income for Two Lives.
We will pay monthly installments jointly to two named payees if both are living
when the installments become payable. One payee will be designated as primary
payee. Full installments will continue so long as the primary payee is living.
If the primary payee dies after installments begin, full installments or
installments of 1/2 or 2/3, (whichever you elected when applying for this
option) will continue to the other payee during his or her lifetime.
Option C. Income for Specified Number of Years and Life Thereafter.
We will pay monthly installments beginning on the effective date of the option
and continuing for 5, 10, 15 or 20 years certain, as may be chosen, and after
that, during the payee's lifetime.
Option D. Life Income With Cash Refund.
We will pay monthly installments as long as the payee lives. If the payee dies
before the total amounts paid equal the proceeds applied, we pay the difference
in one sum.
Option E. Installments of a Specified Amount.
We will pay installments at dates and in amounts chosen by the owner at the time
of option request with our approval. We will continue to make payments until all
of the proceeds, with interest, are paid. The final payment will not exceed the
unpaid balance.
Option F. Income for Specified Number of Years.
We will pay monthly installments beginning on the effective date of the option
and continuing for a specified number of years, not to exceed 30 years.
00714 7.01
(4/88)
<PAGE>
Option G. Interest.
We will hold the proceeds on deposit during the payee's lifetime or for any
other period selected with our approval. Interest may be accumulated or received
in monthly, quarterly, semiannual, or annual payments, as may be chosen.
Interest begins to accrue as of the effective date of the option.
Payee
A person who receives benefits under an option is a payee. Except for a legal
guardian, a payee must be a natural person receiving benefits in his or her own
right. With our consent, the payee may be a trustee, assignee, corporation, or
partnership.
Guaranteed Settlement Option Interest Rate
We use a guaranteed effective annual rate of 4% in computing payments under all
options. We may pay interest in excess of this amount.
Minimum Amounts (for each payee)
The minimum amount that can be placed under an option and the minimum amount of
any payments under an option will be based on our rules at the time the option
is to become effective.
The required minimum amount to be placed under an option will never be more than
$5,000, nor shall the minimum amount of any payment be set at more than $50 per
month.
Life Income Options
Life Income Options are based on the payee's age nearest birthday on the
settlement option effective date. We have the right to require satisfactory
proof of age. If the age has been incorrectly stated, the proper adjustment in
payments will be made. We may also require proof that the payee is living on any
payment due date.
Death of Payee
If a payee dies, any amount still payable under an option will be paid as it
becomes due to the surviving or next succeeding payee. If no designated payee
survives, any amount payable in one sum, or the commuted value of any unpaid
installments, will be paid in one sum to the estate of the last payee to die.
First Payment
We will make the first payment under an option other than Option G as of the
option effective date. We will pay interest under Option G at the end of each
period selected for payment.
Rights Under Settlement Options
No payee has the right to make any change in the provisions of the settlement
option agreement or to receive the proceeds in any manner other than that stated
in the settlement option agreement, unless such right was reserved in the
settlement option agreement. The right may be reserved to the payee to withdraw
all or part of any amount held under Options G and E, including any interest, or
the commuted value of any unpaid installments under Option F. We will not make
any payments in advance, nor commute installments under any life income option.
Under a partial withdrawal right, the number of withdrawals allowed per year and
the minimum amount of each withdrawal shall be determined by our rules in effect
at the time of the request for a partial withdrawal, unless otherwise specified
in the agreement.
Basis of Commutation
Commutation of installments will be at the effective annual rate of 4%
compounded annually.
00714 7.02
(4/88)
<PAGE>
Contingent Payee
The payee may name contingent payees, subject to any restrictions under a
settlement option chosen during the insured's lifetime, under the following
conditions:
1. If you are the payee; or
2. If the payee has the right to withdraw the entire amount under the option,
even though contingent payees may have been previously named; or
3. If at any time after the insured's death and during the option period no
previously named contingent payee is living.
Designations made by the payee under these provisions may be changed by the
payee. Such changes must be made by written request satisfactory to us. Changes
will only take effect when we accept them in writing at our home office. At
that time, the contingent interest of any other person is terminated as of the
date the payee signed the request, whether or not the payee is living when we
receive the request.
Extended Provisions
Provisions for settlement of proceeds different from those stated in this policy
may only be made upon written agreement with us.
Company Liability
We will be fully discharged by any payment we make when a written request for an
election, change, or revocation is made and is received in our home office.
00714 7.03
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES
FOR EACH $1,000
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
OPTION A-LIFE INCOME
- ----------------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY
INSTALLMENTS INSTALLMENTS INSTALLMENTS INSTALLMENTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 $3.58 35 $3.99 55 $5.08 75 $ 8.30
16 3.59 36 4.02 56 5.17 76 8.60
17 3.61 37 4.05 57 5.27 77 8.93
18 3.62 38 4.09 58 5.36 78 9.28
19 3.63 39 4.13 59 5.46 79 9.67
- ----------------------------------------------------------------------------------------------------------------------------
20 3.65 40 4.16 60 5.57 80 10.08
21 3.67 41 4.21 61 5.68 81 10.53
22 3.68 42 4.25 62 5.80 82 11.02
23 3.70 43 4.30 63 5.93 83 11.54
24 3.72 44 4.35 64 6.06 84 12.11
- ----------------------------------------------------------------------------------------------------------------------------
25 3.74 45 4.40 65 6.20 85 AND 12.73
26 3.76 46 4.45 66 6.35 OVER
27 3.78 47 4.51 67 6.51
28 3.80 48 4.57 68 6.69
29 3.82 49 4.63 69 6.87
- ----------------------------------------------------------------------------------------------------------------------------
30 3.85 50 4.70 70 7.07
31 3.87 51 4.77 71 7.28
32 3.90 52 4.84 72 7.51
33 3.93 53 4.92 73 7.75
34 3.95 54 5.00 74 8.01
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
OPTION B-MONTHLY INSTALLMENTS-JOINT AND ONE-HALF TO SECONDARY PAYEE
- -----------------------------------------------------------------------------------------------------
AGE OF PRIMARY AGE OF SECONDARY PAYEE**
PAYEE**
- -----------------------------------------------------------------------------------------------------
45 46 47 48 49 50 51 52 53 54 55
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.64 $4.66 $4.68 $4.70 $4.72 $4.74 $4.75 $4.77 $4.78 $4.79 $4.80
56 4.68 4.71 4.73 4.75 4.77 4.79 4.81 4.83 4.84 4.85 4.87
57 4.73 4.75 4.78 4.80 4.82 4.84 4.87 4.88 4.90 4.92 4.93
58 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96 4.98 5.00
59 4.81 4.84 4.87 4.90 4.93 4.95 4.98 5.00 5.02 5.05 5.07
- -----------------------------------------------------------------------------------------------------
60 4.86 4.89 4.92 4.95 4.98 5.01 5.04 5.06 5.09 5.11 5.13
61 4.90 4.94 4.97 5.00 5.03 5.06 5.09 5.12 5.15 5.18 5.20
62 4.95 4.98 5.02 5.05 5.09 5.12 5.15 5.18 5.21 5.24 5.27
63 5.00 5.03 5.07 5.11 5.14 5.18 5.21 5.24 5.28 5.31 5.34
64 5.05 5.09 5.12 5.16 5.20 5.23 5.27 5.31 5.34 5.38 5.41
- -----------------------------------------------------------------------------------------------------
65 5.10 5.14 5.18 5.21 5.25 5.29 5.33 5.37 5.41 5.45 5.48
66 5.15 5.19 5.23 5.27 5.31 5.35 5.40 5.44 5.48 5.52 5.56
67 5.21 5.25 5.29 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63
68 5.27 5.31 5.35 5.39 5.44 5.48 5.53 5.57 5.62 5.67 5.71
69 5.33 5.37 5.41 5.46 5.50 5.55 5.60 5.65 5.69 5.74 5.79
- -----------------------------------------------------------------------------------------------------
70 5.39 5.43 5.48 5.52 5.57 5.62 5.67 5.72 5.77 5.82 5.87
71 5.45 5.50 5.55 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.96
72 5.52 5.57 5.62 5.67 5.72 5.77 5.82 5.87 5.93 5.99 6.04
73 5.59 5.64 5.69 5.74 5.79 5.85 5.90 5.96 6.01 6.07 6.13
74 5.66 5.71 5.76 5.82 5.87 5.92 5.98 6.04 6.10 6.16 6.22
- -----------------------------------------------------------------------------------------------------
75 5.74 5.79 5.84 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.32
76 5.81 5.86 5.92 5.97 6.03 6.09 6.15 6.22 6.28 6.35 6.41
77 5.89 5.94 6.00 6.06 6.12 6.18 6.24 6.31 6.37 6.44 6.51
78 5.97 6.03 6.08 6.14 6.20 6.27 6.33 6.40 6.47 6.54 6.61
79 6.05 6.11 6.17 6.23 6.29 6.36 6.43 6.50 6.57 6.64 6.72
- -----------------------------------------------------------------------------------------------------
80 6.14 6.20 6.26 6.32 6.39 6.45 6.52 6.60 6.67 6.75 6.82
- -----------------------------------------------------------------------------------------------------
56 57 58 59 60 61 62 63 64 65
- ---------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.81 $4.82 $4.83 $4.83 $4.84 $4.85 $4.85 $4.86 $4.86 $4.87
56 4.88 4.89 4.90 4.90 4.91 4.92 4.93 4.93 4.94 4.94
57 4.95 4.96 4.97 4.98 4.99 5.00 5.00 5.01 5.02 5.02
58 5.01 5.03 5.04 5.05 5.06 5.07 5.08 5.09 5.10 5.11
59 5.08 5.10 5.12 5.13 5.14 5.15 5.17 5.18 5.18 5.19
- ---------------------------------------------------------------------------------------------
60 5.15 5.17 5.19 5.21 5.22 5.24 5.25 5.26 5.27 5.28
61 5.23 5.25 5.27 5.29 5.31 5.32 5.34 5.35 5.36 5.38
62 5.30 5.32 5.35 5.37 5.39 5.41 5.43 5.44 5.46 5.47
63 5.37 5.40 5.43 5.45 5.48 5.50 5.52 5.54 5.55 5.57
64 5.45 5.48 5.51 5.54 5.56 5.59 5.61 5.63 5.65 5.67
- ---------------------------------------------------------------------------------------------
65 5.52 5.56 5.59 5.62 5.65 5.68 5.71 5.73 5.76 5.78
66 5.60 5.64 5.67 5.71 5.74 5.78 5.81 5.84 5.86 5.89
67 5.68 5.72 5.76 5.80 5.84 5.87 5.91 5.94 5.97 6.00
68 5.76 5.80 5.85 5.89 5.93 5.97 6.01 6.05 6.08 6.12
69 5.84 5.89 5.94 5.98 6.03 6.07 6.12 6.16 6.20 6.24
- ---------------------------------------------------------------------------------------------
70 5.92 5.98 6.03 6.08 6.13 6.18 6.23 6.27 6.32 6.36
71 6.01 6.07 6.12 6.18 6.23 6.28 6.34 6.39 6.44 6.49
72 6.10 6.16 6.22 6.28 6.33 6.39 6.45 6.51 6.56 6.62
73 6.19 6.25 6.32 6.38 6.44 6.50 6.57 6.63 6.69 6.75
74 6.29 6.35 6.42 6.48 6.55 6.62 6.68 6.75 6.82 6.89
- ---------------------------------------------------------------------------------------------
75 6.38 6.45 6.52 6.59 6.66 6.73 6.81 6.88 6.95 7.02
76 6.48 6.55 6.63 6.70 6.77 6.85 6.93 7.01 7.08 7.17
77 6.58 6.66 6.73 6.81 6.89 6.97 7.05 7.14 7.22 7.31
78 6.69 6.77 6.85 6.93 7.01 7.10 7.18 7.27 7.36 7.46
79 6.80 6.88 6.96 7.04 7.13 7.22 7.32 7.41 7.51 7.61
- ---------------------------------------------------------------------------------------------
80 6.91 6.99 7.08 7.17 7.26 7.35 7.45 7.55 7.65 7.76
- ---------------------------------------------------------------------------------------------
</TABLE>
**FOR ADDITIONAL AGE COMBINATIONS, THE PROPER RATES WILL BE PROVIDED UPON
REQUEST TO THE HOME OFFICE.
00714 7.04
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES-CONTINUED
<TABLE>
<CAPTION>
FOR EACH $1,000
- -------------------------------------------------------------------------------------------------------------------------------
OPTION B-MONTHLY INSTALLMENTS-JOINT AND TWO-THIRDS TO SECONDARY PAYEE
- -------------------------------------------------------------------------------------------------------------------------------
AGE OF PRIMARY
PAYEE ** AGE OF SECONDARY PAYEE **
- -------------------------------------------------------------------------------------------------------------------------------
45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.51 $4.54 $4.56 $4.59 $4.61 $4.63 $4.65 $4.67 $4.69 $4.70 $4.71 $4.73 $4.74 $4.75 $4.75 $4.76
56 4.54 4.57 4.60 4.63 4.65 4.68 4.70 4.72 4.74 4.76 4.77 4.79 4.80 4.81 4.82 4.83
57 4.57 4.60 4.63 4.66 4.69 4.72 4.74 4.77 4.79 4.81 4.83 4.85 4.86 4.88 4.89 4.90
58 4.60 4.63 4.67 4.70 4.73 4.76 4.79 4.82 4.84 4.87 4.89 4.91 4.93 4.94 4.96 4.97
59 4.63 4.67 4.70 4.74 4.77 4.80 4.83 4.86 4.89 4.92 4.94 4.97 4.99 5.01 5.03 5.04
- -------------------------------------------------------------------------------------------------------------------------------
60 4.66 4.70 4.74 4.77 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.05 5.08 5.10 5.12
61 4.69 4.73 4.77 4.81 4.85 4.88 4.92 4.96 4.99 5.03 5.06 5.09 5.12 5.14 5.17 5.19
62 4.72 4.76 4.80 4.84 4.88 4.93 4.97 5.00 5.04 5.08 5.11 5.15 5.18 5.21 5.24 5.26
63 4.75 4.79 4.84 4.88 4.92 4.97 5.01 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.31 5.34
64 4.78 4.83 4.87 4.92 4.96 5.01 5.05 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.41
- -------------------------------------------------------------------------------------------------------------------------------
65 4.81 4.86 4.91 4.95 5.00 5.05 5.09 5.14 5.19 5.23 5.28 5.33 5.37 5.41 5.45 5.49
66 4.85 4.89 4.94 4.99 5.04 5.09 5.14 5.19 5.24 5.29 5.34 5.38 5.43 5.48 5.52 5.56
67 4.88 4.93 4.98 5.03 5.08 5.13 5.18 5.23 5.29 5.34 5.39 5.44 5.49 5.54 5.59 5.64
68 4.92 4.97 5.02 5.07 5.12 5.17 5.23 5.28 5.34 5.39 5.45 5.50 5.56 5.61 5.66 5.72
69 4.96 5.00 5.06 5.11 5.16 5.22 5.27 5.33 5.39 5.44 5.50 5.56 5.62 5.68 5.74 5.79
- -------------------------------------------------------------------------------------------------------------------------------
70 4.99 5.04 5.10 5.15 5.20 5.26 5.32 5.38 5.44 5.50 5.56 5.62 5.68 5.74 5.81 5.87
71 5.03 5.08 5.14 5.19 5.25 5.31 5.37 5.43 5.49 5.55 5.62 5.68 5.75 5.81 5.88 5.94
72 5.07 5.13 5.18 5.24 5.29 5.35 5.42 5.48 5.54 5.61 5.67 5.74 5.81 5.88 5.95 6.02
73 5.11 5.17 5.22 5.28 5.34 5.40 5.47 5.53 5.60 5.66 5.73 5.80 5.87 5.95 6.02 6.10
74 5.16 5.21 5.27 5.33 5.39 5.45 5.52 5.58 5.65 5.72 5.79 5.86 5.94 6.02 6.09 6.17
- -------------------------------------------------------------------------------------------------------------------------------
75 5.20 5.26 5.31 5.37 5.44 5.50 5.57 5.64 5.71 5.78 5.85 5.93 6.01 6.08 6.17 6.25
76 5.24 5.30 5.36 5.42 5.49 5.55 5.62 5.69 5.76 5.84 5.91 5.99 6.07 6.15 6.24 6.33
77 5.29 5.35 5.41 5.47 5.54 5.60 5.67 5.74 5.82 5.89 5.97 6.05 6.14 6.22 6.31 6.40
78 5.34 5.40 5.46 5.52 5.59 5.66 5.73 5.80 5.88 5.95 6.03 6.12 6.20 6.29 6.39 6.48
79 5.38 5.44 5.51 5.57 5.64 5.71 5.78 5.86 5.93 6.01 6.10 6.18 6.27 6.36 6.46 6.56
- -------------------------------------------------------------------------------------------------------------------------------
80 5.43 5.49 5.56 5.62 5.69 5.76 5.84 5.91 5.99 6.08 6.16 6.25 6.34 6.44 6.53 6.64
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------
AGE OF PRIMARY
PAYEE **
- ---------------------------------------------------------
61 62 63 64 65
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 $4.77 $4.78 $4.78 $4.79 $4.80
56 4.84 4.85 4.86 4.86 4.87
57 4.91 4.92 4.93 4.94 4.95
58 4.98 5.00 5.01 5.02 5.03
59 5.06 5.07 5.09 5.10 5.11
- ---------------------------------------------------------
60 5.13 5.15 5.17 5.18 5.19
61 5.21 5.23 5.25 5.26 5.28
62 5.29 5.31 5.33 5.35 5.37
63 5.37 5.39 5.42 5.44 5.46
64 5.45 5.48 5.50 5.53 5.55
- ---------------------------------------------------------
65 5.53 5.56 5.59 5.62 5.65
66 5.61 5.64 5.68 5.72 5.75
67 5.69 5.73 5.77 5.81 5.85
68 5.77 5.82 5.86 5.91 5.95
69 5.85 5.90 5.95 6.00 6.05
- ---------------------------------------------------------
70 5.93 5.99 6.05 6.10 6.16
71 6.01 6.07 6.14 6.20 6.26
72 6.09 6.16 6.23 6.30 6.37
73 6.17 6.25 6.32 6.40 6.47
74 6.25 6.33 6.42 6.50 6.58
- ---------------------------------------------------------
75 6.33 6.42 6.51 6.60 6.68
76 6.42 6.51 6.60 6.69 6.79
77 6.50 6.59 6.69 6.79 6.89
78 6.58 6.68 6.78 6.89 7.00
79 6.66 6.77 6.88 6.99 7.10
- ---------------------------------------------------------
80 6.74 6.85 6.97 7.09 7.21
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION B-MONTHLY INSTALLMENTS-JOINT AND EQUAL TO SECONDARY PAYEE
- -----------------------------------------------------------------------------------------------------------------------
AGE OF PRIMARY
PAYEE ** AGE OF SECONDARY PAYEE **
- -----------------------------------------------------------------------------------------------------------------------
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $4.28 $4.29 $4.30 $4.30 $4.31 $4.31 $4.32 $4.32 $4.33 $4.33 $4.33 $4.34 $4.34 $4.35
51 4.28 4.32 4.33 4.34 4.35 4.36 4.36 4.37 4.37 4.38 4.38 4.39 4.40 4.40 4.41
52 4.29 4.33 4.37 4.38 4.39 4.40 4.41 4.42 4.43 4.43 4.44 4.45 4.45 4.46 4.47
53 4.30 4.34 4.38 4.43 4.44 4.45 4.46 4.47 4.48 4.49 4.50 4.51 4.51 4.52 4.53
54 4.30 4.35 4.39 4.44 4.49 4.50 4.51 4.53 4.54 4.55 4.56 4.57 4.57 4.58 4.59
- -----------------------------------------------------------------------------------------------------------------------
55 4.31 4.36 4.40 4.45 4.50 4.55 4.56 4.58 4.59 4.60 4.62 4.63 4.64 4.65 4.66
56 4.31 4.36 4.41 4.46 4.51 4.56 4.61 4.63 4.65 4.66 4.68 4.69 4.70 4.71 4.72
57 4.32 4.37 4.42 4.47 4.53 4.58 4.63 4.68 4.70 4.72 4.74 4.75 4.77 4.78 4.79
58 4.32 4.37 4.43 4.48 4.54 4.59 4.65 4.70 4.76 4.78 4.80 4.81 4.83 4.85 4.86
59 4.33 4.38 4.43 4.49 4.55 4.60 4.66 4.72 4.78 4.83 4.86 4.88 4.90 4.92 4.93
- -----------------------------------------------------------------------------------------------------------------------
60 4.33 4.38 4.44 4.50 4.56 4.62 4.68 4.74 4.80 4.86 4.92 4.94 4.96 4.98 5.00
61 4.33 4.39 4.45 4.51 4.57 4.63 4.69 4.75 4.81 4.88 4.94 5.00 5.03 5.05 5.08
62 4.34 4.40 4.45 4.51 4.57 4.64 4.70 4.77 4.83 4.90 4.96 5.03 5.10 5.12 5.15
63 4.34 4.40 4.46 4.52 4.58 4.65 4.71 4.78 4.85 4.92 4.98 5.05 5.12 5.19 5.22
64 4.35 4.41 4.47 4.53 4.59 4.66 4.72 4.79 4.86 4.93 5.00 5.08 5.15 5.22 5.30
- -----------------------------------------------------------------------------------------------------------------------
65 4.35 4.41 4.47 4.53 4.60 4.67 4.73 4.80 4.88 4.95 5.02 5.10 5.18 5.25 5.33
66 4.36 4.42 4.48 4.54 4.61 4.67 4.74 4.81 4.89 4.96 5.04 5.12 5.20 5.28 5.36
67 4.37 4.42 4.49 4.55 4.62 4.68 4.75 4.83 4.90 4.98 5.06 5.14 5.22 5.31 5.39
68 4.37 4.43 4.49 4.56 4.62 4.69 4.76 4.84 4.91 4.99 5.07 5.16 5.24 5.33 5.42
69 4.38 4.44 4.50 4.56 4.63 4.70 4.77 4.85 4.92 5.00 5.09 5.17 5.26 5.35 5.44
- -----------------------------------------------------------------------------------------------------------------------
70 4.38 4.44 4.51 4.57 4.64 4.71 4.78 4.86 4.93 5.02 5.10 5.19 5.28 5.37 5.47
71 4.39 4.45 4.51 4.58 4.65 4.72 4.79 4.87 4.94 5.03 5.11 5.20 5.29 5.39 5.49
72 4.39 4.45 4.52 4.58 4.65 4.72 4.80 4.87 4.95 5.04 5.12 5.21 5.31 5.40 5.51
73 4.40 4.46 4.52 4.59 4.66 4.73 4.81 4.88 4.96 5.05 5.14 5.23 5.32 5.42 5.52
74 4.41 4.47 4.53 4.60 4.67 4.74 4.81 4.89 4.97 5.06 5.15 5.24 5.34 5.44 5.54
- -----------------------------------------------------------------------------------------------------------------------
75 4.41 4.47 4.54 4.60 4.67 4.75 4.82 4.90 4.98 5.07 5.16 5.25 5.35 5.45 5.56
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION B-MONTHLY INSTALLMENTS-JOINT AND EQUAL TO SECONDARY PAYEE
- ---------------------------------------------------------
AGE OF PRIMARY
PAYEE **
- ---------------------------------------------------------
65 66 67 68 69 70
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.35 $4.36 $4.37 $4.37 $4.38 $4.38
51 4.41 4.42 4.42 4.43 4.44 4.44
52 4.47 4.48 4.49 4.49 4.50 4.51
53 4.53 4.54 4.55 4.56 4.56 4.57
54 4.60 4.61 4.62 4.62 4.63 4.64
- ---------------------------------------------------------
55 4.67 4.67 4.68 4.69 4.70 4.71
56 4.73 4.74 4.75 4.76 4.77 4.78
57 4.80 4.81 4.83 4.84 4.85 4.86
58 4.88 4.89 4.90 4.91 4.92 4.93
59 4.95 4.96 4.98 4.99 5.00 5.02
- ---------------------------------------------------------
60 5.02 5.04 5.06 5.07 5.09 5.10
61 5.10 5.12 5.14 5.16 5.17 5.19
62 5.18 5.20 5.22 5.24 5.26 5.28
63 5.25 5.28 5.31 5.33 5.35 5.37
64 5.33 5.36 5.39 5.42 5.44 5.47
- ---------------------------------------------------------
65 5.41 5.45 5.48 5.51 5.54 5.56
66 5.45 5.53 5.57 5.60 5.64 5.67
67 5.48 5.57 5.66 5.70 5.73 5.77
68 5.51 5.60 5.70 5.79 5.83 5.87
69 5.54 5.64 5.73 5.83 5.94 5.98
- ---------------------------------------------------------
70 5.56 5.67 5.77 5.87 5.98 6.09
71 5.59 5.69 5.80 5.91 6.03 6.14
72 5.61 5.72 5.83 5.95 6.07 6.19
73 5.63 5.74 5.86 5.98 6.10 6.23
74 5.65 5.77 5.88 6.01 6.14 6.27
- ---------------------------------------------------------
75 5.67 5.79 5.91 6.04 6.17 6.31
- ---------------------------------------------------------
</TABLE>
** FOR ADDITIONAL AGE COMBINATIONS, THE PROPER RATES WILL BE PROVIDED UPON
REQUEST TO THE HOME OFFICE.
00714 7.05
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES-CONTINUED
FOR EACH $1,000
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
OPTION C-MONTHLY INSTALLMENTS CERTAIN AND LIFE THEREAFTER
- ---------------------------------------------------------------------------------------------------------------------------
MONTHLY INSTALLMENTS MONTHLY INSTALLMENTS MONTHLY INSTALLMENTS
AGE OF PAYEE -------------------------- AGE OF PAYEE -------------------------- AGE OF PAYEE ---------------------------
NUMBER OF YEARS CERTAIN NUMBER OF YEARS CERTAIN NUMBER OF YEARS CERTAIN
- ---------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20 5 10 15 20
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
15 $3.58 $3.58 $3.58 $3.57 40 $4.16 $4.15 $4.14 $4.11 65 $ 6.14 $5.96 $5.69 $5.36
16 3.59 3.59 3.59 3.58 41 4.20 4.19 4.18 4.15 66 6.28 6.08 5.78 5.42
17 3.61 3.60 3.60 3.60 42 4.25 4.24 4.22 4.18 67 6.43 6.21 5.87 5.48
18 3.62 3.62 3.61 3.61 43 4.29 4.28 4.26 4.22 68 6.59 6.34 5.97 5.53
19 3.63 3.63 3.63 3.62 44 4.34 4.33 4.30 4.26 69 6.77 6.48 6.06 5.58
- ---------------------------------------------------------------------------------------------------------------------------------
20 3.65 3.65 3.64 3.64 45 4.39 4.38 4.35 4.30 70 6.95 6.62 6.16 5.64
21 3.66 3.66 3.66 3.65 46 4.45 4.43 4.40 4.34 71 7.14 6.77 6.25 5.69
22 3.68 3.68 3.68 3.67 47 4.50 4.48 4.44 4.39 72 7.35 6.93 6.35 5.73
23 3.70 3.70 3.69 3.69 48 4.56 4.54 4.50 4.43 73 7.57 7.09 6.44 5.77
24 3.72 3.71 3.71 3.70 49 4.63 4.60 4.55 4.48 74 7.81 7.26 6.54 5.81
- ---------------------------------------------------------------------------------------------------------------------------------
25 3.74 3.73 3.73 3.72 50 4.69 4.66 4.60 4.53 75 8.05 7.43 6.63 5.85
26 3.76 3.75 3.75 3.74 51 4.76 4.72 4.66 4.57 76 8.32 7.60 6.72 5.88
27 3.78 3.77 3.77 3.76 52 4.83 4.79 4.72 4.62 77 8.60 7.78 6.80 5.91
28 3.80 3.79 3.79 3.78 53 4.91 4.86 4.78 4.67 78 8.90 7.96 6.88 5.93
29 3.82 3.82 3.81 3.80 54 4.98 4.93 4.84 4.73 79 9.21 8.14 6.95 5.95
- ---------------------------------------------------------------------------------------------------------------------------------
30 3.84 3.84 3.84 3.83 55 5.07 5.01 4.91 4.78 80 9.55 8.32 7.02 5.96
31 3.87 3.87 3.86 3.85 56 5.15 5.08 4.98 4.84 81 9.90 8.50 7.08 5.98
32 3.90 3.89 3.89 3.88 57 5.24 5.17 5.05 4.89 82 10.27 8.67 7.13 5.98
33 3.92 3.92 3.91 3.90 58 5.33 5.25 5.12 4.95 83 10.66 8.84 7.18 5.99
34 3.95 3.95 3.94 3.93 59 5.43 5.34 5.19 5.01 84 11.06 9.01 7.22 5.99
- ---------------------------------------------------------------------------------------------------------------------------------
35 3.98 3.98 3.97 3.96 60 5.54 5.43 5.27 5.06 85 & 11.48 9.16 7.25 6.00
36 4.02 4.01 4.00 3.98 61 5.64 5.53 5.35 5.12 OVER
37 4.05 4.04 4.03 4.02 62 5.76 5.63 5.43 5.18
38 4.09 4.08 4.07 4.05 63 5.88 5.73 5.51 5.24
39 4.12 4.12 4.10 4.08 64 6.00 5.84 5.60 5.30
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------- -----------------------
OPTION F
OPTION D-MONTHLY INSTALLMENTS-CASH REFUND INSTALLMENTS
CERTAIN
- -------------------------------------------------------------------------------------------- -----------------------
MONTHLY MONTHLY MONTHLY YEARS MONTHLY
AGE OF PAYEE INSTALLMENTS AGE OF PAYEE INSTALLMENTS AGE OF PAYEE INSTALLMENTS CERTAIN INSTALLMENTS
- -------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 $3.57 45 $4.28 75 $6.71 1 $84.83
16 3.58 46 4.32 76 6.85 2 43.25
17 3.59 47 4.36 77 7.02 3 29.39
18 3.60 48 4.40 78 7.17 4 22.47
19 3.62 49 4.45 79 7.34 5 18.32
- -------------------------------------------------------------------------------------------- -----------------------
20 3.63 50 4.50 80 7.51 6 15.56
21 3.65 51 4.55 81 7.70 7 13.59
22 3.66 52 4.60 82 7.87 8 12.11
23 3.68 53 4.65 83 8.06 9 10.97
24 3.69 54 4.71 84 8.25 10 10.06
- -------------------------------------------------------------------------------------------- -----------------------
25 3.71 55 4.77 85 & 8.46 11 9.31
26 3.73 56 4.83 OVER 12 8.69
27 3.75 57 4.89 13 8.17
28 3.77 58 4.96 14 7.72
29 3.79 59 5.03 15 7.34
- -------------------------------------------------------------------------------------------- -----------------------
30 3.81 60 5.10 16 7.00
31 3.84 61 5.18 17 6.70
32 3.86 62 5.26 18 6.44
33 3.89 63 5.34 19 6.21
34 3.91 64 5.43 20 6.00
- -------------------------------------------------------------------------------------------- -----------------------
35 3.94 65 5.52 21 5.81
36 3.97 66 5.62 22 5.64
37 4.00 67 5.72 23 5.49
38 4.03 68 5.82 24 5.35
39 4.06 69 5.93 25 5.22
- -------------------------------------------------------------------------------------------- -----------------------
40 4.09 70 6.05 26 5.10
41 4.12 71 6.17 27 4.99
42 4.16 72 6.30 28 4.89
43 4.20 73 6.43 29 4.80
44 4.24 74 6.57 30 4.72
</TABLE>
00714 7.06
(4/88)
<PAGE>
ACCIDENTAL DEATH BENEFIT RIDER
If we have approved this rider as a part of this policy and the rider premium
has been paid, this rider will become a part of the policy. This rider is
subject to all applicable terms and provisions of the policy. The Policy
Specifications page or, if this rider is added after issue, the request for
policy change shows the rider amount, premium, and premium period.
Accidental Death Benefit
This benefit is subject to the restrictions and provisions of this rider. We
will pay the amount of this benefit as part of the policy proceeds. We must
however receive due proof that the death of the insured:
1. Occurred while this rider is in force; and
2. Occurred before the policy anniversary nearest age 70 of the insured; and
3. Occurred within 120 days from the date of an accidental injury; and
4. Resulted directly from accidental injury and independently of all other
causes. There must be visible evidence of a contusion or wound on the
exterior of the body. If the injury is internal, it must be visibly
manifested on an autopsy. The exception to visible evidence would be in the
case of drowning.
Risks Not Assumed
We will not pay this benefit if the insured's death results directly or
indirectly from any of the following (nor will we pay this benefit if the
insured's death was caused by or contributed to by any of these conditions):
1. Self-inflicted injury while sane or insane.
2. Any reasonably foreseeable injury.
3. Any bodily or mental infirmity or disease existing before or which commences
after the accidental injury.
4. Any medical or surgical treatment, unless such treatment is the result of a
covered accidental injury.
5. Any infection, other than a bacterial infection which occurs as a result of
a covered accidental injury.
6. The entry into the body, in any manner, whether voluntary or involuntary of
any of the following unless taken as prescribed by a licensed physician:
a. any intoxicant, excitant, hallucinogen; or
b. any other narcotic, drug or controlled substance.
7. The entry into the body, in any manner, whether voluntary or involuntary of
any of the following, unless involuntary in the course of employment:
a. any gas; or
b. any poison or poisonous substance.
8. Participation in an assault.
9. Participation in a felony.
10. Participation in a riot.
11. Injury which is a result of war or any act of war while the insured is in
the military, naval, or air forces of any country. Injury while in any
auxiliary or civilian combatant or non-combatant unit. "Any country"
includes any international organization or the combination of countries at
war. "War" includes undeclared war.
12. Travel or flight in or on or descent from any kind of aircraft if the
insured is a pilot, officer, or other member of the crew of the aircraft; or
is giving or receiving any kind of training or instruction; or has any
duties aboard the aircraft; or is being flown for the purpose of any descent
from the aircraft. "Aircraft" includes rocket craft or any other vehicle,
conveyance or device designed for travel or other movement in or beyond the
earth's atmosphere.
3082600 ADB 1
(7/85)
<PAGE>
Termination
You may terminate this rider as of any monthly anniversary following a proper
written request. If this rider is not already terminated it will terminate on
the date when any of the following events first occurs:
1. The policy anniversary nearest age 70 of the insured; or
2. The lapse of the policy; or
3. The surrender of the policy; or
4. The maturity of the policy; or
5. The date of death of the insured.
Cost of Insurance
The cost of insurance for the accidental death benefit is determined on a
monthly basis. The cost of insurance for a policy month is calculated as (a)
multiplied by (b), where:
a. is the cost of insurance rate for this benefit; and
b. is the amount of accidental death benefit.
The cost of insurance rate for this benefit is based on the attained age and
rate class of the insured. Cost of insurance rates will be determined by us
based on expectations as to future experience. However, these rates will not
exceed those shown in the Guaranteed Cost of Insurance Rates for Accidental
Death Benefit Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deduction as defined in
the Cash Values section of the basic policy. This increased monthly deduction
will be used to determine the cash value of the policy on such monthly
anniversary.
General Provisions
We will have the right to examine the body of the insured. We also will have the
right to require an autopsy where not forbidden by law.
This rider will not affect the guaranteed values, loan values, nor other values
of the policy, if any. This rider does not apply to any insurance provided by
any guaranteed value options of the policy.
You may apply for reinstatement of the base policy with or without this rider.
We have the right to decide whether to approve the reinstatement of the base
policy with or without this rider.
Incontestability
This rider will be incontestable after it has been in force during the life of
the insured for two years from its date of issue.
The date of issue and effective date of this rider and the policy are the same
unless another date is shown below.
___________________
DATE
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
[LOGO]
3082600 ADB 2
(7/85)
<PAGE>
CHILDREN'S LIFE INSURANCE RIDER
TERM INSURANCE INVOLVED
Please Read This Rider Carefully
The waiting periods in the suicide and incontestability provisions are different
from those in the certificate and begin on the effective date of this rider.
If we have approved this rider as a part of this certificate and the rider
premium has been paid, this rider will become a part of the certificate. This
rider is subject to all applicable terms and provisions of the certificate;
except as modified herein. The certificate specifications page or, if this
rider is added after issue, the request for policy change shows the rider
amount, premium, and premium period.
Level Term Life Insurance Benefit
We will pay the amount specified below to the Beneficiary under this rider upon
the death of the insured child while this rider is in force. We must receive
proof that the death occurred before the expiry date of coverage on such insured
child.
Amount of Insurance
The amount of insurance for this rider on each insured child is the rider
amount. Insurance on each child will become effective on the later of:
1. The date the child attains the age of 15 days; or
2. The day the child is first discharged from the hospital after birth.
Definition of Insured
The Insured is the person whose life is covered under the certificate to which
this rider is attached.
Definition of Insured Child
An insured child is a child who, at the time of application for this rider, was:
1. A natural child, a stepchild or a child legally adopted of the Insured; and
2. Unmarried; and
3. Living in the household of the Insured; and
4. At least 15 days of age; and
5. Initially discharged from the hospital after birth; and
6. Less than insuring age 19 (or age 22 if a full-time student in higher
education beyond high school) on the first date of any part of the
application.
A natural child, a stepchild or an adopted child named at the time of the
application but who has not yet reached age 15 days will become an insured child
when:
1. The child does reach 15 days; and
2. The day the child is first released from the hospital after birth.
A child who is born to the Insured after the application for this rider, and
while this rider is in force, shall become an insured child on the later of the
following dates:
1. The day the child attains age 15 days; or
2. The day the child is first released from the hospital after birth.
A child who is legally adopted by the Insured after the application for this
rider, and while this rider is in force, can become an insured child. This child
must be under insuring age 19 (or age 22 if a full-time student in higher
education beyond high school). If these requirements are met the coverage for
this child will begin on the date of adoption.
Expiry Dates of Insurance
The expiry date of this rider is the certificate anniversary nearest the 65th
birthday of the Insured.
If this rider has not already expired or been canceled, then insurance on each
insured child will expire on the certificate anniversary nearest the 25th
birthday of each child, if earlier.
<PAGE>
Paid-Up Term Insurance in Event of Death Of Insured
If the death of the Insured occurs while this rider is in force, it will be
continued on a fully paid-up term insurance basis. We must receive proof of the
death of the Insured. This term insurance will be subject to the terms of this
rider.
Any child who would have become an insured child later, except for such death,
will become an insured child under this rider.
Owner
During the lifetime of the Insured, you will be the owner of this rider. If you
should die while the Insured is living, all rights of the owner will go to the
Insured. If you should die while insurance on the life of an insured child is
still in force and the insured is not living, then all rights of owner will go
to the insured child.
The Beneficiary
The Beneficiary of this benefit shall be:
The Insured, if living; if not then the estate of the person upon whose death
payment is to be made; unless:
1. Otherwise provided in the application; or
2. Changed by you.
You may change the Beneficiary designation of the insurance on the life of any
insured child under this rider. This change must be done during the lifetime of
such insured child. To make such a change you must file a proper written request
with us. This request must be accepted by us at our Home Office. We have the
right to request the policy for endorsement. If we accept your request, the
change will take effect as of the date of the request. This change will be
subject to any payment or action we took before we received your written request
for the change.
The Beneficiary designation and any changes made will be subject to any
assignment of the policy.
Assignment
This rider cannot be assigned by itself. Only if the policy is assigned will
this rider then be subject to an assignment. An assignment of the policy will
include the interest of the assignor in and to this rider. The interest of the
Insured and all owners and beneficiaries under this rider will also be included.
Suicide Exclusion
If the insured child dies by suicide, while sane or insane, within two years
from the issue date of this rider; (or within the maximum period permitted by
laws of the state in which this policy was delivered, if less than two years),
the amount payable will be limited to the amount of monthly deductions made on
this rider. This amount will be paid according to the provisions of this rider
for the payment of death claim benefits on any such person.
This provision does not apply if the policy this rider is attached to is issued
to a Missouri citizen, unless the insured child intended suicide when this rider
was applied for.
Within 31 days after the death of the Insured by suicide the Conversion
Privilege of this rider will be available for each insured child. We must
receive a proper written application within this 31 days. The date of issue of
the new policy will be the date of exchange.
Incorrect Age
The date that coverage under this rider expires or terminates will be based on
the correct age of each person insured.
Conversion Privilege
The term insurance on the life of each insured child under this rider may be
exchanged for a policy. This exchange will be without evidence of insurability.
The new policy may be for a plan then offered by us. This exchange is subject to
the following provisions:
1. The term insurance must be in force.
2. We must receive a proper written application within 31 days before the date
term insurance is to expire.
3. The face amount of the new policy will be the number of years the insured
child is covered under the rider to a maximum of five times the amount of
insurance under this rider for an insured child.
<PAGE>
4. The plan will be subject to our regular issue limits on the date of issue of
the policy.
The first premium payment for the new policy must be made at the time of
application. Future premiums are to be paid according to the terms of the new
policy.
The date of issue for the new policy will be the date the term insurance under
this rider expires on the life of the person to be insured by the new policy.
That person will not be covered under the new policy until the term insurance
expires.
The premium rate for the new policy will be based on the following:
1. The age last birthday of the person to be insured on the date of issue of
new policy; and
2. The risk class of such person under this rider; and
3. The set of rates used by us on the date of issue of the new policy.
The new policy may include rider benefits only with our consent, subject to our
requirements.
Surrender of Paid-Up Term Insurance
You may surrender this rider for its cash value while it is continued as paid-up
term insurance due to the death of the Insured. If you surrender this rider
within 31 days after a policy anniversary date, the cash value of such insurance
will not be less than the cash value of such insurance on that anniversary.
The cash value of the paid-up term insurance is the net single premium for such
benefits at the Attained Age of the person insured, at the time of surrender. It
is computed on the basis of:
1. The Commissioner's 1980 Standard Ordinary Mortality Table C; and
2. Interest at the rate of 3 1/2% a year compounded annually; and
3. Continuous functions.
Information on the amount of this cash value will be furnished upon request.
Cost of Insurance
The cost of insurance for the Children's Insurance Rider is determined on a
monthly basis. The cost of insurance for a policy month is calculated as (a)
multiplied by (b), where:
a. is the cost of insurance rate for this rider; and
b. is the amount of insurance for this rider.
The cost of insurance rate for this benefit is based on the Attained Age of the
Insured. Cost of insurance rates will be determined by us based on expectations
as to future experience. However, these rates will not exceed those shown in the
Guaranteed Cost of Insurance Rates for Children's Insurance Rider.
Each Monthly Anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the Monthly Deductions as defined
in the Cash Values section of the policy. This increased monthly deduction will
be used to determine the cash value of the policy on such Monthly Anniversary.
Termination
You may terminate this rider as of any Monthly Anniversary following a written
request to us. We may require the policy and this rider for endorsement.
This rider will terminate when any of the following events first occurs:
1. The lapse of the policy; or
2. The surrender of the policy; or
3. The maturity of the policy; or
4. The rider expiry date.
<PAGE>
Reinstatement
This rider may be reinstated before the expiry date within five years after the
date of policy lapse if:
1. The policy is in force or is also being reinstated; and
2. We receive satisfactory proof that each person to be insured is insurable
by our standards.
We have the right to approve the reinstatement of the policy with or without
this rider. We will incur no liability for the death of an insured child who
died after the end of the grace period of the policy and before the date of
reinstatement.
Incontestability
This rider will be incontestable after it has been in force during the life of
each person insured for two years from its date of issue.
The Policy Date and effective date of this rider and the policy are the same
unless another effective date of this rider is shown below.
____________________
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
3083000 4
(1/95)
<PAGE>
SPOUSE INSURANCE RIDER
If we have approved this rider as a part of this certificate and the rider
premium has been paid, it will become a part of the certificate. It is subject
to all applicable terms and provisions of the certificate. The certificate
specifications page shows the rider amount, premium mode, annual premium and
Name of Spouse.
Life Insurance Benefit
We will pay the amount of this rider to the beneficiary upon the death of the
spouse while this rider is in force. We must receive proof that the death
occurred before the expiry date of coverage on such insured.
Definition of Spouse
The spouse is the person as designated on the certificate specifications page.
Definition of Insured
The person whose life is insured under the certificate to which this rider is
attached.
Expiry Date of Insurance
The expiry date of this rider is the first occurrence of the certificate
anniversary nearest:
a. the 75th birthday of the spouse; or
b. the 75th birthday of the insured.
The Beneficiary
The beneficiary of this benefit will be as stated in the application for this
rider. You may change the beneficiary designation of the insurance on the life
of any person insured under this rider. This change must be done during the
lifetime of such person . To make such a change you must file a proper written
request with us. This request must be accepted by us at our Home Office. We have
the right to request the certificate for endorsement. If we accept your request,
the change will take effect as of the date of the request. This change will be
subject to any payment or action we took before we received your written request
for the change. The beneficiary designation and any changes made will be subject
to any assignment of the certificate.
Assignment
This rider cannot be assigned by itself. Only if the certificate is assigned
will this rider then be subject to an assignment. An assignment of the
certificate will include the interest of the assignor in and to this rider. The
interest of the insured and all owners and beneficiaries under this rider will
also be included.
Suicide Exclusion
If the spouse dies by suicide, while sane or insane, within two years from the
rider issue date; (or within the maximum period permitted by laws of the state
in which this certificate was delivered, if less than two years) the amount
payable will be limited to the monthly deductions made on this rider. This
amount will be paid according to the provisions of this rider for the payment of
death claim benefit on any such person. This provision does not apply if this
rider is issued to a Missouri citizen, unless the spouse intended suicide when
this rider was applied for.
Misstatement of Age
If the age of the spouse is incorrectly stated, we will adjust all benefits
under this rider to the amount that would have been provided at the correct age.
Cost of Insurance
The cost of insurance for the spouse rider is determined on a monthly basis.
This cost, for a certificate month, is determined by the amount of insurance for
this rider divided by 1000 and then multiplied by the sum of the following at
the spouse attained age.
a. the monthly cost of insurance rate for this rider; and
b. the monthly expense charge, as described in the
certificate.
3082800 SR 1
(7/85)
<PAGE>
The cost of insurance rate for this benefit is based on the attained age, and
rate class of the spouse. Cost of insurance rates will be determined by us based
on expectations as to future experience. However, these rates will not exceed
those shown in Table of Guaranteed Cost of Insurance Rates for the Spouse Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deductions as defined
in the Cash Values section of the certificate. This increased monthly deduction
will be used to determine the cash value of the certificate on such monthly
anniversary.
Termination
You may terminate this rider as of any monthly anniversary following a written
request to us. We may require the certificate and the rider for endorsement.
This rider will terminate when any of the following events first occurs:
1. The lapse of the certificate; or
2. The surrender of the certificate; or
3. The maturity of the certificate; or
4. The date of death of the insured; or
5. The rider expiry date.
Reinstatement
This rider may be reinstated before its expiry date within five years after the
date of certificate lapse if:
1. The certificate is in force or is also being reinstated; and
2. We receive satisfactory proof that the spouse is insurable by our
standards.
We have the right to approve the reinstatement of the certificate with or
without this rider.
Incontestability
This rider will be incontestable after it has been in force during the life of
the spouse for two years from its date of issue.
Limited Continuation and Exchange Privilege Upon Death of Insured
If the insured dies while this rider is in force prior to the certificate
anniversary nearest the 65th birthday of the spouse, there will be a limited
continuation and exchange privilege for 60 days. The face amount of this rider
will remain in effect without further charge until the 60 days expire. At the
expiration of the 60 days this rider may be exchanged for a new policy on the
life of the spouse for a plan then offered by us. The face amount of the new
policy may not be greater than the face amount of this rider. The risk class of
the spouse under the new policy will be the same as that under this rider. No
riders may be attached to the new policy without our consent.
The certificate date and effective date of this rider and the certificate are
the same unless another date is shown below.
- ----------------
DATE
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
[PARAGON LOGO]
3082800 SR 2
(7/86)
<PAGE>
WAIVER OF MONTHLY DEDUCTION RIDER
If we have approved this rider as a part of this policy and the rider premium
has been paid, this rider will become a part of the policy. This rider is
subject to all applicable terms and provisions of the policy. The Policy
Specifications page or. if this rider is added after issue, the request for
policy change shows the rider amount, premium, and premium period.
Waiver of Monthly Deduction
If you furnish us with due written proof that the insured is totally disabled,
as defined in this rider, we will waive monthly deduction payments on this
policy. The insured must have become disabled before age 65. The disability must
have continued without interruption for at least six months. This rider must be
in force. Monthly deductions on this policy will be waived as follows:
Disability Beginning Before Age 60. If the insured's disability begins before
age 60, we will waive monthly deductions which were due during the six months of
uninterrupted disability. We will continue to waive monthly deductions after
that. However, the insured must continue to be totally disabled. Disability
Beginning Between Ages 60 and 65. If the insured's disability begins on or after
age 60 but before age 65, we will waive monthly deductions which were due during
the six months of uninterrupted disability. We will continue to waive monthly
deductions after that, but no later than age 65. However, the insured must
continue to be totally disabled.
Total Disability
"Total Disability" means the complete inability of the insured to perform all of
the substantial and material duties of his regular occupation. Such disability
must be the result of an injury or a sickness. The injury or sickness must
originate after this rider became effective.
However, after this period of disability has continued for 60 months, the
insured will be considered to be totally disabled only if he is unable to
perform all of the substantial and material duties of any occupation for which
he is reasonably fitted by education, training or experience. Such disability
must be the result of an injury or a sickness. If after this rider becomes
effective you suffer the total and irrecoverable loss of sight in both eyes, or
of the use of both hands or both feet, or of one hand and one foot, this will be
considered total disability as defined in this rider. On such a loss the insured
will still be considered disabled even though working at an occupation.
Recurrent Total Disability
If, while this policy is in force, the insured becomes disabled again after
having been totally disabled before, the new disability will be considered a
continuation of the previous period unless:
1. It is due to an entirely different cause; or
2. The insured has performed the material and substantial duties of a gainful
occupation. These duties must be performed for a continuous period of 6
months or more between such periods of total disability.
Risks Not Assumed
We will not waive monthly deductions under this rider if disability results from
war or any act of war while the insured is in the military, naval or air forces
of any country at war. We will also not waive monthly deductions if the insured
becomes disabled while in a civilian non-combatant unit serving with such
forces. "War" includes undeclared war and "any country" includes any
international organization or combination of countries.
Termination
You may terminate this rider as of any monthly anniversary following a proper
written request. If this rider is not already terminated it will terminate on
the date any, of the following events first occurs:
1. When the insured attains age 65. This will be without prejudice to any
benefits granted for total disability occurring before age 65, or
1
3082000 WMD
(7/85)
<PAGE>
2. The lapse for the policy: or
3. The surrender of the policy; or
4. The maturity of the policy; or
5. The date of death of the insured.
Notice of Claim and Proof of Disability
Before we waive any monthly deduction, we must receive at our Home Office:
1. Written notice of claim for this benefit during the lifetime of the
insured-This notice must be submitted during the continuance of total
disability,. This notice cannot be submitted later than six months after
age 65 of the insured.
2. Written proof of total disability within six months after we receive
written notice of claim. In no event shall this proof be submitted later
than the date when any of the following events first occurs:
a. One year after age 65 of the insured;
b. Prior maturity of the policy,
c. Surrender of the policy for its net cash value;
d. One year from the due date of the first unpaid monthly deduction.
Failure to give such notice and proof within the time allowed will not
always invalidate a claim. We will consider the claim if you show us
that it was not reasonably possible to file notice and proof in time.
However, you must file notice and proof as soon as is reasonably
possible. In no event will any monthly deduction be waived or refunded
if its due date was more than one year before we received notice of
claim at our Home Office. We will require no further proof of
disability and we will automatically waive all further monthly
deductions if:
1. The insured is totally disabled at age 65, and
2. All monthly deductions for at least the five years
preceding age 65 have been waived.
Examination of the Insured
We have the right to have the insured examined by our appointed examiner. We
also have the right to receive written proof of continuance of disability from
the insured at the following times:
1. After receipt of such notice of claim;
2. At any time within two years after we receive proof of
total disability;
3. Not more than once each year after the first two years. We will riot waive
any further monthly deductions if the insured refuses to be medically
examined. Nor will we waive further monthly deductions if proof of
continuance of disability is not furnished when we request it.
Incontestability
We cannot contest this rider as to statements made in the application for the
policy after a period of two years from the date of issue if:
1. This rider shall have been in force during the lifetime of the insured, and
2. The insured does not become totally disabled within this period.
3082000 WMD 2
<PAGE>
Cost of Insurance
The cost insurance for the Waiver of Monthly Deductions Rider is determined on a
monthly basis. The cost of insurance for a policy month is calculated as (a)
multiplied by (b) where:
a. is the cost of insurance rate for this rider: and
b. is the sum of items i, ii, and iii where:
i. is the cost of insurance for the basic policy for the policy month.
ii. is the monthly expense charge, when applicable
iii. is any cost of insurance for the policy month for any benefit provided
by a supplemental rider (other than Waiver of Monthly Deduction Rider)
made a part of the basic policy.
The cost of insurance rate for this benefit is based on the attained age, and
rate class of the insured. Cost of insurance rates will be determined by us
based on expectations as to future experience. However, these rates will not
exceed those shown in the Guaranteed Cost of Insurance Rates for Waiver of
Monthly Deductions Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deduction as defined in
the Cash Values section of the basic policy. This increased monthly deduction
will be used to determine the cash value of the policy on such monthly
anniversary.
General Provisions
We will pay all benefits payable under the policy the same as if monthly
deductions had not been waived.
If the insured becomes disabled during the grace period of the first monthly
deduction in default, we will allow this Waiver of monthly deduction as if
default had not occurred. However, you will be liable for the monthly deduction
in default. Interest compounded at 60/0 per year will be charged on this monthly
deduction.
You may apply for reinstatement of this policy with or without this rider. We
have the right to decide whether to approve the reinstatement of this police,
with or without this rider.
Date of Issue
The date of issue of the rider is the same as the date of issue of this policy
unless another date of issue is shown below.
- ---------------
DATE
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL
AND SECRETARY PRESIDENT
[PARAGON LOGO]
3082000 WMD 3
(7/85)
<PAGE>
Accelerated Death Benefit Settlement Option Rider
Please Read This Rider Carefully.
Subject to all the provisions of this rider and of the rest of the
policy/certificate, we will make the payments described below if the insured is
terminally ill or is confined to a nursing home.
This rider is non-participating.
Exercising these options may not qualify the benefits as life insurance proceeds
for tax purposes. Therefore, assistance should be sought from a personal tax
advisor.
Available Proceeds
The proceeds we would otherwise pay under the policy/certificate at the death of
the Insured on the date this option is elected, less any indebtedness and any
term insurance that comes from supplementary benefits (except level term
insurance riders still in the conversion period and for which we charge a
premium).
Benefit Factor
This is a fixed multiple that will be applied to the Settlement Benefit for each
option.
Settlement Benefit
This is the lump sum benefit available with an option. The benefit will equal
the cash surrender value of the policy/certificate on the date this option is
elected plus the Benefit Factor for the option times (a) minus (b); where (a) is
the Available Proceeds and (b) is the cash surrender value of the
policy/certificate.
Eligible Nursing Home
An institution or special nursing unit of a hospital that meets at least one of
the following requirements:
1. It is Medicare approved as a provider of skilled nursing care services; or
2. It is licensed as a skilled nursing home or as an intermediate care facility
by the state in which it is located; or
3. It meets all the requirements listed below:
a. It is licensed as a nursing home by the state in which it is located;
and
b. Its main function is to provide skilled, intermediate, or custodial
nursing care; and
c. It is engaged in providing continuous room and board accommodations to
three or more persons; and
d. It is under the supervision of a registered nurse (RN) or licensed
practical nurse (LPN); and
e. It maintains a daily medical record of each patient; and
f. It maintains control and records for all medications dispensed.
Institutions which primarily provide residential facilities are not eligible
nursing homes.
Terminal Illness Option
To choose this option, you must give us evidence that satisfies us that a
medical condition exists that would result in the lnsured's life expectancy to
be 12 months or less. Part of that evidence must be a certification by a
licensed physician.
The Benefit Factor for this option is 0.85.
Nursing Home Option
You may choose this option if: (1) the Insured is confined to an Eligible
Nursing Home and has been confined there continuously for all of the preceding
six months; and (2) you give us evidence that satisfies us that the Insured is
expected to stay in the nursing home until death. Part of that evidence must be
a certification by a licensed physician.
The Benefit Factor for this option is 0.70.
3081100
(7/91)
<PAGE>
Effect on Policy/Certificate
This option is a complete settlement of the Company's obligation under the
policy/certificate causing all benefits under the policy/certificate based on
the lnsured's life to end. Any insurance under the policy/certificate on the
life of someone other than the Insured will stay in effect; we will waive all
future premiums for that insurance or convert it according to its terms as
though the lnsured's death had occurred.
Conditions
Your right to be paid under one of these options is subject to the following
conditions:
1. The policy/certificate must be in force other than as extended term
insurance.
2. You must choose the option in writing in a form that meets our needs.
3. The policy/certificate must not be assigned except to us as security for a
loan.
4. You must send us the policy/certificate.
5. The main purpose of a life insurance death benefit is to meet your estate
planning needs. This benefit provides for the accelerated payment of life
insurance proceeds. It is not meant to cause you to involuntarily invade
proceeds ultimately payable to the named beneficiary. Accelerated death
benefits will be made available to you on a voluntary basis only. Therefore:
a. If you are required by law to use this option to meet the claims of
creditors, whether in bankruptcy or otherwise, you are not eligible for
this benefit.
b. If you are required by a government agency to use this option in order
to apply for, obtain, or keep a government benefit or entitlement, you
are not eligible for this benefit.
Right to Cancel
If you ask us in writing and send us the policy/certificate, we will cancel his
rider.
Rider attached to and made a part of the policy/certificate on the Date of
Issue.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
------------------------------- --------------------------------
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[PARAGON LIFE INSURANCE COMPANY LOGO]
3081100
(7/91)
<PAGE>
Exhibit 6
PROPOSED FORM OF CERTIFICATE AND CERTIFICATE RIDERS
<PAGE>
** DATA PAGE **
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE UNDER THE CONDITIONS DESCRIBED ON PAGES 3.02 AND 3.03.
THE CERTIFICATE'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 provisions on the pages which follow are a part of this certificate. This
contains a summary of the terms of the Group Contract which is the contract
between the Contract holder and Paragon Life Insurance Company. This certificate
is evidence of life insurance under the Group Contract and is subject to all of
the terms and limits of the Group Contract and any amendments thereto. PLEASE
READ YOUR CERTIFICATE CAREFULLY.
ISSUED BY: PARAGON LIFE INSURANCE CO.
A STOCK COMPANY
100 SOUTH BRENTWOOD
ST. LOUIS, MISSOURI 63105
(314) 862-2211
CERTIFICATE NUMBER:
INSURED:
RIGHT TO EXAMINE
CERTIFICATE
Please read this certificate. You may return this certificate 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 certificate will be void from the
beginning. We will refund any premium paid.
FLEXIBLE PREMIUM
VARIABLE LIFE
INSURANCE TO AGE 95
Flexible Premiums are payable during the lifetime of the insured to age 95. The
death benefit is payable at the death of the insured prior to age 95 and while
the certificate is in force. Cash surrender value, if any, is payable at the
insured's age 95.
<PAGE>
ALPHABETIC GUIDE TO YOUR CONTRACT
Page
6.04 Addition, Deletion or Substitution of Investments
3.04 Allocation of Net Premiums
6.01 Assignments
4.05 Basis of Computation
6.01 Beneficiary
4.03 Cash Surrender Value
4.01 Cash Values
3.03 Certificate Changes
3.01 Certificate Date
3.03 Change in Contract Type
3.03 Change in Face Amount
6.01 Change of Owner or Beneficiary
6.02 Claims of Creditors
6.01 Conformity with Statutes
6.02 Conversion Rights
3.02 Death Benefit
3.01 Definitions
6.02 Eligibility Change Conversion Privilege
3.04 Grace Period
6.03 Incontestability
7.01 Interest on Proceeds
4.03 Loan Account Cash Value
4.01 Loans
3.01 Maturity Date
6.03 Misstatement of Age and Corrections
4.03 Monthly Cost of Insurance
4.03 Monthly Deduction
4.02 Net Investment Factor
3.04 Net Premium
6.01 Owner
4.04 Partial Withdrawals
7.01 Payment of Benefits
3.04 Payment of Premiums
4.05 Postponement of Payments
3.02 Proceeds
3.05 Reinstatement
6.02 Right to Examine Increase in Face Amount
6.02 Right to Examine Certificate
4.02 Separate Account Cash Value
6.03 Separate Account Provisions
7.01 Settlement Options
6.02 Statements in Application
6.03 Suicide Exclusion
6.04 Transfers
Additional Benefit Riders, Modifications and Amendments, if any, and a Copy of
the Application are found following the final section.
30009 0.02
(4/88)
<PAGE>
CERTIFICATE SPECIFICATIONS
INSURED AGE <AGE> INSURED <INSURED>
SEX <SEX> FACE AMOUNT <FACEAMT>
CONTRACT TYPE <CONTTYPE> CERTIFICATE DATE <CERTDATE>
MINIMUM FACE AMOUNT <MINFACEAMT> CERTIFICATE NUMBER <CERTNUM>
NET PREMIUM PERCENTAGE <NETPREMPER> PLANNED ANNUAL PREMIUM <APREMIUM>
MONTHLY EXPENSE CHARGE <MOEXPCHG>
LOAN ACCOUNT GUARANTEED FIRST YEAR MONTHLY
INTEREST RATE <LAGIR> EXPENSE CHARGE <FYMEC>
FORM BENEFITS-AS SPECIFIED IN CERTIFICATE
NUMBER AND IN ANY RIDER
Certificate Plan: FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE TO AGE 95
<DOCSLIST[LOOPIN,1]>
30111 1.01
<PAGE>
CERTIFICATE SPECIFICATIONS
INSURED <INSURED>
CERTIFICATE DATE <CERTDATE>
CERTIFICATE NUMBER <CERTNUM>
COVERAGE RISK FACE MATURITY
CLASSIFICATION AMOUNT DATE*
<COVRG> <RISKCLASS> <FACEAMT> <MATDATE>
SEPARATE ACCOUNT: <SEPACCT>
INITIAL ALLOCATION OF NET PREMIUMS TO SEPARATE ACCOUNT
* It is possible that coverage will expire prior to the Maturity Date shown
where either no premiums are paid following payment of the initial premium
or subsequent premiums are insufficient to continue coverage to such a
date. If current values change, the planned periodic premium could be
insufficient to continue coverage to the maturity date.
30111 1.02
<PAGE>
CERTIFICATE SPECIFICATIONS
DESCRIPTION OF SEPARATE ACCOUNT A FUNDS
American Variable Insurance Series (the "Series") is an open-end diversified
management investment company which was incorporated in Massachusetts in 1983.
The Series offers seven separate funds which operate as distinct investment
vehicles. The names and investment objectives of the funds are as follows:
Cash Management Fund: The investment objective of this Fund is to seek high
current yield while preserving capital by investing in a diversified selection
of money market instruments.
High Yield Bond Fund: The investment objective of this Fund is to seek high
current income by investing primarily in intermediate and long-term corporate
obligations, with emphasis on higher yielding, higher risk, lower rated or
unrated securities.
Growth-Income Fund: The investment objective of this Fund is to seek growth of
capital and income by investing primarily in common stocks or other securities
with a view to appreciation and/or potential dividends.
Growth Fund: The investment objective of this Fund is to seek growth of capital
by investing primarily in common stocks or securities with common stock
characteristics, such as convertible preferred stocks, which demonstrate the
potential for appreciation.
U.S. Government/AAA-Rated Securities Fund: The investment objective of this Fund
is to seek a high level of current income consistent with prudent investment
risk and preservation of capital by investing primarily in a combination of
securities guaranteed by the U.S. Government and other debt securities rated AAA
or Aaa.
Asset Allocation Fund: The investment objective of this Fund is to seek total
return (including income and capital gains) and preservation of capital over the
long-term by investing in a diversified portfolio of securities that can include
common stocks and other equity-type securities (such as convertible bonds and
preferred stocks), bonds and other intermediate and long-term fixed-income
securities, and money market instruments (debt securities maturing in one year
or less).
International Fund: The investment objectives of this Fund is to seek long-term
growth of capital by investing primarily in securities of issuers domiciled
outside the United States. A major premise of the Fund's investment approach is
the belief that economic and political developments have helped create new
opportunities outside the U.S. In addition to investing directly in equity
securities, the Fund may invest in American Depository Receipts and European
Depository Receipts. When prevailing market, economic, political or currency
conditions warrant, the Fund may purchase fixed-income securities of issuers
domiciled outside the U.S. Under normal circumstances, the Fund will invest at
least 65% of its assets in equity securities of issuers domiciled outside the
U.S.
There can be no assurance that the investment objectives of these Funds, or any
other Funds that the Company may create, will be achieved.
30111 1.03
<PAGE>
SURRENDER CHARGE SCHEDULE
INSURED: (INSURED) CERTIFICATE #: (CERTNUM)
AMOUNT OF INSURANCE: (FACEAMT) CERTIFICATE DATE: (CERTDATE)
SURRENDER CHARGE FACTOR: (SURCHGFACTR) GUIDELINE ANNUAL PREMIUM: (APREMIUM)
CERTIFICATE SURRENDER
YEAR CHARGE PERCENTAGE
(SRRCHG[CTR,1]) (SRRCHG[CTR,2])
IF THIS AMOUNT OF INSURANCE IS FULLY SURRENDERED DURING THE TEN YEARS FOLLOWING
THE EFFECTIVE DATE, THE SURRENDER CHARGE IS THE APPROPRIATE PERCENTAGE SHOWN
ABOVE TIMES THE SURRENDER CHARGE AMOUNT DEFINED IN SECTION 5, CASH VALUES. IF
THIS AMOUNT OF INSURANCE IS DECREASED BY SOME FRACTION OF THE TOTAL AMOUNT
DURING THE TEN YEARS FOLLOWING THE EFFECTIVE DATE, THE SURRENDER CHARGE AMOUNT
WILL BE THE PREVIOUSLY DEFINED SURRENDER CHARGE TIMES THE FRACTION. A NEW
SURRENDER CHARGE SCHEDULE PAGE WILL BE MAILED TO YOU FOR THE REMAINING COVERAGE.
IF THE AMOUNT OF INSURANCE IS INCREASED, A SURRENDER CHARGE WILL APPLY DURING
THE TEN YEARS FOLLOWING THE EFFECTIVE DATE OF THE INCREASE. A NEW SURRENDER
CHARGE SCHEDULE PAGE FOR THE INCREASE WILL BE MAILED TO YOU. THE SURRENDER
CHARGE FACTOR WILL NOT CHANGE FOR THE INCREASE.
<PAGE>
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
RATES ARE PER $1,000
INSURED: (INSURED) POLICY NUMBER: (CERTNUM)
DATE OF ISSUE: (CERTDATE)
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
(COIRATES[CTR,1])(COIRATES[CTR,2]) (COIRATES[CTR2,1])(COIRATES[CTR2,2]) (COIRATES[CTR3,1]) (COIRATES[CTR3,2])
(COIRATES[(94-AGE),1])(COIRATES[(94-AGE),2]) (COIRATES[(95-AGE),1])(COIRATES[(95-AGE),2])
(COIRATES[(95-AGE),1])(COIRATES[(95-AGE),2])
</TABLE>
THESE RATES ARE FOR THE BASE CERTIFICATE AT ISSUE. They are based on 125 percent
of the 1980 Commissioners Standard Ordinary Mortality Table C.
Any values guaranteed in this contract are based on these rates.
<PAGE>
1. DEFINITIONS
We, Us and Our
The Paragon Life Insurance Company.
You and Your
The owner of this certificate. The owner is as shown in the application unless
later changed as provided in this certificate. The owner may be someone other
than the insured.
In the application the words "You" and "Your" refer to the proposed insured
person(s).
Insured
The person whose life is insured under this certificate. See the certificate
specifications page. The insured must be eligible to participate in the plan
sponsored by the contractholder at the time this certificate is issued.
Issue Age
The insured's age at his or her last birthday as of the certificate date.
Attained Age
The issue age plus the number of completed certificate years.
Certificate Date
The date of issue of this certificate is the effective date of coverage under
this certificate. It is also the date from which certificate anniversaries,
certificate years, and certificate months are measured.
Investment Start Date
The date the first premium is applied to the Divisions of the Separate Account.
This date will be the later of:
- - The certificate date; or
- - The date we receive the first premium at our home office.
Maturity Date
The certificate anniversary on which the insured attains age 95. If the insured
is living and the certificate is in force on this date, the cash surrender value
is payable. It is possible that insurance coverage may not continue to the
maturity date even if planned premiums are paid in a timely manner.
Monthly Anniversary
The same date in each succeeding month as the certificate 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.
Business Day
Any day that we are open for business.
Separate Account
A separate investment account created by us to receive and invest net premiums
received for this certificate. The particular Separate Account for this
certificate is indicated on the certificate specifications page.
Loan Account
The account to which we will transfer from the Divisions of the Separate Account
the amount of any certificate loan.
Loan SubAccount
A Loan SubAccount exists for each Division of the Separate Account. Any cash
value transferred to the Loan Account will be allocated to the appropriate
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.
30304 3.01
(4/88)
<PAGE>
Actively at Work
The employee must work for his employer at his usual place of work or such other
places as required by his employer in the course of such work for the full
number of hours and full rate of pay, as set by the employment practices of his
employer. In no event will the amount of time worked per week be less than 30
hours.
Contract
The Group Flexible Premium Variable Life Insurance Contract issued to the
contractholder by us.
2. DEATH BENEFITS
Proceeds
The certificate 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 month from the date of
death to the end of the month of death; less
3. Any loan and loan interest due.
Death Benefit
The death benefit depends upon the contract type in effect on the date of the
insured's death. The contract type in effect is shown on the certificate
specifications page.
Level Contract Type: (Death benefit is level except when it equals a percentage
of cash value.)
The death benefit is the greater of:
1. The face amount; or
2. The applicable percentage of the cash value on the date of death as
described in Section 7702(d) of the Internal Revenue Code of 1986 or as set
forth in any applicable successor provision thereto.
Increasing Contract Type:
The death benefit is the greater of:
1. The face amount plus the cash value on the date of death; or
2. The applicable percentage of the cash value on the date of death as
described in Section 7702(d) of the Internal Revenue Code of 1986 or as set
forth in any applicable successor provision thereto.
Applicable Percentage
The percentages as currently described in Section 7702(d) of the Internal
Revenue Code of 1986 are as follows:
In the case of an insured with an attained age as of the beginning of the policy
year of:
More than: But not more than:
0 ......................... 40
40 ......................... 45
45 ......................... 50
50 ......................... 55
55 ......................... 60
60 ......................... 65
65 ......................... 70
70 ......................... 75
75 ......................... 90
90 ......................... 95
The applicable percentage will decrease by a ratable portion for each full year:
From: To:
250 ......................... 250
250 ......................... 215
215 ......................... 185
185 ......................... 150
150 ......................... 130
130 ......................... 120
120 ......................... 115
115 ......................... 105
105 ......................... 105
105 ......................... 100
30304 3.02
(4/88)
<PAGE>
Certificate Changes
You may request certificate changes at any time. We reserve the right to limit
the number of changes to one per certificate year and to restrict the changes in
the first certificate year. The types of changes allowed are explained below.
No change will be permitted that would result in the death benefit under this
certificate being included in gross income due to not satisfying the
requirements of Section 7702 of the Internal Revenue Code of 1986 or as set
forth in any applicable successor provision thereto.
Change in Face Amount
The face amount may be changed by sending us a written request.
Any decrease in face amount will be subject to the following conditions:
1. The decrease will become effective on the monthly anniversary date on or
following our receipt of the request.
2. The decrease will reduce the face amount in the following order:
a. The face amount provided by the most recent increase;
b. Face amounts provided by the next most recent increases, successively;
and
c. The face amount when the certificate was issued.
3. The face amount remaining in force after any requested decrease may not be
less than the minimum face amount shown on the certificate specifications
page.
4. Any decrease must be at least $5,000.
Any increase in face amount will be subject to the following conditions:
1. Proof that the insured is insurable by our standards on the date of the
requested increase must be submitted.
2. The increase will become effective on the monthly anniversary date on or
following our receipt of such proof.
3. Any increase must be at least $5,000.
4. The insured must have an attained age not greater than age 80 on the date of
the requested increase.
We will amend your certificate to show the effective date of the decrease or
increase.
Change in Contract Type
The contract type in effect may be changed by sending us a written request. The
effective date of change will be the monthly anniversary date on or following
the date we receive the request. On the effective date of this change the death
benefit payable does not change.
If the contract type in effect is increasing, it may be changed to level. The
face amount will be increased to equal the death benefit on the effective date
of change.
If the contract type in effect is level, it may be changed to increasing. Proof
that the insured is 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 certificate specifications page.
30304 3.03
(4/88)
<PAGE>
3. PREMIUMS AND GRACE PERIOD
Payment of Premiums
Your first premium is due as of the certificate date. While the insured is
living, Premiums after the first must be paid at our home office. You may pay
planned premiums directly or through the contractholder annually, semiannually,
quarterly, or at other intervals we may establish from time to time. This right
is subject to our rates and minimum premium requirements as of the certificate
date.
If this certificate 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 certificate
for inspection only.
Premiums after the first may be paid in any amount and at any interval subject
to the following conditions:
1. No premium payment may be less than $20.00.
2. Total premiums paid in any certificate year may not exceed the maximum
premium limit for that certificate year. The maximum premium limit for a
certificate year is the largest amount of premium which can be paid in that
certificate year such that the sum of the premiums paid under the
certificate will not at any time exceed the guideline premium limitation
referred to in Section 7702(c) of the Internal Revenue Code of 1986, or as
set forth in any applicable successor provision thereto. The maximum premium
limit for the following certificate year will be shown on your annual
report.
Net Premium
The premium paid times the net premium percentage from the certificate
specifications page is the net premium.
Allocation of Net Premiums
You determine the allocation of net premiums among the Divisions of the Separate
Account. The minimum percentage (other than zero) that may be allocated to any
Division of the Separate Account is 10%. Percentages must be in whole numbers.
The initial allocation is shown on the certificate specifications page.
Your Right to Change Allocation
You may change the allocation of future net premiums among the Divisions of the
Separate 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.
Grace Period
We will allow a grace period of 62 days. The grace period will start on any
monthly anniversary date when the cash surrender value is not large enough to
cover the next monthly deduction. (Monthly deduction is defined in the Cash
Values Section.) At that time, we will send you and any assignee of record a
notice. The notice will indicate the minimum premium needed to keep the
certificate in force and the date such payment is due.
If you do not pay a premium large enough to cover the monthly deduction by the
end of the grace period, your certificate will lapse at the end of that 62 day
period. It will then terminate without cash value. If the insured dies during
the grace period, any past due monthly deductions will be deducted from the
death benefit.
30304 3.04
(4/88)
<PAGE>
Reinstatement
You may reinstate your lapsed certificate within 5 years after the date of
lapse. This must be done before the insured's age 95. You must submit the
following items:
1. A written request for reinstatement.
2. Proof satisfactory to us that the insured is insurable by our standards.
3. A premium 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.
Reinstatement will not be effective until the date of application for
reinstatement is approved by us. There will be a full monthly deduction for the
certificate month that includes that date. The only accumulation value of this
certificate upon reinstatement will be the amount provided by the premium then
paid. The application for reinstatement will be contestable for two years during
the lifetime of the insured from the date of its approval.
Any loan and loan interest due on the date of lapse may be paid or reinstated.
Any loan and loan interest reinstated will cause a cash value of an equal amount
to also be reinstated.
Any loan paid at the time of reinstatement will cause an increase in cash value
equal to the amount of the repaid loan.
The surrender charge at the time of reinstatement will be the surrender charge
in effect at the time of lapse. If only a portion of the coverage is reinstated
then only the applicable portion of the surrender charge will be reinstated. We
will amend your certificate to show the new surrender charge. The cash value
following reinstatement will be increased by the amount of the surrender charge
imposed at the time of lapse.
30304 3.05
(4/88)
<PAGE>
4. LOANS
After the first certificate anniversary, you may borrow an amount not in excess
of the loan value of your certificate while it is in force. The minimum amount
of your net loan request at any one time must be at least $100. Your certificate
will be the sole security for such loan. We have the right to require your
certificate for endorsement.
The loan value is 85% of the cash value of your certificate at the date of the
loan request, reduced by:
1. Any existing loans and loan interest due; and
2. Any surrender charges.
You may allocate the certificate loan and any loan interest due on this loan
among the Divisions of the Separate Account. If you do not specify the
allocation, then the certificate loan will be allocated among the Divisions of
the Separate Account in the same proportion that the cash value in each Division
bears to the total cash value of the certificate, minus the cash value in the
Loan Account, on the date of the certificate loan.
Cash value equal to the certificate loan and the loan interest due on this loan
allocated to each Division of the Separate Account will be transferred to the
Loan Account, reducing the cash value allocated to the Divisions of the Separate
Account accordingly.
Cash value held in the Loan Account for loan collateral will earn interest daily
at an annual rate of the Loan Account guaranteed interest rate shown on the
certificate specifications page.
Interest payable on a loan accrues daily. Loan interest is due and payable in
arrears on each certificate anniversary or on a pro rata basis for any shorter
period as the loan may exist. If you do not pay the interest when it is due, we
will add it to your existing loan if your certificate has sufficient loan value.
We will charge the same rate of interest on this amount as on the certificate
loan. The total loan rate will be 8.0% per year.
Loan Repayments
All funds received will be credited to your certificate as a 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
insured while the certificate 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 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
as of the date the original loan was made, unless you indicate a specific
allocation to the Divisions of the Separate Account. Unpaid loans and loan
interest will be deducted from any settlement of your certificate.
If you fail to make repayment when the total loan and loan interest due would
exceed the cash value, less any surrender charges, your certificate will be in
default. We will allow you a grace period for such payment of loans and loan
interest due. In such event that payment is not made, the certificate terminates
at the end of the grace period. On the date of default, we will mail a notice to
your last known address, the last known address of the insured, and that of any
assignee of record. This grace period of 62 days will start on the monthly
anniversary immediately before the date the total loan and loan interest exceeds
the cash value less any surrender charges and any unpaid monthly expense
charges; or 31 days after such notice has been mailed, if later.
5. CASH VALUES
Cash Value
The cash value of your certificate is equal to the total of:
- - The cash value in the Divisions of the Separate Account; plus
- - The cash value in the Loan Account.
30403 4.01
(4/88)
<PAGE>
You may borrow against the loan value of your certificate. The interest rate
used to calculate the interest earned on the cash values in the Loan Account
securing any certificate loan will be at an effective annual rate not less than
the Loan Account guaranteed interest rate shown on the certificate
specifications page.
Separate Account Cash Value
The cash value in each Division of the Separate Account on 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 certificate date through
the Investment Start Date charged to the Division.
The cash value in each Division of the Separate Account on a subsequent
valuation date 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 net amounts transferred to the Division 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 surrender charges incurred 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, the
portion of the monthly deduction charged to the Division during the current
valuation period to cover the certificate month which starts during that
valuation period.
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:
- - 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, 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
- - A charge not to exceed .0024547% for each day in the valuation period. This
corresponds to 0.90% per year for mortality and expense risks; divided by
- - The value of the assets at the end of the preceding valuation period.
30403 4.02
(4/88)
<PAGE>
Loan Account Cash Value
The cash value of the Loan Account as of the Investment Start Date is zero.
The cash value of the Loan Account on any day after the Investment Start Date is
equal to:
- - The cash value of the Loan Account on the preceding business day, with
interest; plus
- - Any net amount transferred to the Loan Account from the Divisions of the
Separate Account on that day; minus
- - Any loan repayments on that day.
Monthly Cost of Insurance
The monthly cost of insurance for the following month is 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.
2. The death benefit at the beginning of the certificate month divided by
1.0040741.
3. The cash value at the beginning of the certificate month, before the
deduction of the monthly cost of insurance.
If the contract type is level and if there has been an increase in the face
amount, then the cash value will first be considered a part of the face amount
when the certificate was issued. If the cash value is greater than the initial
face amount, it will then be considered a part of each increase in order,
starting with the first increase.
Monthly Cost of Insurance Rates
At the beginning of each certificate year, the monthly cost of insurance rate is
determined using the insured's attained age. The monthly cost of insurance rate
is based on the attained age and rate class. For the initial face amount, we
will use the rate class on the certificate date. For each increase, we will use
the rate class applicable to the increase. If the death benefit equals a
percentage of the cash value, any increase in cash value will cause an automatic
increase in the death benefit. The rate class for such increase will be the same
as that used for the most recent increase that required proof that the insured
was insurable by our standards.
The monthly cost of insurance rates will never exceed the rates shown on the
Table of Guaranteed Monthly Cost of Insurance Rates page divided by 1,000. Any
change in the cost of insurance rates will apply to all persons of the same age,
and classification whose certificates have been in force for the same length of
time.
First Year Monthly Expense Charge
The amount of additional monthly expense to be charged during the first
certificate year is shown on the certificate specifications page.
Monthly Expense Charge
The amount of the monthly expense charge is shown on the certificate
specifications page.
Monthly Deduction
The monthly deduction is:
1. The monthly cost of insurance; plus
2. The monthly cost of insurance for any rider included with this certificate;
plus
3. The monthly expense charge; plus
4. For the first certificate year, the first year monthly expense charge.
The monthly deduction for a certificate month will be allocated among the
Divisions of the Separate Account in the same proportion that the cash value in
each Division bears to the total cash value of the certificate, minus the cash
value in the Loan Account on the monthly anniversary.
Cash Surrender Value
The cash surrender value of this certificate is:
1. The cash value at the time of surrender; less
2. Any loan and loan interest due; less
3. Any surrender charge.
30403 4.03
(4/88)
<PAGE>
Surrender
You may surrender your certificate for its cash surrender value at any time
during the lifetime of the insured by sending us a written request. The cash
surrender value will be determined as of the date we receive your written
request. The cash surrender value will not be reduced by any monthly deduction
due, if any, on that date for the following month.
Partial Withdrawals
After the first certificate year, you can make a partial withdrawal of cash
subject to the following conditions:
- - You may make up to one partial withdrawal each certificate month.
- - The minimum amount of your net partial withdrawal request from any one
Division must be at least $50.00 of a Division or your entire balance in that
Division, if smaller.
- - The total amount of your net partial withdrawal request at any one time must
be at least $500.
- - The amount of withdrawal obtained by partial withdrawal may not exceed the
loan value.
Allocation of Partial Withdrawals
You may allocate the partial withdrawal, subject to the above conditions, among
the Divisions of the Separate Account. If you do not specify the allocation,
then the partial withdrawal will be allocated among the Divisions of the
Separate Account in the same proportion that the cash value in each Division
bears to the total cash value of the certificate, minus the cash value in the
Loan Account on the date of the partial withdrawal.
If the contract type is level 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 plus the applicable surrender charge. The surrender charge
will be allocated among the Divisions of the Separate Account in the same
proportion that the partial withdrawal was allocated among the Divisions of the
Separate Account. 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 plus the applicable surrender charge exceeds the
difference between the death benefit and the face amount. The face amount will
be decreased in the following order:
1. The face amount at issue; and
2. Any increases in the same order in which they were issued.
No partial withdrawal will be processed which will result in the face amount
being decreased below the minimum face amount shown on the certificate
specifications page.
We reserve the right to change the minimum amount or the number of times you may
make a partial withdrawal. Each partial withdrawal is subject to an
administrative charge equal to the lesser of $25.00 or 2% of the amount of the
partial withdrawal.
Surrender Charge
If the certificate is surrendered, a surrender charge will be applied:
1. With respect to the initial face amount and the number of completed
certificate years from the certificate date; and
2. With respect to each increase in face amount and the number of completed
years from the effective date of that increase.
The surrender charge amount for the initial face amount for the first
certificate year will be the lesser of:
1. The Surrender Charge Factor multiplied by actual premiums paid during the
first certificate year to meet our minimum premium requirements; or
2. The Surrender Charge Factor multiplied by the guideline annual premium. The
guideline annual premium is shown on the surrender charge schedule page.
This amount as calculated at the end of the first certificate year will be used
to determine the surrender charge for any decrease in the initial face amount or
full cash surrender of the initial face amount in subsequent years.
30403 4.04
(4/88)
<PAGE>
The surrender charge amount for an increase in face amount during the twelve
certificate months following any increase will be the lesser of:
1. The Surrender Charge Factor multiplied by the premiums that are allocated to
that increase during the twelve certificate months following the increase;
or
2. The Surrender Charge Factor multiplied by the guideline annual premium for
the increase. The guideline annual premium for the increase will be shown in
the surrender charge schedule page for the increase.
This amount as calculated at the end of the first year following the effective
date of the increase will be used to determine the surrender charge for any
decrease in increased face amount or full cash surrender following the increase
in subsequent years.
The premium allocated to an increase for purposes of determining the surrender
charge will be based on the rules established by the Securities and Exchange
Commission and may include a part of the existing cash value.
The Surrender Charge Percentage for the initial face amount and any increase in
face amount is shown on the surrender charge schedule page for the respective
face amount. The Surrender Charge Percentage multiplied by the surrender charge
amount determines the appropriate surrender charge to be assessed.
The Surrender Charge Factor is shown on the surrender charge schedule page.
A surrender charge will apply to any decrease in face amount. A decrease in face
amount may decrease some of the initial face amount and some or all of any
increases in face amount as provided in Section 2. A partial withdrawal may
cause a decrease in face amount as provided above and, therefore, a surrender
charge may be taken. The amount of surrender charge applied because of a
decrease in face amount is defined on the surrender charge schedule page for the
face amount being decreased. The surrender charge for a decrease in face amount
is deducted from the cash value on the effective date of the decrease.
Postponement of Payments
We will usually pay any amounts payable on surrender, partial withdrawal or
certificate of Payments loan allocated to the Divisions of the Separate Account
within seven days after written notice is received. We will usually pay any
death benefit proceeds within seven days after we receive due proof of claim.
Payment of any amount payable on surrender, partial withdrawal, certificate loan
or death may be postponed whenever:
1. The New York Stock Exchange or our home office are closed (other than
customary weekend and holiday closing) or trading on the New York Stock
Exchange is restricted as determined by the Securities and Exchange
Commission;
2. The Securities and Exchange Commission, by order, permits postponement for
the protection of certificate owners; or
3. An emergency exists as determined by the Securities and Exchange Commission,
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.
Transfers may also be postponed under the circumstances listed above.
Continuation of Insurance
If all premium payments cease, the insurance provided under this certificate,
including benefits provided by any rider attached to this certificate will
continue in accordance with the provisions of this certificate for as long as
the cash surrender value is sufficient to cover the monthly deductions. Any
remaining cash surrender value will be payable on the maturity date.
Basis of Computation
The minimum cash values and net single premiums, if any, are based on 1) 125
percent of the Commissioner's 1980 Standard Ordinary Mortality Table C age last
birthday; and 2) compound interest at 5% a year.
All values are at least equal to those required by any applicable law of the
state that governs your certificate. We have filed a detailed statement of the
method of calculating cash values and reserves with the insurance supervisory
official of that state.
30403 4.05
(4/88)
<PAGE>
6. PERSONS WITH AN INTEREST IN THE CERTIFICATE
Owner
The insured is the original owner of this certificate unless someone else is
shown as owner in the application. You, as owner, are entitled to all rights
provided by this certificate, prior to its maturity date. Ownership may be
changed in accordance with the Change of Owner or Beneficiary provision. After
the maturity date, you cannot change the payee nor the mode of payment, unless
otherwise provided in this certificate. Any person whose rights of ownership
depend upon some future event will not possess any present rights of ownership.
If there is more than one owner at a given time, all must exercise the rights of
ownership, If you should die, and you are not the insured, your interest will go
to your estate unless otherwise provided.
Beneficiary
The original beneficiary is shown in the application. 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 certificate
before the death of the insured. If there is more than one beneficiary at the
death of the insured, each will receive equal payments unless otherwise
provided. If no beneficiary is living at the death of the insured the proceeds
will be payable to you, if you are living, or to your estate.
Change of Owner or Beneficiary
During the insured's lifetime you may change the ownership and beneficiary
designations. You must make the change in written form satisfactory to us. If
acceptable to us it will take effect as of the time you signed the request,
whether or not the insured is living when we receive your request at our home
office. The change will be subject to any assignment of this certificate 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 certificate for endorsement before we accept the change.
If you are also the beneficiary of the certificate at the time of the insured's
death, you may designate some other person to receive the proceeds of the
certificate within 60 days after the insured's death.
Assignments
We will not be bound by an assignment of the certificate or of any interest in
it unless:
1. It is made as a written instrument,
2. You file the original instrument or a certified copy with us at our home
office, and
3. We send you an acknowledged copy.
We are not responsible for 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.
7. GENERAL PROVISIONS
Entire Contract
We have issued this certificate in consideration of the application and payment
of premiums. The certificate, the application for it, and any application for an
increase in face amount constitute the entire contract. Any application is
attached and made a part of the certificate when the insurance applied for is
accepted. The certificate may be changed by mutual agreement. Any change must be
in writing and approved by our President, or Secretary. Our agents have no
authority to alter or modify any terms, conditions, or agreements of this
certificate, or to waive any of its provisions.
Conformity with Statutes
If any provision in this certificate is in conflict with the laws of the state
which govern this certificate, the provision will be deemed to be amended to
conform with such laws.
30604 6.01
(4/88)
<PAGE>
Statements in Application
All statements made by the insured or on his or her behalf, or 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 certificate, or deny a claim
unless made in the application.
Claims of Creditors
To the extent permitted by law, neither the certificate nor any payment under it
will be subject to the claim of creditors or to any legal process.
Right to Examine Certificate
You have the right to request us to cancel this certificate and receive a
refund. The request must be made no later than:
- - 20 days after you received the certificate; or
- - 45 days after the date you signed the application.
The refund will equal the premiums paid into this certificate.
Right to Examine Increase in Face Amount
You have the right to request us to cancel an increase in face amount and
receive a refund. The request must be made no later than:
- - 20 days from the date you received the new certificate specifications page
for the increase; or
- - 45 days after the date you signed the application for the increase.
The refund will equal the monthly deductions associated with that increase. If
you do request us to cancel the increase but do not request a refund, the
monthly deductions associated with that increase will be restored to the
certificate's cash value. This amount will be allocated to the Divisions of the
Separate Account in the same manner as it was deducted.
Conversion Rights
Once during the first two certificate years you have the right, upon written
request, to exchange this certificate for a life insurance policy that provides
for benefits that do not vary with the investment return of the Divisions of the
Separate Account. No evidence of insurability will be required. However, we will
require that this certificate be in force and that you repay any existing
indebtedness. At the time of the conversion, the new policy will have, at your
option, either the same death benefit or the same difference between death
benefit and cash value as this certificate. The new policy will also have the
same issue date and issue age as this certificate. The planned premiums for the
new policy will be based on our rates in effect for the same issue age and risk
class as the original certificate.
You also have the right once during the first two years following the effective
date of an increase in face amount to exchange the increased portion of this
certificate for a life insurance policy that provides for fixed benefits. The
provisions applicable to the conversion of the entire certificate described
above are also applicable to a conversion of an increase in face amount.
Eligibility Change Conversion Privilege
If an insured's eligibility under the Contract ends due to the termination of
the contract or termination of the employee's employment, your coverage, if
still in force, will convert automatically to an individual policy. Such
individual policy will provide benefits which are identical to those provided
under this certificate.
An amendment to convert the certificate to an individual policy will be mailed:
1. Within 31 days after we receive written notification that the employee's
employment ended; or after the termination of the contract; and
2. Once any premium necessary to prevent the policy from lapsing is paid to us
at our Home Office.
The planned premiums for this individual policy may be paid annually,
semiannually, quarterly, or at other intervals we may establish from time to
time. Additional premium payments may be made at any time subject to limitations
identical to those contained in this certificate.
30604 6.02
(4/88)
<PAGE>
Misstatement of Age and Corrections
If there is a misstatement of age in the application, the amount of the death
benefit will be that which would be purchased by the most recent mortality
charge at the correct age.
If we make any payment or certificate 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 certificate.
Incontestability
We cannot contest this certificate after it has been in force during the
lifetime of the insured for two years from its certificate date. We cannot
contest an increase in face amount with regard to material misstatements made
concerning such increase after it has been in force during the lifetime of the
insured for two years from its effective date. We cannot contest any
reinstatement of this certificate after it has been in force during the lifetime
of the insured for a period of two years from the date we approve the
reinstatement. This provision will not apply to any rider which contains its own
incontestability clause.
Suicide Exclusion
If the insured dies by suicide, while sane or insane, within two years from the
certificate date (or within the maximum period permitted by law of the state in
which this certificate was delivered, if less than two years), the amount
payable will be limited to the amount of premiums paid, less any outstanding
certificate loans with interest to the date of death, and less any partial
withdrawals.
If the insured, while sane or insane, commits suicide within two years after the
effective date of any increase in face amount, the death benefit for that
increase will be limited to the monthly deductions for the increase.
This provision does not apply if the Group Contract is issued to a Missouri
citizen, unless the insured intended suicide when this certificate or any
increase in face amount was applied for.
Annual Report
Each year a report will be sent to you which shows the current certificate
values, premiums paid and deductions made since the last report, and any
outstanding certificate loans.
Projection of Benefits and Values
You may make a written request to us for a projection of illustrative future
cash values and death benefits. This projection will be furnished to you for a
nominal fee.
8. SEPARATE ACCOUNT PROVISIONS
Separate Account
The variable benefits under this certificate are provided through investments in
the Separate Account. 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 Company's general assets. 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.
Assets held by 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
the Company's general assets 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 the
contract was delivered.
30604 6.03
(4/88)
<PAGE>
Divisions
The Separate Account has several Divisions which are shown on the certificate
specifications page. The Separate Account will buy shares in the Funds
identified on the certificate specifications page. Each Fund corresponds to a
different investment portfolio.
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.
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, commencing at the close of trading (currently 4:00 p.m. New
York time) each valuation date and ending at the close of trading (currently
4:00 p.m. New York time) on the next succeeding valuation date. A valuation date
is each day that the New York Stock Exchange and our home office 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 among the Divisions of the Separate Account.
These transfers will be subject to the following conditions:
- - We must receive a written request for transfer.
- - Transfers from or among the Divisions of the Separate Account may be made at
any time and must be at least $250.00 or the entire amount you have in a
Division, if smaller.
We may modify the transfer privilege at any time, including the minimum amount
transferable, the frequency, and the transfer charge, if any.
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 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 and to substitute
shares of another fund or of another registered open-end, 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 or contract. 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 prior approval of the Securities and Exchange
Commission, to the extent required by 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,
each of which would invest in a new fund or in shares of another open-end
investment company and to make such Divisions available to such class or series
of policies as we deem appropriate. Subject to any required regulatory approval,
we also reserve the right to eliminate or combine existing Divisions of the
Separate Account or to transfer assets between Divisions.
Subject to obtaining any necessary regulatory or owner approval, 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.
30604 6.04
(4/88)
<PAGE>
9. PAYMENT OF BENEFITS
Payment
Payment will be made as provided on the face page.
If a beneficiary entitled to proceeds dies after the insured, and
1. no settlement option elected by you is in effect, and
2. the deceased beneficiary has not chosen an option or requested the proceeds
in cash,
his or her proceeds will be paid as though he or she died before the insured.
Interest on Proceeds
We will pay interest on single sum proceeds from the date of the insured's death
to the date of payment. Interest will be at an annual rate determined by us, but
never less than the Guaranteed Settlement Option rate.
Election of Settlement Options
Prior to the maturity of the certificate, you may choose a settlement option.
Upon the death of the insured, the proceeds will be placed under the settlement
option chosen. You may change or revoke an option during the lifetime of the
insured. After the maturity of the certificate, a person entitled to receive
payment in one sum may choose an option for his or her benefit, if you have not
already done so. With our consent, an option may be chosen for the benefit of
another payee.
For you to choose an option, we must receive your written request at our home
office prior to the insured's death. If the request is satisfactory to us, we
will issue a written agreement showing the option you elected. The effective
date of the election will be the date of the request, the certificate date, or
the date the person who is making the election signed the agreement, whichever
is the latest.
The Settlement Options are described below.
Settlement Options
(See Settlement Option Tables at the end of this section.) Upon the maturity of
the certificate or upon death of the insured, the proceeds may be placed under
any of the following options:
Option A. Life Income.
We will pay equal monthly installments as long as the payee lives.
Option B. Life Income for Two Lives.
We will pay monthly installments jointly to two named payees if both are living
when the installments become payable. One payee will be designated as primary
payee. Full installments will continue so long as the primary payee is living.
If the primary payee dies after installments begin, full installments or
installments of 1/2 or 2/3, (whichever you elected when applying for this
option) will continue to the other payee during his or her lifetime.
Option C. Income for Specified Number of Years and Life Thereafter.
We will pay monthly installments beginning on the effective date of the option
and continuing for 5, 10, 15 or 20 years certain, as may be chosen, and after
that, during the payee's lifetime.
Option D. Life Income With Cash Refund.
We will pay monthly installments as long as the payee lives. If the payee dies
before the total amounts paid equal the proceeds applied, we pay the difference
in one sum.
Option E. Installments of a Specified Amount.
We will pay installments at dates and in amounts chosen by the owner at the time
of option request with our approval. We will continue to make payments until all
of the proceeds, with interest, are paid. The final payment will not exceed the
unpaid balance.
Option F. Income for Specified Number of Years.
We will pay monthly installments beginning on the effective date of the option
and continuing for a specified number of years, not to exceed 30 years.
00715 7.01
(4/88)
<PAGE>
Option G. Interest.
We will hold the proceeds on deposit during the payee's lifetime or for any
other period selected with our approval. Interest may be accumulated or received
in monthly, quarterly, semiannual, or annual payments, as may be chosen.
Interest begins to accrue as of the effective date of the option.
Payee
A person who receives benefits under an option is a payee. Except for a legal
guardian, a payee must be a natural person receiving benefits in his or her own
right. With our consent, the payee may be a trustee, assignee, corporation, or
partnership.
Guaranteed Settlement Option Interest Rate
We use a guaranteed effective annual rate of 4% in computing payments under all
options. We may pay interest in excess of this amount.
Minimum Amounts (for each payee)
The minimum amount that can be placed under an option and the minimum amount of
any payments under an option will be based on our rules at the time the option
is to become effective. The required minimum amount to be placed under an option
will never be more than $5,000, nor shall the minimum amount of any payment be
set at more than $50 per month.
Life Income Options
Life Income Options are based on the payee's age nearest birthday on the
settlement option effective date. We have the right to require satisfactory
proof of age. f the age has been incorrectly stated, the proper adjustment in
payments will be made. We may also require proof that the payee is living on any
payment due date.
Death of Payee
If a payee dies, any amount still payable under an option will be paid as it
becomes due surviving or next succeeding payee. If no designated payee survives,
any amount payable in one sum, or the commuted value of any unpaid installments,
will be paid in one sum to the estate of the last payee to die.
First Payment
We will make the first payment under an option other than Option G as of the
option effective date. We will pay interest under Option G at the end of each
period selected for payment.
Rights Under Settlement Options
No payee has the right to make any change in the provisions of the settlement
option agreement or to receive the proceeds in any manner other than that stated
in the settlement option agreement, unless such right was reserved in the
settlement option agreement. The right may be reserved to the payee to withdraw
all or part of any amount held under Options G and E, including any interest, or
the commuted value of any unpaid installments under Option F. We will not make
any payments in advance, nor commute installments under any life income option.
Under a partial withdrawal right, the number of withdrawals allowed per year and
the minimum amount of each withdrawal shall be determined by our rules in effect
at the time of the request for a partial withdrawal, unless otherwise specified
in the agreement.
Basis of Commutation
Commutation of installments will be at the effective annual rate of 4%
compounded annually.
00715 7.02
(4/88)
<PAGE>
Contingent Payee
The payee may name contingent payees, subject to any restrictions under a
settlement option chosen during the insured's lifetime, under the following
conditions:
1. If you are the payee; or
2. If the payee has the right to withdraw the entire amount under the option,
even though contingent payees may have been previously named; or
3. If at any time after the insured's death and during the option period no
previously named contingent payee is living.
Designations made by the payee under these provisions may be changed by the
payee. Such changes must be made by written request satisfactory to us. Changes
will only take effect when we accept them in writing at our home office. At that
time, the contingent interest of any other person is terminated as of the date
the payee signed the request, whether or not the payee is living when we receive
the request.
Extended Provisions
Provisions for settlement of proceeds different from those stated in t his
certificate may only be made upon written agreement with us.
Company Liability
We will be fully discharged by any payment we make when a written request for an
election, change, or revocation is made and is received in our home office.
00715 7.03
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES
FOR EACH $1,000
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
OPTION A-LIFE INCOME
- ----------------------------------------------------------------------------------------------------------------------
AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY
INSTALLMENTS INSTALLMENTS INSTALLMENTS INSTALLMENTS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 $3.58 35 $3.99 55 $5.08 75 $ 8.30
16 3.59 36 4.02 56 5.17 76 8.60
17 3.61 37 4.05 57 5.27 77 8.93
18 3.62 38 4.09 58 5.36 78 9.28
19 3.63 39 4.13 59 5.46 79 9.67
- ----------------------------------------------------------------------------------------------------------------------
20 3.65 40 4.16 60 5.57 80 10.08
21 3.67 41 4.21 61 5.68 81 10.53
22 3.68 42 4.25 62 5.80 82 11.02
23 3.70 43 4.30 63 5.93 83 11.54
24 3.72 44 4.35 64 6.06 84 12.11
- ----------------------------------------------------------------------------------------------------------------------
25 3.74 45 4.40 65 6.20 85 AND 12.73
26 3.76 46 4.45 66 6.35 OVER
27 3.78 47 4.51 67 6.51
28 3.80 48 4.57 68 6.69
29 3.82 49 4.63 69 6.87
- -----------------------------------------------------------------------------------------------------------------------
30 3.85 50 4.70 70 7.07
31 3.87 51 4.77 71 7.28
32 3.90 52 4.84 72 7.51
33 3.93 53 4.92 73 7.75
34 3.95 54 5.00 74 8.01
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
OPTION B-MONTHLY INSTALLMENTS-JOINT AND ONE-HALF TO SECONDARY PAYEE
- -------------------------------------------------------------------------------------------------------
AGE OF PRIMARY AGE OF SECONDARY PAYEE**
PAYEE**
- -------------------------------------------------------------------------------------------------------
45 46 47 48 49 50 51 52 53 54 55
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.64 $4.66 $4.68 $4.70 $4.72 $4.74 $4.75 $4.77 $4.78 $4.79 $4.80
56 4.68 4.71 4.73 4.75 4.77 4.79 4.81 4.83 4.84 4.85 4.87
57 4.73 4.75 4.78 4.80 4.82 4.84 4.87 4.88 4.90 4.92 4.93
58 4.77 4.80 4.82 4.85 4.87 4.90 4.92 4.94 4.96 4.98 5.00
59 4.81 4.84 4.87 4.90 4.93 4.95 4.98 5.00 5.02 5.05 5.07
- -------------------------------------------------------------------------------------------------------
60 4.86 4.89 4.92 4.95 4.98 5.01 5.04 5.06 5.09 5.11 5.13
61 4.90 4.94 4.97 5.00 5.03 5.06 5.09 5.12 5.15 5.18 5.20
62 4.95 4.98 5.02 5.05 5.09 5.12 5.15 5.18 5.21 5.24 5.27
63 5.00 5.03 5.07 5.11 5.14 5.18 5.21 5.24 5.28 5.31 5.34
64 5.05 5.09 5.12 5.16 5.20 5.23 5.27 5.31 5.34 5.38 5.41
- -------------------------------------------------------------------------------------------------------
65 5.10 5.14 5.18 5.21 5.25 5.29 5.33 5.37 5.41 5.45 5.48
66 5.15 5.19 5.23 5.27 5.31 5.35 5.40 5.44 5.48 5.52 5.56
67 5.21 5.25 5.29 5.33 5.37 5.42 5.46 5.50 5.55 5.59 5.63
68 5.27 5.31 5.35 5.39 5.44 5.48 5.53 5.57 5.62 5.67 5.71
69 5.33 5.37 5.41 5.46 5.50 5.55 5.60 5.65 5.69 5.74 5.79
- -------------------------------------------------------------------------------------------------------
70 5.39 5.43 5.48 5.52 5.57 5.62 5.67 5.72 5.77 5.82 5.87
71 5.45 5.50 5.55 5.59 5.64 5.69 5.74 5.80 5.85 5.90 5.96
72 5.52 5.57 5.62 5.67 5.72 5.77 5.82 5.87 5.93 5.99 6.04
73 5.59 5.64 5.69 5.74 5.79 5.85 5.90 5.96 6.01 6.07 6.13
74 5.66 5.71 5.76 5.82 5.87 5.92 5.98 6.04 6.10 6.16 6.22
- -------------------------------------------------------------------------------------------------------
75 5.74 5.79 5.84 5.89 5.95 6.01 6.07 6.13 6.19 6.25 6.32
76 5.81 5.86 5.92 5.97 6.03 6.09 6.15 6.22 6.28 6.35 6.41
77 5.89 5.94 6.00 6.06 6.12 6.18 6.24 6.31 6.37 6.44 6.51
78 5.97 6.03 6.08 6.14 6.20 6.27 6.33 6.40 6.47 6.54 6.61
79 6.05 6.11 6.17 6.23 6.29 6.36 6.43 6.50 6.57 6.64 6.72
- -------------------------------------------------------------------------------------------------------
80 6.14 6.20 6.26 6.32 6.39 6.45 6.52 6.60 6.67 6.75 6.82
- -------------------------------------------------------------------------------------------------------
56 57 58 59 60 61 62 63 64 65
- -----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.81 $4.82 $4.83 $4.83 $4.84 $4.85 $4.85 $4.86 $4.86 $4.87
56 4.88 4.89 4.90 4.90 4.91 4.92 4.93 4.93 4.94 4.94
57 4.95 4.96 4.97 4.98 4.99 5.00 5.00 5.01 5.02 5.02
58 5.01 5.03 5.04 5.05 5.06 5.07 5.08 5.09 5.10 5.11
59 5.08 5.10 5.12 5.13 5.14 5.15 5.17 5.18 5.18 5.19
- -----------------------------------------------------------------------------------------------
60 5.15 5.17 5.19 5.21 5.22 5.24 5.25 5.26 5.27 5.28
61 5.23 5.25 5.27 5.29 5.31 5.32 5.34 5.35 5.36 5.38
62 5.30 5.32 5,35 5.37 5.39 5.41 5.43 5.44 5.46 5.47
63 5.37 5.40 5.43 5.45 5.48 5.50 5.52 5.54 5.55 5.57
64 5.45 5.48 5.51 5.54 5.56 5.59 5.61 5.63 5.65 5.67
- -----------------------------------------------------------------------------------------------
65 5.52 5.56 5.59 5.62 5.65 5.68 5.71 5.73 5.76 5.78
66 5.60 5.64 5.67 5.71 5.74 5.78 5.81 5.84 5.86 5.89
67 5.68 5.72 5.76 5.80 5.84 5.87 5.91 5.94 5.97 6.00
68 5.76 5.80 5.85 5.89 5.93 5.97 6.01 6.05 6.08 6.12
69 5.84 5.89 5.94 5.98 6.03 6.07 6.12 6.16 6.20 6.24
- -----------------------------------------------------------------------------------------------
70 5.92 5.98 6.03 6.08 6.13 6.18 6.23 6.27 6.32 6.36
71 6.01 6.07 6.12 6.18 6.23 6.28 6.34 6.39 6.44 6.49
72 6.10 6.16 6.22 6.28 6.33 6.39 6.45 6.51 6.56 6.62
73 6.19 6.25 6.32 6.38 6.44 6.50 6.57 6.63 6.69 6.75
74 6.29 6.35 6.42 6.48 6.55 6.62 6.68 6.75 6.82 6.89
- -----------------------------------------------------------------------------------------------
75 6.38 6.45 6.52 6.59 6.66 6.73 6.81 6.88 6.95 7.02
76 6.48 6.55 6.63 6.70 6.77 6.85 6.93 7.01 7.08 7.17
77 6.58 6.66 6.73 6.81 6.89 6.97 7.05 7.14 7.22 7.31
78 6.69 6.77 6.85 6.93 7.01 7.10 7.18 7.27 7.36 7.46
79 6.80 6.88 6.96 7.04 7.13 7.22 7.32 7.41 7.51 7.61
- -----------------------------------------------------------------------------------------------
80 6.91 6.99 7.08 7.17 7.26 7.35 7.45 7.55 7.65 7.76
- -----------------------------------------------------------------------------------------------
</TABLE>
**FOR ADDITIONAL AGE COMBINATIONS, THE PROPER RATES WILL BE PROVIDED UPON
REQUEST TO THE HOME OFFICE.
00715 7.04
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES-CONTINUED
<TABLE>
<CAPTION>
FOR EACH $1,000
- -------------------------------------------------------------------------------------------------------------------------------
OPTION B-MONTHLY INSTALLMENTS-JOINT AND TWO-THIRDS TO SECONDARY PAYEE
- -------------------------------------------------------------------------------------------------------------------------------
AGE OF PRIMARY
PAYEE ** AGE OF SECONDARY PAYEE **
- -------------------------------------------------------------------------------------------------------------------------------
45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.51 $4.54 $4.56 $4.59 $4.61 $4.63 $4.65 $4.67 $4.69 $4.70 $4.71 $4.73 $4.74 $4.75 $4.75 $4.76
56 4.54 4.57 4.60 4.63 4.65 4.68 4.70 4.72 4.74 4.76 4.77 4.79 4.80 4.81 4.82 4.83
57 4.57 4.60 4.63 4.66 4.69 4.72 4.74 4.77 4.79 4.81 4.83 4.85 4.86 4.88 4.89 4.90
58 4.60 4.63 4.67 4.70 4.73 4.76 4.79 4.82 4.84 4.87 4.89 4.91 4.93 4.94 4.96 4.97
59 4.63 4.67 4.70 4.74 4.77 4.80 4.83 4.86 4.89 4.92 4.94 4.97 4.99 5.01 5.03 5.04
- -------------------------------------------------------------------------------------------------------------------------------
60 4.66 4.70 4.74 4.77 4.81 4.84 4.88 4.91 4.94 4.97 5.00 5.03 5.05 5.08 5.10 5.12
61 4.69 4.73 4.77 4.81 4.85 4.88 4.92 4.96 4.99 5.03 5.06 5.09 5.12 5.14 5.17 5.19
62 4.72 4.76 4.80 4.84 4.88 4.93 4.97 5.00 5.04 5.08 5.11 5.15 5.18 5.21 5.24 5.26
63 4.75 4.79 4.84 4.88 4.92 4.97 5.01 5.05 5.09 5.13 5.17 5.21 5.24 5.28 5.31 5.34
64 4.78 4.83 4.87 4.92 4.96 5.01 5.05 5.10 5.14 5.18 5.23 5.27 5.31 5.34 5.38 5.41
- -------------------------------------------------------------------------------------------------------------------------------
65 4.81 4.86 4.91 4.95 5.00 5.05 5.09 5.14 5.19 5.23 5.28 5.33 5.37 5.41 5.45 5.49
66 4.85 4.89 4.94 4.99 5.04 5.09 5.14 5.19 5.24 5.29 5.34 5.38 5.43 5.48 5.52 5.56
67 4.88 4.93 4.98 5.03 5.08 5.13 5.18 5.23 5.29 5.34 5.39 5.44 5.49 5.54 5.59 5.64
68 4.92 4.97 5.02 5.07 5.12 5.17 5.23 5.28 5.34 5.39 5.45 5.50 5.56 5.61 5.66 5.72
69 4.96 5.00 5.06 5.11 5.16 5.22 5.27 5.33 5.39 5.44 5.50 5.56 5.62 5.68 5.74 5.79
- -------------------------------------------------------------------------------------------------------------------------------
70 4.99 5.04 5.10 5.15 5.20 5.26 5.32 5.38 5.44 5.50 5.56 5.62 5.68 5.74 5.81 5.87
71 5.03 5.08 5.14 5.19 5.25 5.31 5.37 5.43 5.49 5.55 5.62 5.68 5.75 5.81 5.88 5.94
72 5.07 5.13 5.18 5.24 5.29 5.35 5.42 5.48 5.54 5.61 5.67 5.74 5.81 5.88 5.95 6.02
73 5.11 5.17 5.22 5.28 5.34 5.40 5.47 5.53 5.60 5.66 5.73 5.80 5.87 5.95 6.02 6.10
74 5.16 5.21 5.27 5.33 5.39 5.45 5.52 5.58 5.65 5.72 5.79 5.86 5.94 6.02 6.09 6.17
- -------------------------------------------------------------------------------------------------------------------------------
75 5.20 5.26 5.31 5.37 5.44 5.50 5.57 5.64 5.71 5.78 5.85 5.93 6.01 6.08 6.17 6.25
76 5.24 5.30 5.36 5.42 5.49 5.55 5.62 5.69 5.76 5.84 5.91 5.99 6.07 6.15 6.24 6.33
77 5.29 5.35 5.41 5.47 5.54 5.60 5.67 5.74 5.82 5.89 5.97 6.05 6.14 6.22 6.31 6.40
78 5.34 5.40 5.46 5.52 5.59 5.66 5.73 5.80 5.88 5.95 6.03 6.12 6.20 6.29 6.39 6.48
79 5.38 5.44 5.51 5.57 5.64 5.71 5.78 5.86 5.93 6.01 6.10 6.18 6.27 6.36 6.46 6.56
- -------------------------------------------------------------------------------------------------------------------------------
80 5.43 5.49 5.56 5.62 5.69 5.76 5.84 5.91 5.99 6.08 6.16 6.25 6.34 6.44 6.53 6.64
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------
AGE OF PRIMARY
PAYEE **
- ----------------------------------------------------
61 62 63 64 65
- ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
55 $4.77 $4.78 $4.78 $4.79 $4.80
56 4.84 4.85 4.86 4.86 4.87
57 4.91 4.92 4.93 4.94 4.95
58 4.98 5.00 5.01 5.02 5.03
59 5.06 5.07 5.09 5.10 5.11
- ----------------------------------------------------
60 5.13 5.15 5.17 5.18 5.19
61 5.21 5.23 5.25 5.26 5.28
62 5.29 5.31 5.33 5.35 5.37
63 5.37 5.39 5.42 5.44 5.46
64 5.45 5.48 5.50 5.53 5.55
- ----------------------------------------------------
65 5.53 5.56 5.59 5.62 5.65
66 5.61 5.64 5.68 5.72 5.75
67 5.69 5.73 5.77 5.81 5.85
68 5.77 5.82 5.86 5.91 5.95
69 5.85 5.90 5.95 6.00 6.05
- ----------------------------------------------------
70 5.93 5.99 6.05 6.10 6.16
71 6.01 6.07 6.14 6.20 6.26
72 6.09 6.16 6.23 6.30 6.37
73 6.17 6.25 6.32 6.40 6.47
74 6.25 6.33 6.42 6.50 6.58
- ----------------------------------------------------
75 6.33 6.42 6.51 6.60 6.68
76 6.42 6.51 6.60 6.69 6.79
77 6.50 6.59 6.69 6.79 6.89
78 6.58 6.68 6.78 6.89 7.00
79 6.66 6.77 6.88 6.99 7.10
- ----------------------------------------------------
80 6.74 6.85 6.97 7.09 7.21
- ----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION B-MONTHLY INSTALLMENTS-JOINT AND EQUAL TO SECONDARY PAYEE
- -----------------------------------------------------------------------------------------------------------------------
AGE OF PRIMARY
PAYEE ** AGE OF SECONDARY PAYEE **
- -----------------------------------------------------------------------------------------------------------------------
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 $4.27 $4.28 $4.29 $4.30 $4.30 $4.31 $4.31 $4.32 $4.32 $4.33 $4.33 $4.33 $4.34 $4.34 $4.35
51 4.28 4.32 4.33 4.34 4.35 4.36 4.36 4.37 4.37 4.38 4.38 4.39 4.40 4.40 4.41
52 4.29 4.33 4.37 4.38 4.39 4.40 4.41 4.42 4.43 4.43 4.44 4.45 4.45 4.46 4.47
53 4.30 4.34 4.38 4.43 4.44 4.45 4.46 4.47 4.48 4.49 4.50 4.51 4.51 4.52 4.53
54 4.30 4.35 4.39 4.44 4.49 4.50 4.51 4.53 4.54 4.55 4.56 4.57 4.57 4.58 4.59
- -----------------------------------------------------------------------------------------------------------------------
55 4.31 4.36 4.40 4.45 4.50 4.55 4.56 4.58 4.59 4.60 4.62 4.63 4.64 4.65 4.66
56 4.31 4.36 4.41 4.46 4.51 4.56 4.61 4.63 4.65 4.66 4.68 4.69 4.70 4.71 4.72
57 4.32 4.37 4.42 4.47 4.53 4.58 4.63 4.68 4.70 4.72 4.74 4.75 4.77 4.78 4.79
58 4.32 4.37 4.43 4.48 4.54 4.59 4.65 4.70 4.76 4.78 4.80 4.81 4.83 4.85 4.86
59 4.33 4.38 4.43 4.49 4.55 4.60 4.66 4.72 4.78 4.83 4.86 4.88 4.90 4.92 4.93
- -----------------------------------------------------------------------------------------------------------------------
60 4.33 4.38 4.44 4.50 4.56 4.62 4.68 4.74 4.80 4.86 4.92 4.94 4.96 4.98 5.00
61 4.33 4.39 4.45 4.51 4.57 4.63 4.69 4.75 4.81 4.88 4.94 5.00 5.03 5.05 5.08
62 4.34 4.40 4.45 4.51 4.57 4.64 4.70 4.77 4.83 4.90 4.96 5.03 5.10 5.12 5.15
63 4.34 4.40 4.46 4.52 4.58 4.65 4.71 4.78 4.85 4.92 4.98 5.05 5.12 5.19 5.22
64 4.35 4.41 4.47 4.53 4.59 4.66 4.72 4.79 4.86 4.93 5.00 5.08 5.15 5.22 5.30
- -----------------------------------------------------------------------------------------------------------------------
65 4.35 4.41 4.47 4.53 4.60 4.67 4.73 4.80 4.88 4.95 5.02 5.10 5.18 5.25 5.33
66 4.36 4.42 4.48 4.54 4.61 4.67 4.74 4.81 4.89 4.96 5.04 5.12 5.20 5.28 5.36
67 4.37 4.42 4.49 4.55 4.62 4.68 4.75 4.83 4.90 4.98 5.06 5.14 5.22 5.31 5.39
68 4.37 4.43 4.49 4.56 4.62 4.69 4.76 4.84 4.91 4.99 5.07 5.16 5.24 5.33 5.42
69 4.38 4.44 4.50 4.56 4.63 4.70 4.77 4.85 4.92 5.00 5.09 5.17 5.26 5.35 5.44
- -----------------------------------------------------------------------------------------------------------------------
70 4.38 4.44 4.51 4.57 4.64 4.71 4.78 4.86 4.93 5.02 5.10 5.19 5.28 5.37 5.47
71 4.39 4.45 4.51 4.58 4.65 4.72 4.79 4.87 4.94 5.03 5.11 5.20 5.29 5.39 5.49
72 4.39 4.45 4.52 4.58 4.65 4.72 4.80 4.87 4.95 5.04 5.12 5.21 5.31 5.40 5.51
73 4.40 4.46 4.52 4.59 4.66 4.73 4.81 4.88 4.96 5.05 5.14 5.23 5.32 5.42 5.52
74 4.41 4.47 4.53 4.60 4.67 4.74 4.81 4.89 4.97 5.06 5.15 5.24 5.34 5.44 5.54
- -----------------------------------------------------------------------------------------------------------------------
75 4.41 4.47 4.54 4.60 4.67 4.75 4.82 4.90 4.98 5.07 5.16 5.25 5.35 5.45 5.56
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OPTION B-MONTHLY INSTALLMENTS-JOINT AND EQUAL TO SECONDARY PAYEE
- ---------------------------------------------------------
AGE OF PRIMARY
PAYEE **
- ---------------------------------------------------------
65 66 67 68 69 70
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.35 $4.36 $4.37 $4.37 $4.38 $4.38
51 4.41 4.42 4.42 4.43 4.44 4.44
52 4.47 4.48 4.49 4.49 4.50 4.51
53 4.53 4.54 4.55 4.56 4.56 4.57
54 4.60 4.61 4.62 4.62 4.63 4.64
- ---------------------------------------------------------
55 4.67 4.67 4.68 4.69 4.70 4.71
56 4.73 4.74 4.75 4.76 4.77 4.78
57 4.80 4.81 4.83 4.84 4.85 4.86
58 4.88 4.89 4.90 4.91 4.92 4.93
59 4.95 4.96 4.98 4.99 5.00 5.02
- ---------------------------------------------------------
60 5.02 5.04 5.06 5.07 5.09 5.10
61 5.10 5.12 5.14 5.16 5.17 5.19
62 5.18 5.20 5.22 5.24 5.26 5.28
63 5.25 5.28 5.31 5.33 5.35 5.37
64 5.33 5.36 5.39 5.42 5.44 5.47
- ---------------------------------------------------------
65 5.41 5.45 5.48 5.51 5.54 5.56
66 5.45 5.53 5.57 5.60 5.64 5.67
67 5.48 5.57 5.66 5.70 5.73 5.77
68 5.51 5.60 5.70 5.79 5.83 5.87
69 5.54 5.64 5.73 5.83 5.94 5.98
- ---------------------------------------------------------
70 5.56 5.67 5.77 5.87 5.98 6.09
71 5.59 5.69 5.80 5.91 6.03 6.14
72 5.61 5.72 5.83 5.95 6.07 6.19
73 5.63 5.74 5.86 5.98 6.10 6.23
74 5.65 5.77 5.88 6.01 6.14 6.27
- ---------------------------------------------------------
75 5.67 5.79 5.91 6.04 6.17 6.31
- ---------------------------------------------------------
</TABLE>
** FOR ADDITIONAL AGE COMBINATIONS, THE PROPER RATES WILL BE PROVIDED UPON
REQUEST TO THE HOME OFFICE.
00715 7.05
(4/88)
<PAGE>
SETTLEMENT OPTION TABLES-CONTINUED
FOR EACH $1,000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION C-MONTHLY INSTALLMENTS CERTAIN AND LIFE THEREAFTER
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONTHLY INSTALLMENTS MONTHLY INSTALLMENTS MONTHLY INSTALLMENTS
AGE OF PAYEE -------------------------- AGE OF PAYEE ----------------------- AGE OF PAYEE ---------------------------
NUMBER OF YEARS CERTAIN NUMBER OF YEARS CERTAIN NUMBER OF YEARS CERTAIN
- ------------------------------------------------------------------------------------------------------------------------------------
5 10 15 20 5 10 15 20 5 10 15 20
- ------------------------------------------------------------------------------------------------------------------------------------
15 $3.58 $3.58 $3.58 $3.57 40 $4.16 $4.15 $4.14 $4.11 65 $6.14 $5.96 $5.69 $5.36
16 3.59 3.59 3.59 3.58 41 4.20 4.19 4.18 4.15 66 6.28 6.08 5.78 5.42
17 3.61 3.60 3.60 3.60 42 4.25 4.24 4.22 4.18 67 6.43 6.21 5.87 5.48
18 3.62 3.62 3.61 3.61 43 4.29 4.28 4.26 4.22 68 6.59 6.34 5.97 5.53
19 3.63 3.63 3.63 3.62 44 4.34 4.33 4.30 4.26 69 6.77 6.48 6.06 5.58
- ------------------------------------------------------------------------------------------------------------------------------------
20 3.65 3.65 3.64 3.64 45 4.39 4.38 4.35 4.30 70 6.95 6.62 6.16 5.64
21 3.66 3.66 3.66 3.65 46 4.45 4.43 4.40 4.34 71 7.14 6.77 6.25 5.69
22 3.68 3.68 3.68 3.67 47 4.50 4.48 4.44 4.39 72 7.35 6.93 6.35 5.73
23 3.70 3.70 3.69 3.69 48 4.56 4.54 4.50 4.43 73 7.57 7.09 6.44 5.77
24 3.72 3.71 3.71 3.70 49 4.63 4.60 4.55 4.48 74 7.81 7.26 6.54 5.81
- ------------------------------------------------------------------------------------------------------------------------------------
25 3.74 3.73 3.73 3.72 50 4.69 4.66 4.60 4.53 75 8.05 7.43 6.63 5.85
26 3.76 3.75 3.75 3.74 51 4.76 4.72 4.66 4.57 76 8.32 7.60 6.72 5.88
27 3.78 3.77 3.77 3.76 52 4.83 4.79 4.72 4.62 77 8.60 7.78 6.80 5.91
28 3.80 3.79 3.79 3.78 53 4.91 4.86 4.78 4.67 78 8.90 7.96 6.88 5.93
29 3.82 3.82 3.81 3.80 54 4.98 4.93 4.84 4.73 79 9.21 8.14 6.95 5.95
- ------------------------------------------------------------------------------------------------------------------------------------
30 3.84 3.84 3.84 3.83 55 5.07 5.01 4.91 4.78 80 9.55 8.32 7.02 5.96
31 3.87 3.87 3.86 3.85 56 5.15 5.08 4.98 4.84 81 9.90 8.50 7.08 5.98
32 3.90 3.89 3.89 3.88 57 5.24 5.17 5.05 4.89 82 10.27 8.67 7.13 5.98
33 3.92 3.92 3.91 3.90 58 5.33 5.25 5.12 4.95 83 10.66 8.84 7.18 5.99
34 3.95 3.95 3.94 3.93 59 5.43 5.34 5.19 5.01 84 11.06 9.01 7.22 5.99
- ------------------------------------------------------------------------------------------------------------------------------------
35 3.98 3.98 3.97 3.96 60 5.54 5.43 5.27 5.06 85 & 11.48 9.16 7.25 6.00
36 4.02 4.01 4.00 3.98 61 5.64 5.53 5.35 5.12 OVER
37 4.05 4.04 4.03 4.02 62 5.76 5.63 5.43 5.18
38 4.09 4.08 4.07 4.05 63 5.88 5.73 5.51 5.24
39 4.12 4.12 4.10 4.08 64 6.00 5.84 5.60 5.30
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------- --------------------------------
OPTION F
OPTION D-MONTHLY INSTALLMENTS-CASH REFUND INSTALLMENTS
CERTAIN
- -------------------------------------------------------------------------------------------- --------------------------------
AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY AGE OF PAYEE MONTHLY YEARS MONTHLY
INSTALLMENTS INSTALLMENTS INSTALLMENTS CERTAIN INSTALLMENTS
- -------------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 $3.57 45 $4.28 75 $6.71 1 $84.83
16 3.58 46 4.32 76 6.85 2 43.25
17 3.59 47 4.36 77 7.02 3 29.39
18 3.60 48 4.40 78 7.17 4 22.47
19 3.62 49 4.45 79 7.34 5 18.32
- -------------------------------------------------------------------------------------------- --------------------------------
20 3.63 50 4.50 80 7.51 6 15.56
21 3.65 51 4.55 81 7.70 7 13.59
22 3.66 52 4.60 82 7.87 8 12.11
23 3.68 53 4.65 83 8.06 9 10.97
24 3.69 54 4.71 84 8.25 10 10.06
- -------------------------------------------------------------------------------------------- --------------------------------
25 3.71 55 4.77 85 & 8.46 11 9.31
26 3.73 56 4.84 OVER 12 8.69
27 3.75 57 4.89 13 8.17
28 3.77 58 4.96 14 7.72
29 3.79 59 5.03 15 7.34
- -------------------------------------------------------------------------------------------- --------------------------------
30 3.81 60 5.10 16 7.00
31 3.84 61 5.18 17 6.70
32 3.86 62 5.26 18 6.44
33 3.89 63 5.34 19 6.21
34 3.91 64 5.43 20 6.00
- -------------------------------------------------------------------------------------------- --------------------------------
35 3.94 65 5.52 21 5.81
36 3.97 66 5.62 22 5.64
37 4.00 67 5.72 23 5.49
38 4.03 68 5.82 24 5.35
39 4.06 69 5.93 25 5.22
- -------------------------------------------------------------------------------------------- --------------------------------
40 4.09 70 6.05 26 5.10
41 4.12 71 6.17 27 4.99
42 4.16 72 6.30 28 4.89
43 4.20 73 6.43 29 4.80
44 4.24 74 6.57 30 4.72
- -------------------------------------------------------------------------------------------- --------------------------------
</TABLE>
00715 7.06
(4/88)
<PAGE>
ACCIDENTAL DEATH BENEFIT RIDER
If we have approved this rider as a part of this certificate and the rider
premium has been paid, this rider will become a part of the certificate. This
rider is subject to all applicable terms and provisions of the certificate. The
certificate specifications page or, if this rider is added after issue, the
request for policy change shows the rider amount, premium, and premium period.
Accidental Death Benefit
The benefit is subject to the restrictions and provisions of this rider. We will
pay the amount of this benefit as part of the certificate proceeds. We must
however receive due proof that the death of the insured:
1. Occurred while this rider is in force; and
2. Occurred before the certificate anniversary nearest age 70 of the insured;
and
3. Occurred within 120 days from the date of an accidental injury; and
4. Resulted directly from accidental injury and independently of all other
causes. There must be visible evidence of a contusion or wound on the
exterior of the body. If the injury is internal, it must be visibly
manifested on an autopsy. The exception to visible evidence would be in the
case of drowning.
Risks Not Assumed
We will not pay this benefit if the insured's death results directly or
indirectly from any of the following (nor will we pay this benefit if the
insured's death was caused by or contributed to by any of these conditions:)
1. Self-inflicted injury while sane or insane.
2. Any reasonably foreseeable injury.
3. Any bodily or mental infirmity or disease existing before or which commences
after the accidental injury.
4. Any medical or surgical treatment, unless such treatment is the result of a
covered accidental injury.
5. Any infection, other than a bacterial infection which occurs as a result of
a covered accidental injury.
6. The entry into the body, in any manner, whether voluntary or involuntary of
any of the following unless taken as prescribed by a licensed physician:
a. any intoxicant, excitant, hallucinogen; or
b. any other narcotic, drug or controlled substance.
7. The entry into the body, in any manner, whether voluntary or involuntary of
any of the following, unless involuntary in the course of employment:
a. any gas; or
b. any poison or poisonous substance.
8. Participation in an assault.
9. Participation in a felony.
10. Participation in a riot.
11. Injury which is a result of war or any act of war while the insured is in
the military, naval, or air forces of any country. Injury while in any
auxiliary or civilian combatant or non-combatant unit. "Any country"
includes any international organization or the combination of countries at
war. "War" includes undeclared war.
12. Travel or flight in or on or descent from any kind of aircraft if the
insured is a pilot, officer, or other member of the crew of the aircraft; or
is giving or receiving any kind of training or instruction; or has any
duties aboard the aircraft; or is being flown for the purpose of any descent
from the aircraft. "Aircraft" includes rocket craft or any other vehicle,
conveyance or device designed for travel or other movement in or beyond the
earth's atmosphere.
3080800 ADB 1
(11/86)
<PAGE>
Termination
You may terminate this rider as of any monthly anniversary following a proper
written request. If this rider is not already terminated it will terminate on
the date when any of the following events first occurs:
1. The certificate anniversary nearest age 70 of the insured; or
2. The lapse of the certificate; or
3. The surrender of the certificate; or
4. The maturity of the certificate; or
5. The date of death of the insured.
Cost of Insurance
The cost of insurance for the accidental death benefit is determined on a
monthly basis. The cost of insurance for a certificate month is calculated as
(a) multiplied by (b), where:
a. is the cost of insurance rate for this benefit; and
b. is the amount of accidental death benefit.
The cost of insurance rate for this benefit is based on the attained age and
rate class of the insured. Cost of insurance rates will be determined by us
based on expectations as to future experience. However, these rates will not
exceed those shown in the Guaranteed Cost of Insurance Rates for Accidental
Death Benefit Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deduction as defined in
the Cash Values section of the certificate. This increased monthly deduction
will be used to determine the cash value of the certificate on such monthly
anniversary.
General Provisions
We will have the right to examine the body of the insured. We also will have the
right to require an autopsy where not forbidden by law.
This rider will not affect the guaranteed values, loan values, nor other values
of the certificate, if any. This rider does not apply to any insurance provided
by any guaranteed value options of the certificate.
You may apply for reinstatement of the certificate with or without this rider.
We have the right to decide whether to approve the reinstatement of the
certificate with or without this rider.
Incontestability
This rider will be incontestable after it has been in force during the life of
the insured for two years from its date of issue.
The certificate date and effective date of this rider and the certificate are
the same unless another 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]
3080800 ADB 2
(11/86)
<PAGE>
WAIVER OF MONTHLY DEDUCTION RIDER
If we have approved this rider as a part of this certificate and the rider
premium has been paid, this rider will become a part of the certificate. This
rider is subject to all applicable terms and provisions of the certificate. The
certificate specifications page or, if this rider is added after issue, the
request for policy change shows the rider amount, premium, and premium period.
Waiver of Monthly Deduction
If you furnish us with due written proof that the insured is totally disabled,
as defined in this rider, we will waive monthly deduction payments on this
certificate. The insured must have become disabled before age 65. The disability
must have continued without interruption for at least six months. This rider
must be in force. Monthly deductions on this certificate will be waived as
follows:
Disability Beginning Before Age 60. If the insured's disability begins before
age 60, we will waive monthly deductions which were due during the six months of
uninterrupted disability. We will continue to waive monthly deductions after
that. However, the insured must continue to be totally disabled.
Disability Beginning Between Ages 60 and 65. If the insured's disability begins
on or after age 60 but before age 65, we will waive monthly deductions which
were due during the six months of uninterrupted disability. We will continue to
waive monthly deductions after that, but no later than age 65. However, the
insured must continue to be totally disabled.
Total Disability
"Total Disability" means the complete inability of the insured to perform all of
the substantial and material duties of his regular occupation. Such disability
must be the result of an injury or a sickness. The injury or sickness must
originate after this rider became effective.
However, after this period of disability has continued for 60 months, the
insured will be considered to be totally disabled only if he is unable to
perform all of the substantial and material duties of any occupation for which
he is reasonably fitted by education, training or experience. Such disability
must be the result of an injury or a sickness.
If after this rider becomes effective you suffer the total and irrecoverable
loss of sight in both eyes, or of the use of both hands or both feet, or of one
hand and one foot, this will be considered total disability as defined in this
rider. On such a loss the insured will still be considered disabled even though
working at an occupation.
Recurrent Total Disability
If, while this certificate is in force, the insured becomes disabled again after
having been totally disabled before, the new disability will be considered a
continuation of the previous period unless:
1. It is due to an entirely different cause; or
2. The insured has performed the material and substantial duties of a gainful
occupation. These duties must be performed for a continuous period of 6
months or more between such periods of total disability.
Risks Not Assumed
We will not waive monthly deductions under this rider if disability results from
war or any act of war while the insured is in the military, naval or air forces
of any country at war. We will also not waive monthly deductions if the insured
becomes disabled while in a civilian non-combatant unit serving with such
forces. "War" includes undeclared war and "any country" includes any
international organization or combination of countries.
Termination
You may terminate this rider as of any monthly anniversary following a proper
written request. If this rider is not already terminated it will terminate on
the date any of the following events first occurs:
1. When the insured attains age 65. This will be without prejudice to any
benefits granted for total disability occurring before age 65; or
3080700 WMD 1
(11/86)
<PAGE>
2. The lapse of the certificate; or
3. The surrender of the certificate; or
4. The maturity of the certificate; or
5. The date of death of the insured.
Notice of Claim and Proof of Disability
Before we waive any monthly deduction, we must receive at our Home Office:
1. Written notice of claim for this benefit during the lifetime of the insured.
This notice must be submitted during the continuance of total disability.
This notice cannot be submitted later than six months after age 65 of the
insured.
2. Written proof of total disability within six months after we receive written
notice of claim. In no event shall this proof be submitted later than the
date when any of the following events first occurs:
a. One year after age 65 of the insured;
b. Prior maturity of the certificate;
c. Surrender of the certificate for its net cash value;
d. One year from the due date of the first unpaid monthly deduction.
Failure to give such notice and proof within the time allowed will not always
invalidate a claim. We will consider the claim if you show us that it was not
reasonably possible to file notice and proof on time. However, you must file
notice and proof as soon as is reasonably possible. In no event will any monthly
deduction be waived or refunded if its due date was more than one year before we
received notice of claim at our Home Office.
We will require no further proof of disability and we will automatically waive
all further monthly deductions if:
1. The insured is totally disabled at age 65; and
2. All monthly deductions for at least the five years preceding age 65 have
been waived.
Examination of the Insured
We have the right to have the insured examined by our appointed examiner. We
also have the right to receive written proof of continuance of disability from
the insured at the following times:
1. After receipt of such notice of claim;
2. At any time within two years after we receive proof of total disability;
3. Not more than once each year after the first two years.
We will not waive any further monthly deductions if the insured refuses to be
medically examined. Nor will we waive further monthly deductions if proof of
continuance of disability is not furnished when we request it.
Incontestability
We cannot contest this rider as to statements made in the application for the
certificate after a period of two years from the date of issue if:
1. This rider shall have been in force during the lifetime of the insured; and
2. The insured does not become totally disabled within this period
3080700 WMD 2
(11/86)
<PAGE>
Cost of Insurance
The cost of insurance for the Waiver of Monthly Deductions Rider is determined
on a monthly basis. The cost of insurance for a certificate month is calculated
as (a) multiplied by (b) where:
a. is the cost of insurance rate for this rider; and
b. is the sum of items i, ii, and iii where:
i. is the cost of insurance for the certificate for the certificate month
ii. is the monthly expense charge, when applicable
iii. is any cost of insurance for the certificate month for any benefit
provided by a supplemental rider (other than Waiver of Monthly
Deduction Rider) made a part of the certificate.
The cost of insurance rate for this benefit is based on the attained age, and
rate class of the insured. Cost of insurance rates will be determined by us
based on expectations as to future experience. However, these rates will not
exceed those shown in the Guaranteed Cost of Insurance Rates for Waiver of
Monthly Deductions Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deduction as defined in
the Cash Values section of the certificate. This increased monthly deduction
will be used to determine the cash value of the certificate on such monthly
anniversary.
General Provisions
We will pay all benefits payable under the certificate the same as if monthly
deductions had not been waived.
If the insured becomes disabled during the grace period of the first monthly
deduction in default, we will allow this Waiver of monthly deduction as if
default had not occurred. However, you will be liable for the monthly deduction
in default. Interest compounded at 6% per year will be charged on this monthly
deduction.
You may apply for reinstatement of this certificate with or without this rider.
We have the right to decide whether to approve the reinstatement of this
certificate with or without this rider.
Date of Issue
The date of issue of the rider is the same as the certificate date unless
another date of issue 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]
3080700 WMD 3
(11/86)
<PAGE>
SPOUSE INSURANCE RIDER
If we have approved this rider as a part of this certificate and the rider
premium has been paid, it will become a part of the certificate. It is subject
to all applicable terms and provisions of the certificate. The certificate
specifications page shows the rider amount, premium mode, annual premium and
Name of Spouse.
Life Insurance Benefit
We will pay the amount of this rider to the beneficiary upon the death of the
spouse while this rider is in force. We must receive proof that the death
occurred before the expiry date of coverage on such insured.
Definition of Spouse
The spouse is the person as designated on the certificate specifications page.
Definition of Insured
The person whose life is insured under the certificate to which this rider is
attached.
Expiry Date of Insurance
The expiry date of this rider is the first occurrence of the certificate
anniversary nearest:
a. the 75th birthday of the spouse; or
b. the 75th birthday of the insured.
The Beneficiary
The beneficiary of this benefit shall be as stated in the application for this
rider.
You may change the beneficiary designation of the insurance on the life of any
person insured under this rider. This change must be done during the lifetime of
such person. To make such a change you must file a proper written request with
us. This request must be accepted by us at our Home Office. We have the right to
request the certificate for endorsement. If we accept your request, the change
will take effect as of the date of the request. This change will be subject to
any payment or action we took before we received your written request for the
change.
The beneficiary designation and any changes made will be subject to any
assignment of the certificate.
Assignment
This rider cannot be assigned by itself. Only if the certificate is assigned
will this rider then be subject to an assignment. An assignment of the
certificate will include the interest of the assignor in and to this rider. The
interest of the insured and all owners and beneficiaries under this rider will
also be included.
Suicide Exclusion
If the spouse dies by suicide, while sane or insane, within two years from the
rider issue date; (or within the maximum period permitted by laws of the state
in which this certificate was delivered, if less than two years) the amount
payable will be limited to the monthly deductions made on this rider. This
amount will be paid according to the provisions of this rider for the payment of
death claim benefit is on any such person.
This provision does not apply if this rider is issued to a Missouri citizen,
unless the spouse intended suicide when this rider was applied for.
Misstatement of Age
If the age of the spouse is incorrectly stated, we will adjust all benefits
under this rider to the amount that would have been provided at the correct age.
Cost of Insurance
The cost of insurance for the spouse rider is determined on a monthly basis.
This cost, for a certificate month, is determined by the amount of insurance for
this rider divided by 1000 and then multiplied by the sum of the following at
the spouse attained age.
a. the monthly cost of insurance rate for this rider; and
b. the monthly expense charge, as described in the certificate.
3080600 SIR
(11/86) 1
<PAGE>
The cost of insurance rate for this benefit is based on the attained age, and
rate class of the spouse. Cost Of insurance rates will be determined by us based
on expectations as to future experience. However, these rates will not exceed
those shown in Table of Guaranteed Cost of Insurance Rates for the Spouse Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the monthly deductions as defined
in the Cash Values section of the basic policy. This increased monthly deduction
will be used to determine the cash value of the policy on such monthly
anniversary.
Termination
You may terminate this rider as of any monthly anniversary following a written
request to us. We may require the policy and the rider for endorsement. This
rider will terminate when any of the following events first occurs:
1. The lapse of the policy; or
2. The surrender of the policy; or
3. The maturity of the policy; or
4. The date of death of the insured; or
5. The rider expiry date.
Reinstatement
This rider may be reinstated before its expiry date within five years after the
date of policy lapse if:
1. The policy is in force or is also being reinstated; and
2. We receive satisfactory proof that the spouse is insurable by our standards.
We have the right to approve the reinstatement of the policy with or without
this rider.
Incontestability
This rider will be incontestable after it has been in force during the life of
the spouse for two years from its date of issue.
Limited Continuation and Exchange Privilege Upon Death of Insured
If the insured dies while this rider is in force prior to the policy anniversary
nearest the 65th birthday of the spouse, there will be a limited continuation
and exchange privilege for 60 days. The face amount of this rider will remain in
effect without further charge until the 60 days expire. At the expiration of the
60 days this rider may be exchanged for a new policy on the life of the spouse
for a plan then offered by us. The face amount of the new policy may not be
greater than the face amount of this rider. The risk class of the spouse under
the new policy will be the same as that under this rider. No riders may be
attached to the new policy without our consent.
The date of issue and effective date of this rider and the policy are the same
unless another date is shown below.
___________________
DATE
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON]
3080600 SIR 2
(11/86)
<PAGE>
CHILDREN'S LIFE INSURANCE RIDER
TERM INSURANCE INVOLVED
Please Read This Rider Carefully
The waiting periods in the suicide and incontestability provisions are different
from those in the policy and begin on the effective date of this rider.
If we have approved this rider as a part of this policy and the rider premium
has been paid, this rider 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 request for policy change shows the rider amount, premium, and premium
period.
Level Term Life Insurance Benefit
We will pay the amount specified below to the Beneficiary under this rider upon
the death of the insured child while this rider is in force. We must receive
proof that the death occurred before the expiry date of coverage on such insured
child.
Amount of Insurance
The amount of insurance for this rider on each insured child is the rider
amount. Insurance on each child will become effective on the later of:
1. The date the child attains the age of 15 days; or
2. The day the child is first discharged from the hospital after birth.
Definition of Insured
The Insured is the person whose life is covered under the policy to which this
rider is attached.
Definition of Insured Child
An insured child is a child who, at the time of application for this rider, was:
1. A natural child, a stepchild or a child legally adopted of the Insured; and
2. Unmarried; and
3. Living in the household of the Insured; and
4. At least 15 days of age; and
5. Initially discharged from the hospital after birth; and
6. Less than insuring age 19 (or age 22 if a full-time student in higher
education beyond high school) on the first date of any part of the
application.
A natural child, a stepchild or an adopted child named at the time of the
application but who has not yet reached age 15 days will become an insured child
when:
1. The child does reach 15 days; and
2. The day the child is first released from the hospital after birth.
A child who is barn to the Insured after the application for this rider, and
while this rider is in force, shall become an insured child on the later of the
following dates:
1. The day the child attains age 15 days; or
2. The day the child is first released from the hospital after birth.
A child who is legally adopted by the Insured after the application for this
rider, and while this rider is in force, can become an insured child. This child
must be under insuring age 19 (or age 22 if a full-time student in higher
education beyond high school). If these requirements are met the coverage for
this child will begin on the date of adoption.
Expiry Dates of Insurance
The expiry date of this rider is the policy anniversary nearest the 65th
birthday of the Insured.
If this rider has not already expired or been canceled, then insurance on each
insured child will expire on the policy anniversary nearest the 25th birthday of
each child, if earlier.
3082900 1
(1/95)
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Paid-Up Term Insurance in Event of Death of Insured
If the death of the Insured occurs while this rider is in force, it will be
continued on a fully paid-up term insurance basis. We must receive proof of the
death of the Insured. This term insurance will be subject to the terms of this
rider.
Any child who would have become an insured child later, except for such death,
will become an insured child under this rider.
Owner
During the lifetime of the Insured, you will be the owner of this rider. If you
should die while the Insured is living, all rights of the owner will go the
Insured. If you should die while insurance on the life of an insured child is
still in force and the Insured is not living, then all rights of owner will go
to the insured child.
The Beneficiary
The Beneficiary of this benefit shall be:
The Insured, if living; if not then the estate of the person upon whose death
payment is to be made; unless:
1. Otherwise provided in the application; or
2. Changed by you.
You may change the Beneficiary designation of the insurance on the life of any
insured child under this rider, This change must be done during the lifetime of
such insured child. To make such a change you must file a proper written request
with us. This request must be accepted by us at our Home Office. We have the
right to request the policy for endorsement. If we accept your request, the
change will take effect as of the date of the request. This change will be
subject to any payment or action we took before we received your written request
for the change.
The Beneficiary designation and any changes made will be subject to any
assignment of the certificate.
Assignment
This rider cannot be assigned by itself. Only if the certificate is assigned
will this rider then be subject to an assignment. An assignment of the
certificate will include the interest of the assignor in and to this rider. The
interest of the Insured and all owners and beneficiaries under this rider will
also be included.
Suicide Exclusion
If the insured child dies by suicide, while sane or insane, within two years
from the issue date of this rider; (or within the maximum period permitted by
laws of the state in which this certificate was delivered, if less than two
years), the amount payable will be limited to the amount of monthly deductions
made on this rider. This amount will be paid according to the provisions of this
rider for the payment of death claim benefits on any such person.
This provision does not apply if the certificate this rider is attached to is
issued to a Missouri citizen, unless the insured child intended suicide when
this rider was applied for.
Within 31 days after the death of the Insured by suicide the Conversion
Privilege of this rider will be available for each insured child. We must
receive a proper written application within this 31 days. The date of issue of
the new policy will be the date of exchange.
Incorrect Age
The date that coverage under this rider expires or terminates will be based on
the correct age of each person insured.
Conversion Privilege
The term insurance on the life of each insured child under this rider may be
exchanged for a policy. This exchange will be without evidence of insurability.
The new policy may be for a plan then offered by us. This exchange is subject to
the following provisions:
1. The term insurance must be in force.
2. We must receive a proper written application within 31 days before the date
term insurance is to expire.
3. The face amount of the new policy will be the number of years the insured
child is covered under the rider to a maximum of five times the amount of
insurance under this rider for an insured child.
3082908 2
(1/95)
<PAGE>
4. The plan will be subject to our regular issue limits on the date of issue of
the policy.
The first premium payment for the new policy must be made at the time of
application. Future premiums are to be paid according to the terms of the new
policy.
The date of issue for the new policy will be the date the term insurance
under this rider expires on the life of the person to be insured by the new
policy. That person will not be covered under the new policy until the term
insurance expires.
The premium rate for the new policy will be based on the following:
1. The age last birthday of the person to be insured on the date of issue of
new policy; and
2. The risk class of such person under this rider; and
3. The set of rates used by us on the date of issue of the new policy. The new
policy may include rider benefits only with our consent, subject to our
requirements.
Surrender of Paid-Up Term Insurance
You may surrender this rider for its cash value while it is continued as paid-up
term insurance due to the death of the Insured. If you surrender this rider
within 31 days after a certificate anniversary date, the cash value of such
insurance will not be less than the cash value of such insurance on that
anniversary.
The cash value of the paid-up term insurance is the net single premium for such
benefits at the Attained Age of the person insured, at the time of surrender. It
is computed on the basis of:
1. The Commissioner's 1980 Standard Ordinary Mortality Table C; and
2. Interest at the rate of 3 1/2% a year compounded annually; and
3. Continuous functions.
Information on the amount of this cash value will be furnished upon request.
Cost of Insurance
The cost of insurance for the Children's Insurance Rider is determined on a
monthly basis. The cost of insurance for a certificate month is calculated as
(a) multiplied by (b), where:
a. is the cost of insurance rate for this rider; and
b. is the amount of insurance for this rider.
The cost of insurance rate for this benefit is based on the Attained Age of the
Insured. Cost of insurance rates will be determined by us based on expectations
as to future experience, However, these rates will not exceed those shown in the
Guaranteed Cost of Insurance Rates for Children's Insurance Rider.
Each Monthly Anniversary this rider is in force, the cost of insurance for the
rider (as determined above) will be added to the Monthly Deductions as defined
in the Cash Values section of the certificate. This increased monthly deduction
will be used to determine the cash value of the certificate on such Monthly
Anniversary.
Termination
You may terminate this rider as of any Monthly Anniversary following a written
request to us. We may require the certificate and this rider for endorsement.
This rider will terminate when any of the following events first occurs:
1. The lapse of the certificate; or
2. The surrender of the certificate; or
3. The maturity of the certificate; or
4. The rider expiry date.
3082900 3
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<PAGE>
Reinstatement
This rider may be reinstated before the expiry date within five years after the
date of certificate lapse if:
1. The certificate is in force or is also being reinstated; and
2. We receive satisfactory proof that each person to be insured is insurable by
our standards.
We have the right to approve the reinstatement of the certificate with or
without this rider. We will incur no liability for the death of an insured child
who died after the end of the grace period of the certificate and before the
date of reinstatement.
Incontestability
This rider will be incontestable after it has been in force during the life of
each person insured for two years from its date of issue.
The Certificate Date and effective date of this rider and the certificate are
the same unless another effective date of this rider is shown below.
_____________________
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
3082900 4
(1/95)
<PAGE>
Accelerated Death Benefit Settlement Option Rider
Please Read This Rider Carefully.
Subject to all the provisions of this rider and of the rest of the
policy/certificate, we will make the payments described below if the insured is
terminally ill or is confined to a nursing home.
This rider is non-participating.
Exercising these options may not qualify the benefits as life insurance proceeds
for tax purposes. Therefore, assistance should be sought from a personal tax
advisor.
Available Proceeds
The proceeds we would otherwise pay under the policy/certificate at the death of
the Insured on the date this option is elected, less any indebtedness and any
term insurance that comes from supplementary benefits (except level term
insurance riders still in the conversion period and for which we charge a
premium).
Benefit Factor
This is a fixed multiple that will be applied to the Settlement Benefit for each
option.
Settlement Benefit
This is the lump sum benefit available with an option. The benefit will equal
the cash surrender value of the policy/certificate on the date this option is
elected plus the Benefit Factor for the option times (a) minus (b); where (a) is
the Available Proceeds and (b) is the cash surrender value of the
policy/certificate.
Eligible Nursing Home
An institution or special nursing unit of a hospital that meets at least one of
the following requirements:
1. It is Medicare approved as a provider of skilled nursing care services; or
2. It is licensed as a skilled nursing home or as an intermediate care facility
by the state in which it is located; or
3. It meets all the requirements listed below:
a. It is licensed as a nursing home by the state in which it is located;
and
b. Its main function is to provide skilled, intermediate, or custodial
nursing care; and
c. It is engaged in providing continuous room and board accommodations to
three or more persons; and
d. It is under the supervision of a registered nurse (RN) or licensed
practical nurse (LPN); and
e. It maintains a daily medical record of each patient; and
f. It maintains control and records for all medications dispensed.
Institutions which primarily provide residential facilities are not eligible
nursing homes.
Terminal Illness Option
To choose this option, you must give us evidence that satisfies us that a
medical condition exists that would result in the Insured's life expectancy to
be 12 months or less. Part of that evidence must be a certification by a
licensed physician.
The Benefit Factor for this option is 0.85.
Nursing Home Option
You may choose this option if: (1) the Insured is confined to an Eligible
Nursing Home and has been confined there continuously for all of the preceding
six months; and (2) you give us evidence that satisfies us that the Insured is
expected to stay in the nursing home until death. Part of that evidence must be
a certification by a licensed physician.
The Benefit Factor for this option is 0.70.
3081100
(7/91)
<PAGE>
Effect on Policy/Certificate
This option is a complete settlement of the Company's obligation under the
policy/certificate causing all benefits under the policy/certificate based on
the lnsured's life to end. Any insurance under the policy/certificate on the
life of someone other than the Insured will stay in effect; we will waive all
future premiums for that insurance or convert it according to its terms as
though the lnsured's death had occurred.
Conditions
Your right to be paid under one of these options is subject to the following
conditions:
1. The policy/certificate must be in force other than as extended term
insurance.
2. You must choose the option in writing in a form that meets our needs.
3. The policy/certificate must not be assigned except to us as security for a
loan.
4. You must send us the policy/certificate.
5. The main purpose of a life insurance death benefit is to meet your estate
planning needs. This benefit provides for the accelerated payment of life
insurance proceeds. It is not meant to cause you to involuntarily invade
proceeds ultimately payable to the named beneficiary. Accelerated death
benefits will be made available to you on a voluntary basis only. Therefore:
a. If you are required by law to use this option to meet the claims of
creditors, whether in bankruptcy or otherwise, you are not eligible for
this benefit.
b. If you are required by a government agency to use this option in order
to apply for, obtain, or keep a government benefit or entitlement, you
are not eligible for this benefit.
Right to Cancel
If you ask us in writing and send us the policy/certificate, we will cancel his
rider.
Rider attached to and made a part of the policy/certificate on the Date of
Issue.
/s/ Matthew P. McCauley /s/ Carl H. Anderson
V.P., GENERAL COUNSEL PRESIDENT
AND SECRETARY
[LOGO OF PARAGON LIFE INSURANCE COMPANY APPEARS HERE]
3081100
(7/91)
<PAGE>
Exhibit 7
FORM OF PARTICIPATION AGREEMENT WITH
AMERICAN VARIABLE INSURANCE SERIES
<PAGE>
SERIES PARTICITATION AGREEMENT
------------------------------
THIS AGREEMENT, is hereby entered into on this 16th day of May, 1989, among
Paragon Life Insurance Company ("Paragon Life"), a life insurance company
organized under the laws of the State of Missouri for itself and on behalf of
Separate Account A of Paragon Life ("Separate Account"), a separate account
established by Paragon Life in accordance with the laws of the State of
Missouri, and American Variable Insurance Series ("Series"), an open-end
management investment company organized under the laws of the State of
Massachusetts, and Capital Research and Management Company ("CRMC"), an
investment advisor under the Investment Advisors Act of 1940.
WITNESSETH:
WHEREAS, the Separate Account has been established by Paragon Life pursuant
to Missouri law in connection with certain Flexible Premium Life Policies
("Policies") proposed to be issued to the public by Paragon Life; and
WHEREAS, the Separate Account is being registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the income, gains and losses, whether or not realized, from assets
allocated to the Separate Account are, in accordance with the applicable
Policies, to be credited to or charged against such Separate Account without
regard to other income, gains or losses of Paragon Life; and
WHEREAS, the Separate Account is subdivided into various sub-accounts
("Sub-accounts") under which income, gains and losses, whether or not realized,
from assets allocated to each such Sub-account are, in accordance with the
applicable Policies, to be credited to or charged against such Sub-Accounts
without regard to other income, gains or losses of other sub-accounts or of
Paragon Life; and
WHEREAS, CRMC (hereinafter also referred to as the "Advisor") is duly
registered as an investment advisor under the Investment Advisors Act of 1940;
and
WHEREAS, the Series is registered as an open-end management investment
company organized under the laws of the State of Massachusetts and will operate
in accordance with the 1940 Act; and
WHEREAS, the Series is divided into various funds ("Funds"), each Fund
being subject to separate investment policies and restrictions which may not be
changed without a majority vote of the shareholders of such Fund; and
WHEREAS; certain Funds will serve as the underlying investment medium for
certain Sub-accounts; and
-1-
<PAGE>
WHEREAS, Walnut Street Securities, Inc., the principal underwriter for the
Policies to be funded by the Separate Account, is a broker-dealer registered as
such under the Securities Exchange Act of 1934;
NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
Paragon Life, the Separate Account, CRMC, and the Series hereby agree as
follows:
1. Paragon Life's employer sponsored variable life program (Securities and
Exchange Commission registration number 33-18341) and group sponsored
program for A.G. Edwards and other group programs (Securities and
Exchange Commission registration number 33-27242) will be the only
Policies used with the Series. With respect to the group-sponsored
program for A.G. Edwards and other employers, Paragon Life will obtain
permission from CRMC prior to offering such program to any entity other
than A.G. Edwards. The Policies funded through the Separate Account
will provide for the allocation of purchase payments among certain Sub-
accounts for investment in such shares of the Funds as may be offered
from time to time in the prospectus of the Policies. The selection of
the particular Sub-account is to be made by the Policy owner and such
selection may be changed or the policy value may be transferred among
Sub-accounts in accordance with the terms of the Policies.
2. No representation is made as to the number or amount of such Policies
to be sold, however, Paragon Life, through Walnut Street Securities,
Inc., will make reasonable efforts to market such Policies.
3. Purchases and redemptions of shares will be at the next computed net
asset value for the appropriate Sub-account, as set forth in the
current Series prospectus and Statement of Additional Information, and
shall be submitted by Paragon Life to the Series' transfer agent
pursuant to procedures and in accordance with the payment provisions
set forth in Appendix A hereto. Appendix A may be modified from time to
time with the mutual consent of the parties by written memoranda which
memoranda will be attached to and incorporated into this Agreement as
if fully set forth herein. Purchase or withdrawal requests received by
Paragon Life (or its designated agent) shall be deemed to have been
received by the Series' transfer agent for proposes of computing the
share price for corresponding purchases and redemptions of shares of
the Series; provided that such requests are communicated to the Series'
transfer agent not later than the time and in the manner designated by
the Series' transfer agent, on the business day next following such
receipt by Paragon Life (or its designated agent).
-2-
<PAGE>
The Series reserves the right to suspend sales if the Board of
Trustees of the Series deems it appropriate and in the best interests
of the Series or in response to an order of an appropriate regulatory
authority.
4. Transfer of Fund shares will be by book entry only. No stock
certificate will be issued to the Separate Account. Shares of each Fund
will be recorded in an appropriate title for the corresponding Sub-
account on the books of Paragon Life. If, however, state law requires
transfer other than by book entry, then the Series agrees to provide
the required form of transfer.
Paragon Life will provide to the Series a list of Policy owners
(and their addresses) upon written notice from any officer or Trustee
of the Series.
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 Policies obtained pursuant to this
Agreement and shall not disclose, disseminate, or utilize such names
and addresses or other confidential information without written consent
of Paragon Life or unless required by state or federal regulatory
bodies, as authorized by applicable law; provided, however, that the
Policy owners may be contacted with respect to Series matters.
Each party hereto shall cooperate with each other party and all
appropriate governmental authorities 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.
CRMC and the Series agree that all records and other data
pertaining to the Policies are the exclusive property of Paragon Life
and that any such records and other data shall be furnished to Paragon
Life by CRMC and the Series upon termination of this Agreement for any
reason whatsoever. This shall not preclude CRMC or the Series from
keeping copies of such data or records for its own files subject to the
provisions of this section.
5. The Series shall furnish notice on the ex-dividend date to Paragon Life
of any dividend or distribution payable on any shares underlying Sub-
accounts. All of such dividends and distributions as are payable on
shares of a Fund recorded in the title for the corresponding Sub-
account shall be automatically reinvested in additional shares of that
Fund. The Series shall notify Paragon Life of the number of shares so
issued.
-3-
<PAGE>
6. The terms governing remuneration of CRMC, in its capacity as an
investment advisor to the Series, are set forth in the Investment
Advisory and Service Agreement between the Series and CRMC and the
Series prospectus. The Series shall pay all its expenses incidental to
its performance under this Agreement. The Series shall see to it that
all of its shares are registered and authorized for issue in accordance
with applicable federal and state laws prior to their purchase by
Paragon Life for the Sub-accounts. The Series shall bear the expenses
for the cost of registration of its shares, preparation of its
prospectus, proxy materials and reports, the printing and distribution
of such items to each Policy owner who has allocated net amounts to any
Sub-account, the preparation of all statements and notices required by
any federal or state law, and taxes imposed upon the Series on the
issue or transfer of the Series' shares subject to this Agreement. The
parties shall cooperate in the printing of the prospectuses of the
Policies and the Series. CRMC shall provide Paragon Life with a
reasonable quantity of Series prospectuses and reports to be used in
connection with transactions contemplated by this Agreement. CRMC may
request reimbursement from Paragon Life for the cost of printing and
mailing prospectuses and reports which are used as sales literature
with prospective Policy owners to the extent such supplied materials
exceed, in the opinion of CRMC, reasonable quantities.
7. Paragon Life shall make no representations concerning the Series or its
shares except those contained in the then current prospectus of the
Series and in printed information subsequently issued on behalf of the
Series and approved in writing by the Series as supplemental to such
prospectus, or otherwise approved by CRMC or the Series in writing.
8. Each Fund of the Series shall comply with Section 817 (h) of the
Internal Revenue Code of 1986, and the regulations issued thereunder
(Reg. Section 1.817-5, March 1,1989), relating to the diversification
requirements for variable annuity, endowment, and life insurance
contracts.
9. It is understood among the parties to this Agreement that shares of the
Funds may be offered to separate accounts of various insurance
companies in addition to Paragon Life and in connection with insurance
contracts or policies other than the Policies (this practice is herein
described as "mixed and shared funding"). It is also understood among
the parties that shares of the Funds may be offered to other persons
identified in paragraph (f) of Regulation Section 1.817-5, in order
that the Separate Account can rely on the look-through provisions of
said paragraph and otherwise subject to section eight above. The Series
and CRMC filed an application and an amendment
-4-
<PAGE>
thereto (file number 812-6393) (the "Application") for an order of the
Securities and Exchange Commission ("SEC"), pursuant to Section 6 (c)
of the 1940 Act exempting the Series and CRMC and certain life
insurance companies from certain provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit shares of the Series
to be sold in connection with mixed and shared funding. The order was
granted in SEC release no. IC-15899 (the "Order"), subject to certain
conditions contained in the Application, (the "Conditions"). The
following is a summary of the Conditions as set forth in the Notice of
Application and Opportunity for Hearing (SEC release no. IC-15233):
a) A majority of the Board of the Series shall consist of
persons who are not "interested persons" of the Series as
defined by the 1940 Act.
b) The Board of the Series will monitor the Series for the
existence of any material irreconcilable conflict between the
interests of contract (or policy) owners of all separate
accounts investing in the Series.
c) Paragon Life shall report any potential or existing conflict
to the Series' Board.
d) The Board of the Series shall promptly notify Paragon Life in
writing of any irreconcilable material conflict and its
implications.
e) If an irreconcilable material conflict exists, Paragon Life
shall, to the extent practicable, take whatever steps are
necessary to eliminate such a conflict.
f) Paragon Life shall consider whether disclosure in the
prospectus of the Policies regarding potential risks of mixed
and shared funding is appropriate.
g) Paragon Life shall vote shares of the Series in accordance
with instructions received from the Policy owners whose
Policy cash values are invested in shares of the Series.
Paragon Life shall vote shares of the Series for which no
instructions have been received in the same proportion as
shares of the Series for which instructions have been
received from Policy owners.
h) Paragon Life and the Series shall undertake to comply with
any material applicable regulation of the SEC
-5-
<PAGE>
which may be adopted relating to mixed and shared funding
(including applying for any additional exemptive relief, if
necessary).
i) The Series prospectus shall disclose that (1) shares of the
Series are offered to insurance company separate accounts
funding both variable annuity and variable life insurance
contracts, (2) interests of various contract owners
participating in a Series might be in conflict, and (3) the
Board will monitor for the existence of any material
conflicts and determine what action, if any, should be taken.
Paragon Life hereby agrees to comply with all the Conditions, as
applicable, and the Series reaffirms its undertaking to comply with
the Conditions. The provisions of this Section are not subject to
termination pursuant to section 10 of this Agreement and shall remain
in effect for as long as necessary to satisfy the Conditions.
10. This Agreement shall terminate:
(a) at any time on six months' written notice by CRMC or the
Series to Paragon Life or on six months' written notice by
Paragon Life to CRMC or the Series without the payment of
any penalty (provided, however, if Paragon Life is not able,
acting in good faith, to obtain suitable substitute
investment media within six months, this Agreement shall
terminate one year from the date of the notice of
termination); or
(b) at the option of Paragon Life or of the Series upon
institution of formal enforcement proceedings against the
Series or CRMC by the SEC; or
(c) upon a vote of the holders of a majority of the shares
underlying the Policies having an interest in a particular
Sub-account to substitute the shares of another investment
company for the corresponding Series shares in accordance
with the terms of the Policies for which those shares had
been selected to serve as the underlying investment medium.
Paragon Life will give 60 days' prior written notice to the
Series upon the occurrence of the earlier of the following
actions taken for the purpose of substituting shares of the
Funds: (1)
-6-
<PAGE>
an application made to the SEC or (2) a proposed Policy
owner vote; or
(d) in the event the shares of the Funds are not registered,
issued, or sold in accordance with applicable state and/or
federal law or such law prohibits the use of such shares as
an underlying investment for the Policies issued or to be
issued by Paragon Life. Prompt notice of such an event shall
be given by each party to the other in the event the
conditions of these provision occur; or
(e) upon assignment of this Agreement at the option of any party
not assigning this Agreement.
11. Each notice required by this Agreement shall be given in writing and
delivered via certified mail -- return receipt requested to:
Paragon Life Insurance Company
Separate Account A
100 South Brentwood Blvd.
St. Louis, MO 63105
American Variable Insurance Series
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
12. The obligation of the Series under this Agreement are not binding upon
any of the Trustees, officers, employees, agents, or shareholders of
the Series individually, but bind only the Series' assets. Paragon
Life and the Separate Account agree to look solely to the assets of
the Series for the satisfaction of any liability of the Series, with
respect to this Agreement and will not seek recourse against the
members of the Board of Trustees of the Series, or its officers,
employees, agents, or shareholders, or any of them, or any of their
personal assets for such satisfaction.
13. CRMC agrees to indemnify and hold harmless Paragon Life, each member
of its Board of Directors, each of its officers, and any person that
controls Paragon Life within the meaning of section 15 of the
Securities Act of 1933 against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of CRMC) or litigation (including legal and other expenses) to
which Paragon Life may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
-7-
<PAGE>
expenses (or actions in respect thereof) or settlements arise as a
result of (1) Paragon Life's reliance on any information contained in
a then current prospectus, Statement of Additional Information, or
report or the Series; or any current information communicated to
Paragon Life in writing by the Series or CRMC or (2) any failure by
the Series or CRMC, whether unintentional or in good faith or
otherwise to comply with section eight above, provided that CRMC shall
have been given prompt written notice concerning any matter for which
indemnification is otherwise afforded hereunder; however, CRMC shall
be entitled to, but need not, rely upon the interpretation of the
requirements of 817 (h) by counsel to Paragon Life when such
interpretation is requested by CRMC.
CRMC shall, at all times, have the right, but not the obligation, to
take over and conduct, in the name of Paragon Life and/or the Separate
Account, the investigation and defense of any claim by a third party
for which indemnification may be sought, and in such event, Paragon
Life and/or the Separate Account shall cooperate in every way with the
Series and/or CRMC.
14. Paragon Life agrees to indemnify and hold harmless CRMC and the
Series, each member of their Boards of Directors or Trustees, each of
their officers, and each person that controls CRMC or the Series
within the meaning of the Securities Act of 1933 against any and all
losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of Paragon Life) or litigation
(including legal and other expenses) to which CRMC may become subject
under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or action in respect
thereof) or settlements arise as a result of (1) CRMC's or the Series'
reliance on any information contained in the then current prospectus,
Statement of Additional Information, or contract of the Separate
Account; or any information communicated to the Series or CRMC in
writing by Paragon Life or (2) any failure by Paragon Life or the
Separate Account, whether unintentional or in good faith or otherwise
to adequately qualify the Policies as "variable contracts" as defined
in Section 817 (d) of the Internal Revenue Code, provided that Paragon
Life shall have been given prompt written notice concerning any matter
for which indemnification is otherwise afforded hereunder; however,
Paragon Life shall be entitled to, but need not, rely upon the
interpretation of the requirements of Section 817 (d) by counsel to
CRMC when such interpretation is requested by Paragon life.
Paragon Life shall, at all times, have the right, but not the obligation,
to take over and conduct, in the name of the Series and/or CRMC, the
investigation and defense of any claim by a third party for which
-8-
<PAGE>
indemnification may be sought, and in such event, the Series and CRMC shall
cooperate in every way with Paragon Life and/or the Separate Account.
15. This Agreement shall be construed in accordance with the laws of the
State of Missouri.
IN WITNESS WHEROF, the parties hereto have caused the Agreement to by duly
executed and attested as of the date first above written.
PARAGON LIFE INSURANCE
COMPANY OF BEHALF OF ITSELF
AND SEPARATE ACCOUNT
Attest:
/s/ Craig K. Nordyke By: /s/ Carl H. Anderson
- ----------------------------------- --------------------------------
Attest: AMERICAN VARIABLE INSURANCE
SERIES
/s/ Michael Downer By: /s/ Thomas E. Terry
- ----------------------------------- --------------------------------
Attest: CAPITAL RESEARCH AND
MANAGEMENT COMPANY
/s/ Michael Downer By: /s/ Grahm Holloway
- ----------------------------------- --------------------------------
-9-
<PAGE>
Exhibit 8
FORM OF APPLICATION FOR GROUP CONTRACT (10914)
<PAGE>
MASTER APPLICATION FOR GROUP INSURANCE
The undersigned Applicant hereby applies to Paragon Life Insurance Company for a
Group Contract providing Flexible Premium Variable Life Insurance coverage.
IT IS UNDERSTOOD AND AGREED THAT:
(1) The conditions of eligibility for Group Flexible Premium Variable Life
Insurance, benefits and amounts, the conditions under which the benefits
will be payable, and other terms and conditions will be in accordance with
the contract issued and any amendments, riders, or endorsements thereto
(which together with the copy of this Application attached to the contract,
certificate, and the individual applications, if any, of the persons to be
insured will constitute the entire contract);
(2) No person other than a duly authorized officer of the Company at its home
office has authority to accept this Application or otherwise bind the
Company;
(3) The Group Flexible Premium Variable Life Insurance Contract will become
effective provided this Application is accepted by a duly authorized
officer of the Company at its home office;
(4) The Applicant, as Contractholder, will furnish the Company each month with
the required information concerning individuals to be insured whose Group
Flexible Premium Variable Life Insurance coverage is to be changed or
discontinued, and similar information on Dependents where Dependent
Insurance is involved;
(5) The Group Flexible Premium Variable Life Insurance applied for is not in
addition to any other insurance on any group or similar basis except (if no
exceptions, so state):__________________________________
(6) The Group Flexible Premium Variable Life Insurance applied for does not
replace any other insurance on any group or similar basis except (if no
exceptions, so state):___________________________________
(7) This Application may be amended solely on the basis of a written request of
the undersigned Applicant made at any time prior to its acceptance by the
Company. The Company is hereby authorized to modify this Application in
accordance with any such written request; provided further that any
amendment of the contract which affects the terms of this Application will
also be considered an amendment of the Application.
Dated at this day of
------------- ----------------- -----------------, -------------
--------------------------------------------------------
(Full or corporate name of Applicant)
------------------------------------ ---------------------------------
(Witnessed by) (Title)
[PARAGON LOGO HERE]
10914
(4/88)
<PAGE>
Exhibit 9
FORM OF APPLICATION FOR EMPLOYEE INSURANCE GI
(GROUP CONTRACT 10915)
<PAGE>
APPLICATION FOR [PARAGON LOGO] EMPLOYEE APPLICATION
GROUP INSURANCE
WITH:
ELIGIBILITY FOR INSURANCE COVERAGE UNDER THE
APPLICATION IS LIMITED TO EMPLOYEES ACTIVELY
AT WORK FOR WAGES. AT LEAST THIRTY 30 HOURS
PER WEEK ON THE DATE OF THIS APPLICATION.
- -------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below? /_/ Yes /_/ No Date Employed ___/___/___
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A. Have you missed ten or more consecutive days of work or a total of thirty or
more days in the last year due to accident, illness, injury, or hospital
confinement? (Work is defined as performing all of the duties of your
occupation or profession.) /_/ Yes /_/ No
B. Is any proposed insured child hospitalized in the date of this application?
/_/ Yes /_/ No
If "Yes" OR if applying after your first enrollment period, complete HEALTH
QUESTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Employee Name_________________________________ Social Security No:___-__-____
Last First MI Maiden
Mailing Address_______________________________ Date of Birth __/__/__ /_/ Male
Daytime
_____________________________________ Phone (___)________ /_/ Female
City State Zip
Annual Salary _____________
Employer _____________________________________
Job Location ___________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Insurance Applied For: /_/ $5,000 Child Insurance Rider
-----------------
Coverage per child (must be less than
18 years old at issue)
Voluntary Enriched Life
- -------------------------
/_/ Level /_/ Increasing ______________________
Frequency
_________________________
Amount of Insurance
_________________________ _______________________ _____________________
Premium + Additional Benefits = Total Premium
Premium
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Beneficiary:______________________________ Relationship:______________________
(Beneficiary will be Estate unless otherwise indicated)
(Beneficiary for Child Rider will be as indicated in the rider provision)
Owner (Employee will be Owner unless otherwise indicated):_____________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
I hereby authorize payroll deductions of any premiums to be paid for insurance
purchased from Paragon Life Insurance Company. PLEASE NOTE INTERIM INSURANCE
DESCRIPTION ON PAGE 2.
I have read the above questions and answers. I declare that the answers are
complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
Date at ____________ on ________________ ___________________________________
City & State Mo. Day Yr. Signature of applicant Employee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DECLINATION OF COVERAGE
I hereby certify that I have been given the opportunity to apply for the
insurance and after carefully consideration have decided not to apply at this
time. I also understand that a later application may require submission of
evidence of insurability and that as a result coverage may be denied at that
time.
_______________ _________________________________ ______________________
Date Employee Name (please print) Signature of Employee
- -------------------------------------------------------------------------------
10915
(4/92)
<PAGE>
HEALTH QUESTIONS (Complete ONLY if (1) applying in excess of Guaranteed Issue
Amount, (2) question A or B is answered "Yes", or (3) applying after your first
enrollment period.)
<TABLE>
<CAPTION>
<S> <C> <C>
(PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
1. Have you ever had or been advised to have surgery, or diagnosis or
treatment for diabetes, heart disease or disorder, stroke, kidneys,
respiratory or nervous system disorder, cancer, high blood pressure, or
tumor? [_] Yes [_] No
2. Have you been hospitalized at any time during the last five years? [_] Yes [_] No
3. Have you received treatment or joined an organization because of alcohol or
drug use or been medically advised to do so? [_] Yes [_] No
4. a) Have you ever had or been treated or diagnosed by a member of the
medical profession for AIDS (Acquired Immune Deficiency Syndrome) or ARC
(AIDS Related Complex)? [_] Yes [_] No
b) Have you tested positive for antibodies to the AIDS (Human
Immunodeficiency Virus; HIV) virus? [_] Yes [_] No
5. Are you disable and/or not performing all of the duties of your occupation
or profession? [_] Yes [_] No
6. Employee: Height Weight
------------------- -----------------
</TABLE>
- --------------------------------------------------------------------------------
REMARKS: (Use separate piece of paper of additional space is needed)
- --------------------------------------------------------------------------------
Name and Question # Date Nature of Condition Duration Result
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT:
- ------------------------
Plan # ___________________________
Date of
Issue_____________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERIM INSURANCE DESCRIPTION
Guaranteed Issue not available for particular proposed insured if Question A or
B is answered "Yes" or if applying after his/her first enrollment period. Any
person who qualifies in all respects for guaranteed issue coverage shall be
considered covered on an interim basis from the date of application for the
amount of insurance applied for up to the applicable "GUARANTEED ISSUE AMOUNT".
The Accidental Death Benefit Rider shall not, however, be in effect prior to the
actual date of issue of a policy. If death is due to suicide on the basis stated
in the policy, the Company's liability under this interim Insurance is limited
to the return of the amount paid or withheld. Interim insurance ends on the
earliest of the following dates: (a) the date insurance begins on the policy
applied for; (b) the date a policy, other than applied for, is offered to the
applicant; (c) the date the company notifies the applicant that the application
for any proposed insured is declined; (d) 60 days from the date of application;
or (e) termination of employment with the sponsoring employer.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I have read the above questions and answers. I declare that the answers are
Complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsurers, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic
copy is as valid as the original. I have a right to receive a copy of this upon
request.
Dated at on
------------------------- ----------------------------- --------
City and State Month Day Year
--------------------------------------
Signature of Applicant Employee
- --------------------------------------------------------------------------------
10915
(4/92)
<PAGE>
Exhibit 10
FORM OF APPLICATION FOR EMPLOYEE INSURANCE SI
(GROUP CONTRACT 10921, 10920)
<PAGE>
[PARAGON LOGO]
APPLICATION FOR EMPLOYEE APPLICATION
GROUP INSURANCE WITH:
ELIGIBILITY FOR INSURANCE COVERAGE
UNDER THE APPLICATION IS LIMITED
TO EMPLOYEES ACTIVELY AT WORK FOR
WAGES. AT LEAST THIRTY 30 HOURS
PER WEEK ON THE DATE OF THIS
APPLICATION.
- --------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below? [_] Yes [_] No Date Employed________/_____/_____
- --------------------------------------------------------------------------------
Employee Name ______________________________________________
Last First MI Maiden
Mailing Address ____________________________________________
____________________________________________
City State Zip
Daytime Phone ( )
-----------------------------------------------
Employer ___________________________________________________
Social Security No: ________-________-________
Date of Birth ________________/_______/_______ [_] Male
M D Y [_] Female
Daytime Phone ( )
---------------------------------
Annual Salary ________________________________
Job Location _________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Insurance Applied For: [_] ___________________ Child Insurance Rider
Coverage per child (must be less than 18 years old at issue)
____________________________
[_] Level [_] Increasing [_] Accidental Death Benefit
for Amount of Insurance
___________________
Frequency
____________________________
Amount of Insurance [_] Waiver of Monthly Deduction
____________________________ ___________________________ _______________
Premium + Additional Benefits Premium = Total Premium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: _____________________________ Relationship: _______________________
(Beneficiary will be Estate unless otherwise indicated)
(Beneficiary for Child Rider will be as indicated in the rider provision)
Owner (Employee will be Owner unless otherwise indicated): _____________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH QUESTIONS (PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
1. Have you ever had or been advised to have surgery, or
diagnosis or treatment for diabetes, heart disease or
disorder, stroke, kidneys, respiratory or nervous system
disorder, cancer, high blood pressure, or tumor? [_] Yes [_] No
2. Have you been hospitalized at any time during the last
five years? [_] Yes [_] No
3. Have you received treatment or joined an organization
because of alcohol or drug use or been medically
advised to do so? [_] Yes [_] No
4. a) Have you ever had or been treated or diagnosed by a
member of the medical profession for AIDS (Acquired
Immune Deficiency Syndrome) or ARC (AIDS Related
Complex)? [_] Yes [_] No
b) Have you tested positive for antibodies to the AIDS
(Human Immunodeficency Virus: HIV) virus? [_] Yes [_] No
5. Are you disable and/or not performing all of the duties
of your occupation or profession? [_] Yes [_] No
6. Employee: Height___________________ Weight________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REMARKS: (Use separate piece of paper if additional space is needed)
- --------------------------------------------------------------------------------
Name &
Question # Date Nature of Condition Duration Result
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10921
(4/92)
<PAGE>
- --------------------------------------------------------------------------------
I hereby authorize payroll deductions of any premiums to be paid for
insurance purchased from Paragon Life Insurance Company.
I have read the above questions and answers. I declare that the answers are
complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
MIB, Inc. (Medical Information Bureau)
You are our most important source of information, but we may also collect or
verify information by contact the Medical Information Bureau. Information
regarding your insurability will be treated as confidential. We may make a brief
report to MIB, Inc. It is a non-profit membership Organization of insurance
companies. It provides an information exchange for its members. If you apply to
another member company for life or health insurance or submit a claim for
benefits, MIV, Inc., by request will supply the member with information in its
file.
You may request from MIB, Inc., any information it may have in your file.
(Medical information will be released only to your physician.) You may question
the accuracy of the information. You may seek a correction by contacting MIB.
This is in accordance with the guidelines set forth in the federal Fair Credit
Reporting Act. MIB, Inc.'s full address is below.
We may also release information to our reinsurers and to other life insurance
companies to whom you may apply for life or health insurance, or submit claim.
MIB, Inc. *Post Office Box 105* Essex Station*
Boston, Massachusetts 02110* (617) 426-3660
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any Physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsureres, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic
copy is as valid as the original. I have a right to receive a copy of this upon
request.
Dated at ______________________________ on _____________________________________
City & State Month Day Year
_____________________________________
Signature of Applicant Employee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT: Plan #_________________________
- ------------------------
Date of Issue _________________
(Home Office Use Only)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DECLINATION OF COVERAGE
I hearby certify that I have been given the opportunity to apply for the
insurance and after carefully consideration have decided not to apply at this
time. I also understand that a later application may require submission of
evidence of insurability and that as a result coverage may be denied at that
time.
_________________ _______________________________ __________________________
Date Employee Name (please print) Signature of Employee
- --------------------------------------------------------------------------------
10921
(4/92)
<PAGE>
APPLICATION FOR ELIGIBILITY FOR INSURANCE COVERAGE UNDER THE
INSURANCE WITH: APPLICATION IS LIMITED TO EMPLOYEES ACTIVELY
AT WORK FOR WAGES. AT LEAST THIRTY 30 HOURS
[PARAGON LIFE LOGO] PER WEEK ON THE DATE OF THIS APPLICATION AND
ON THE DATE OF ISSUE OF THE CERTIFICATE.
- --------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below?
[_] Yes [_] No Date Employed___________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name ____________________________ Social Security No: ____-___-____ [_] Male
Last First MI Maiden [_] Female
Mailing Address __________________________ Date of Birth ____/____/____
__________________________ Annual Salary ____________
City State Zip
Employer _________________________________ Job Title/Classification _________
Job Location _____________________________ Daytime Phone Number ______________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: ______________________________ Relationship: ______________________
(Beneficiary will be Estate unless otherwise indicated)
Owner (Employee will be Owner unless otherwise indicated): _____________________
Owner
Mailing Address ___________________________ Owner
Soc. Sec. No. ____-___-____
___________________________
City State Zip
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT:
- -----------------------
Plan # _____________________________
Date of Issue_______________________
- -------------------------------------------------------------------------------
(Home Office Use Only)
- -------------------------------------------------------------------------------
I have read the above questions and answers. I declare that the answers are
Complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
Paragon Life, its reinsurers, insurance support organizations, and their
authorized representative, may obtain medical and other information in order to
evaluate my application for life insurance. Application for insurance will not
be accepted without proper signatures. A photocopy of this authorization is as
valid as the original.
I hereby authorize payroll deductions of any premiums to be paid for insurance
purchases from Paragon Life Insurance Company.
Dated at_________________________________________on___________________ _______
City and State Month Day Year
______________________________________ _______________________________________
Signature of Applicant Signature of Proposed Insured
(if other than Proposed Insured)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DECLINATION OF COVERAGE
I hereby certify that I have been given the opportunity to apply for the
insurance and after careful consideration have decided not to apply at this
time. I also understand that a later application may require submission of
evidence of insurability and that as a result coverage may be denied at that
time.
______________ ________________________________ __________________________
Date Employee Name (please print) Signature of Employee
- -------------------------------------------------------------------------------
10920
(4/89)
<PAGE>
Exhibit 11
FORM OF APPLICATION FOR SPOUSE INSURANCE SI
(GROUP CONTRACT 10917)
<PAGE>
[PARAGON LOGO]
APPLICATION FOR SPOUSE APPLICATION
GROUP INSURANCE
WITH: ELIGIBILITY FOR INSURANCE COVERAGE
UNDER THE APPLICATION IS LIMITED
TO EMPLOYEES ACTIVELY AT WORK FOR
WAGES, AT LEAST THIRTY (30) HOURS
PER WEEK ON THE DATE OF THIS
APPLICATION.
- --------------------------------------------------------------------------------
Spouse Name ________________________________________________
(Proposed Insured) Last First MI Maiden
Mailing Address ____________________________________________
____________________________________________
City State Zip
Daytime Phone (___)_________________________________________
Employee Name ______________________________________________
Last First MI
Sponsoring Employer ________________________________________
Social Security No: ________-________-________
Date of Birth ________________/_______/_______ [_] Male
M D Y [_] Female
Employee Annual Salary ________________________________
Employee Social Security No. __________________________
Employee Date of Birth ________________/_______/_______
M D Y
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Insurance Applied For: Amount of Insurance Premium Frequency
Voluntary Enriched Life ------------------- ---------------- -------------
- -----------------------
[_] Level [X] Increasing
[_] $5,000 Child Insurance Rider
--------
(Coverage per child (must be less __________________ _____________
than 18 years old at issue)) Additional Premium Total Premium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: _____________________________ Relationship: _______________________
(Beneficiary will be Employee unless otherwise indicated)
Owner (Employee will be Owner unless otherwise indicated): _____________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH QUESTIONS
- ----------------
(PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
1. Have you ever had or been advised to have surgery, or
diagnosis or treatment for diabetes, heart disease or
disorder, stroke, kidneys, respiratory or nervous system
disorder, cancer, high blood pressure, or tumor? [_] Yes [_] No
2. Have you been hospitalized at any time during the last
five years? [_] Yes [_] No
3. Have you received treatment or joined an organization
because of alcohol or drug use or been medically
advised to do so? [_] Yes [_] No
4. a) Have you ever had or been treated or diagnosed by a
member of the medical profession for AIDS (Acquired
Immune Deficiency Syndrome) or ARC (AIDS Related
Complex)? [_] Yes [_] No
b) Have you tested positive for antibodies to the AIDS
(Human Immunodeficiency Virus: HIV) virus? [_] Yes [_] No
5. Are you disabled and/or not performing all of the duties
of your occupation or profession? [_] Yes [_] No
6. Height___________________ Weight________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REMARKS: (Use separate piece of paper if additional space is needed)
- -------
- --------------------------------------------------------------------------------
Name &
Question # Date Nature of Condition Duration Result
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10917
(4/92)
<PAGE>
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT: Plan #_________________________
- ------------------------
Date of Issue _________________
- --------------------------------------------------------------------------------
(Home Office Use Only)
- --------------------------------------------------------------------------------
Employee hereby authorizes payroll deductions of any premiums paid for insurance
purchased from Paragon Life Insurance Company.
_________________________________________
Signature of Employee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I have read the above questions and answers. I declare that the answers are
Complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsurers, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic
copy is as valid as the original. I have a right to receive a copy of this upon
request.
Dated at _______________________________ on ____________________________________
City and State Month Day Year
___________________________________
Signature of Proposed Insured
- --------------------------------------------------------------------------------
10917
(4/92)
<PAGE>
Exhibit 11a
FORM OF APPLICATION FOR SPOUSE INSURANCE SI
(GROUP CONTRACT 10354)
<PAGE>
[PARAGON LOGO]
APPLICATION FOR SPOUSE APPLICATION
INSURANCE WITH:
ELIGIBILITY FOR INSURANCE COVERAGE
UNDER THE APPLICATION IS LIMITED
TO EMPLOYEES ACTIVELY AT WORK FOR
WAGES. AT LEAST THIRTY 30 HOURS
PER WEEK ON THE DATE OF THIS
APPLICATION.
- --------------------------------------------------------------------------------
Spouse Name ________________________________________________
(Proposed Last First MI Maiden
Insured)
Mailing Address ____________________________________________
____________________________________________
City State Zip
Daytime Phone ( )
-----------------------------------------------
Employee Name ______________________________________________
Last First MI
Sponsoring Employer ________________________________________
Social Security No: ________-________-________
Date of Birth ________________/_______/_______ [_] Male
M D Y [_] Female
Employee Annual Salary ________________________________
Employee Social Security No. __________________________
Employee Date of Birth ________________/_______/_______
M D Y
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Insurance Applied For: Amount of Insurance Premium Frequency
- ---------------------- ------------------- ---------------- -------------
[_] Level [_] Increasing
[_] Child Insuance Rider
--------
(Coverage per child (must be less __________________ _____________
than 18 years old at issue) Additional Premium Total Premium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: _____________________________ Relationship: _______________________
(Beneficiary will be Employee unless otherwise indicated)
Owner (Employee will be Owner unless otherwise indicated): _____________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Will the insurance applied for replace any existing life insurance or annuities?
[_] Yes [_] No
If "Yes", Detail _______________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH QUESTIONS (PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
- ----------------
1. Have you ever had or been advised to have surgery, or
diagnosis or treatment for diabetes, heart disease or
disorder, stroke, kidneys, respiratory or nervous system
disorder, cancer, high blood pressure, or tumor? [_] Yes [_] No
2. Have you been hospitalized at any time during the last
five years? [_] Yes [_] No
3. Have you received treatment or joined an organization
because of alcohol or drug use or been medically
advised to do so? [_] Yes [_] No
4. a) Have you ever had or been treated or diagnosed by a
member of the medical profession for AIDS (Acquired
Immune Deficiency Syndrome) or ARC (AIDS Related
Complex)? [_] Yes [_] No
b) Have you tested positive for antibodies to the AIDS
(Human Immunodeficency Virus: HIV) virus? [_] Yes [_] No
5. Are you disabled and/or not performing all of the duties
of your occupation or profession? [_] Yes [_] No
6. Height___________________ Weight________________
- --------------------------------------------------------------------------------
10354
(4/92)
<PAGE>
- --------------------------------------------------------------------------------
REMARKS: (Use separate piece of paper of additional space is needed)
- --------------------------------------------------------------------------------
Name &
Question # Date Nature of Condition Duration Result
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT: Plan #_________________________
- ------------------------
Date of Issue _________________
- --------------------------------------------------------------------------------
(Home Office Use Only)
- --------------------------------------------------------------------------------
Employee hereby authorizes payroll deductions of any premiums paid for insurance
purchased from Paragon Life Insurance Company.
_________________________________________
Signature of Employee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I have read the above questions and answers. I declare that the answers are
complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
MIB, Inc. (Medical Information Bureau)
You are our most important source of information, but we may also collect or
verify information by contact the Medical Information Bureau. Information
regarding your insurability will be treated as confidential. We may make a brief
report to MIB, Inc. It is a non-profit membership Organization of insurance
companies. It provides an information exchange for its members. If you apply to
another member company for life or health insurance or submit a claim for
benefits, MIV, Inc., by request will supply the member with information in its
file.
You may request from MIB, Inc., any information it may have in your file.
(Medical information will be released only to your physician.) You may question
the accuracy of the information. You may seek a correction by contacting MIB.
This is in accordance with the guidelines set forth in the federal Fair Credit
Reporting Act. MIB, Inc.'s full address is below.
We may also release information to our reinsurers and to other life insurance
companies to whom you may apply for life or health insurance, or submit claim.
MIB, Inc. *Post Office Box 105* Essex Station*
Boston, Massachusetts 02110* (617) 426-3660
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any Physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life ir its
representatives may release this information about me to its reinsureres, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic
copy is as valid as the original. I have a right to receive a copy of this upon
request.
Dated at _______________________________ on ____________________________________
City and State Month Day Year
___________________________________
Signature of Proposed Insured
Agent: To the best of your knowledge is
The insurance applied for intended to replace
Any existing life insurance or annuities?
[_] Yes [_] No
____________________________________
Signature if Licensed Resident Agent
- --------------------------------------------------------------------------------
10354
(4/92)
<PAGE>
Exhibit 12
FORM OF APPLICATION FOR EMPLOYEE INSURANCE GI
(Individual Policy, 10352, 33100)
<PAGE>
[LOGO OF PARAGON LIFE INSURANCE COMPANY]
APPLICATION FOR EMPLOYEE APPLICATION
INSURANCE WITH:
ELIGIBILITY FOR INSURANCE COVERAGE UNDER THE
APPLICATION IS LIMITED TO EMPLOYEES ACTIVELY
AT WORK FOR WAGES. AT LEAST THIRTY 30 HOURS
PER WEEK ON THE DATE OF THIS APPLICATION.
- --------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below? [_] Yes [_] No Date Employed / /
------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A. Have you missed ten or more consecutive days of work or a total of thirty
or more days in the last year due to accident, illness, injury, or hospital
confinement? (Work is defined as performing all of the duties of your
occupation or profession.) [_] Yes [_] No
B. Is any proposed insured child hospitalized in the date of this
application? [_] Yes [_] No
If "Yes" OR if applying after your first enrollment period, complete HEALTH
QUESTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Employee Name Social Security No: - -
--------------------------- ---------------
Last First MI Maiden
Mailing Address Date of Birth / / [_] Male
------------------------- ----------- [_] Female
City State Zip
Daytime Phone Annual Salary
( ) -----------
- -----------------------------------------
Employer Job Location
-------------------------------- ------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Insurance Applied For: [_] Child Insurance Rider
------------
- -------------------------- Coverage per child (must be less than 16
[_] Level [_] Increasing years old at issue)
[_] Accidental Death
Benefit for Amount ---------------
of Insurance Frequency
- --------------------------
Amount of Insurance [_] Waiver of Monthly
Deduction
- -------------------------- + --------------------------- = -----------------
Premium Additional Benefits Premium Total Premium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: Relationship:
---------------------------------- ------------------
(Beneficiary will be Estate unless otherwise indicated)
(Beneficiary for Child Rider will be as indicated in the rider provision)
Owner (Employee will be Owner unless otherwise indicated):
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Will the insurance applied for replace any existing life insurance
or annuities? [_] Yes [_] No
If "Yes", Detail
---------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I hereby authorize payroll deductions of any premiums to be paid for insurance
purchased from Paragon Life Insurance Company. PLEASE NOTE INTERIM INSURANCE
DESCRIPTION ON PAGE 2.
I have read the above questions and answers. I declare that the answers are
complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
Agent: To the best of your knowledge
is the insurance applied for
Date at on intended to replace any existing
-------------- ---------- life insurance or annuities?
[_] Yes [_] No
- ------------------------------------ ------------------------------------
Signature of applicant Employee Signature of Licensed Resident Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DECLINATION OF COVERAGE
I hereby certify that I have been given the opportunity to apply for the
insurance and after carefully consideration have decided not to apply at this
time. I also understand that a later application may require submission of
evidence of insurability and that as a result coverage may be denied at that
time.
- ------------- -------------------------------- -------------------------
Date Employee Name (please print) Signature of Employee
- --------------------------------------------------------------------------------
10352(4/92)
<PAGE>
HEALTH QUESTIONS (Complete ONLY if (1) applying in excess of Guaranteed Issue
Amount, (2) question A or B is answered "Yes", or (3) applying
after your first enrollment period.)
(PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
1. Have you ever had or been advised to have surgery, or
diagnosis or treatment for diabetes, heart disease or
disorder, stroke, kidneys, respiratory or nervous system
disorder, cancer, high blood pressure, or tumor? [ ] Yes [ ] No
2. Have you been hospitalized at any time during the last
five years? [ ] Yes [ ] No
3. Have you received treatment or joined an organization
because of alcohol or drug use or been medically advised
to do so? [ ] Yes [ ] No
4. a) Have you ever had or been treated or diagnosed by a
member of the medical profession for AIDS (Acquired Immune
Deficiency Syndrome) or ARC (AIDS Related Complex)? [ ] Yes [ ] No
5. Are you disable and/or not performing all of the duties
of your occupation or profession? [ ] Yes [ ] No
6. Employee: Height______________________ Weight_______________________
REMARKS: (Use separate piece of paper of additional space is needed)
Name and Question # Date Nature of Condition Duration Result
HOME OFFICE ENDORSEMENT:
Plan # _____________________________
Date of Issue_______________________
INTERIM INSURANCE DESCRIPTION
Guaranteed Issue not available for particular proposed insured if Question A or
B is answered "Yes" or if applying after his/her first enrollment period. Any
person who qualifies in all respects for guaranteed issue coverage shall be
considered covered on an interim basis from the date of application for the
amount of insurance applied for up to the applicable "GUARANTEED ISSUE AMOUNT".
The Accidental Death Benefit Rider shall not, however, be in effect prior to the
actual date of issue of a policy. If death is due to suicide on the basis stated
in the policy, the Company's liability under this interim Insurance is limited
to the return of the amount paid or withheld. Interim insurance ends on the
earliest of the following dates: (a) the date insurance begins on the policy
applied for; (b) the date a policy, other than applied for, is offered to the
applicant; (c) the date the company notifies the applicant that the application
for any proposed insured is declined; (d) 60 days from the date of application;
or (e) termination of employment with the sponsoring employer.
I have read the above questions and answers. I declare that the answers are
Complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsurers, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic
copy is as valid as the original. I have a right to receive a copy of this upon
request.
Dated at _________________________ on _____________________________ ________
City and State Month Day Year
_______________________________
Signature of Applicant Employee
10352(4/92)
<PAGE>
APPLICATION FOR INSURANCE WITH: [PARAGON LOGO HERE]
ELIGIBILTY FOR INSURANCE COVERAGE UNDER THE
APPLICATION IS LIMITED TO EMPLOYEES ACTIVELY
AT WORK FOR WAGES. AT LEAST THIRTY 30 HOURS
PER WEEK ON THE DATE OF THIS APPLICATION AND
ON THE DATE OF ISSUE OF THE POLICY.
- --------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below?
[_] Yes [_] No Date Employed
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name
-----------------------------------------------
(Proposed Insured) Last First MI Maiden
Mailing Address
-----------------------------------------
-----------------------------------------
City State Zip
Sponsoring Employer
----------------------------
Job Location
-----------------------------------
Social Security No: - - [_] Male
------------------------------------ [_] Female
Date of Birth / /
---------------------
Annual Salary
---------------------
Job Title/Classification
--------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary: Relationship:
---------------------------- ------------------------
(Beneficiary will be Employee unless otherwise indicated)
Owner (Insured will be Owner unless otherwise indicated:
------------------------
Owner
Mailing Address
----------------------------- Owner
(if other than Insured) Soc. Sec. No. - -
-------------------
-----------------------------
City State Zip
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
33100
(6/91)
<PAGE>
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT:
- ------------------------ Plan # _____________________________
Date of Issue_______________________
- --------------------------------------------------------------------------------
(Home Office Use Only)
- --------------------------------------------------------------------------------
Will the insurance applied for replace any existing life insurance or annuities?
[_] Yes [_] No
If "Yes", Detail _____________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERIM INSURANCE DESCRIPTION
Any person who qualifies in all respects for guaranteed issue coverage shall be
considered covered on an interim basis from the date of application for the
amount of insurance applied for up to the applicable "GUARANTEED ISSUE AMOUNT".
If death is due to suicide on the basis stated in the policy, the Company's
liability under this interim insurance is limited to the return of the amount
paid or withheld. Interim insurance ends on the earliest of the following
dates: (a) the date insurance begins on the policy applied for; (b) the date a
policy, other than applied for, is offered to the applicant; (c) the date the
Company notifies the applicant that the application for any proposed insured is
declined; (d) 60 days from the date of application; or (e) termination of
employment with the sponsoring employer.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I have read the above questions and answers. I declare that the answers are
Complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any physician, health care professional, hospital, clinic, medical
facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsurers, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A photographic copy
is as valid as the original. I have a right to receive a copy of this upon
request.
Paragon Life, its reinsurers, insurance support organizations, and their
authorized representative, may obtain medical and other information in order to
evaluate my application for life insurance. Application for insurance will not
be accepted without proper signatures. A photocopy of this authorization is as
valid as the original.
I hearby authorize payroll deductions of any premiums to be paid for insurance
purchases form Paragon life Insurance Company.
Dated at __________________________ on ________________________________________
City and State Month Day Year
________________________________________
Signature of Proposed Insured
Agent: To the best of you knowledge is the
Insurance applied for intended to replace any existing life
Insurance or annuities? [_] Yes [_] No
___________________________________ _______________________________________
Signature of Licensed Signature of Applicant
Resident Agent (if other than Proposed Insured)
- --------------------------------------------------------------------------------
33100
(6/91)
<PAGE>
Exhibit 13
FORM OF APPLICATION FOR EMPLOYEE INSURANCE SI
(Individual Policy, 10357)
<PAGE>
APPLICATION FOR [PARAGON LOGO] EMPLOYEE APPLICATION
INSURANCE WITH:
ELIGIBILTY FOR INSURANCE COVERAGE
UNDER THE APPLICATION IS LIMITED TO
EMPLOYEES ACTIVELY AT WORK FOR
WAGES. AT LEAST THIRTY 30 HOURS PER
WEEK ON THE DATE OF THIS APPLICATION
- --------------------------------------------------------------------------------
Are you now actively working for wages at least thirty (30) hours per week for
the Employer shown below? [_] Yes [_] No Date Employed _____/____/_____
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Employee
Name___________________________________ Social Security No: _____-___-______
Last First MI Maiden
Mailing
Address________________________________ Date of Birth ___/___/___ [_] Male
City State Zip
Daytime Phone
(______)_______________________________ Annual Salary ___________ [_] Female
Employer ______________________________ Job Location ________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Insurance Applied For: [_] __________________ Child Insurance Rider
Coverage per child (must be less than 18
years old at issue)
___________________________
[_] Level [_] Increasing [_] Accidental Death Benefit
for Amount of Insurance _______________
Frequency
___________________________
Amount of Insurance [_] Waiver of Monthly Deduction
__________________________ ___________________________ _________________
Premium + Additional Benefits Premium = Total Premium
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Beneficiary:__________________________ Relationship:__________________________
(Beneficiary will be Estate unless otherwise indicated)
(Beneficiary for Child Rider will be as indicated in the rider provision)
Owner (Employee will be Owner unless otherwise indicated):______________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEALTH QUESTIONS (PLEASE GIVE DETAILS TO "YES" ANSWERS IN REMARKS SECTION)
1. Have you ever had or been advised to have surgery, or
diagnosis or treatment for diabetes, heart disease or
disorder, stroke, kidneys, respiratory or nervous system
disorder, cancer, high blood pressure, or tumor? [_] Yes [_] No
2. Have you been hospitalized at any time during the last
five years? [_] Yes [_] No
3. Have you received treatment or joined an organization
because of alcohol or drug use or been medically advised
to do so? [_] Yes [_] No
4. a) Have you ever had or been treated or diagnosed by a
member of the medical profession for AIDS (Acquired
Immune Deficiency Syndrome) or ARC (AIDS Related
Complex)? [_] Yes [_] No
b) Have you tested positive for antibodies to the AIDS
(Human Immunodeficency Virus: HIV) virus? [_] Yes [_] No
5. Are you disable and/or not performing all of the duties
of your occupation or profession? [_] Yes [_] No
6. Employee: Height____________ Weight____________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REMARKS: (Use separate piece of paper of additional space is needed)
----------------------------------------------------------------------------
Name and Nature
Question # Date of Condition Duration Result
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Will the insurance applied for replace any existing
life insurance or annuities? [ ] Yes [ ] No
If "Yes", Detail_______________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I hereby authorize payroll deductions of any premiums to be paid for
insurance purchased from Paragon Life Insurance Company.
I have read the above questions and answers. I declare that the answers are
complete and true to the best of my knowledge and belief. I agree that this
application will be part of the policy, if one is issued.
I authorize Paragon Life, its reinsurers, employees, insurance support
organizations, and their representative to obtain information about me to
evaluate this application. This information may be about (a) age; (b) medical
history, condition and care; (c) physical and mental health; (d) income; (e)
other personal characteristics; and (f) other insurance. It includes the use of
alcohol, drugs, and tobacco.
I authorize any Physician, health care professional, hospital, clinic,
medical facility, the Veterans Administration, the MIB, Inc., employer, or other
insurance company to release information about me to Paragon Life or its
representatives on receipt of this authorization. Paragon Life or its
representatives may release this information about me to its reinsurers, MIB,
Inc., or other insurance company to whom I have applied or to whom a claim has
been made. No other release may be made except as allowed by law or I further
authorize.
This form is valid for 30 months from the date it is signed. A
photographic copy is as valid as the original. I have a right to receive a copy
of this upon request.
Dated at _________________________ on ________________________________ ________
City & State Month Day Year
Agent: To the best of your knowledge is
the insurance applied for intended to
replace any existing life
insurance or annuities? [ ] Yes [ ] No _______________________________
Signature of Applicant Employee
____________________________________
Signature of Licensed Resident Agent
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENT: Plan # ________________________
- ------------------------
Date of Issue__________________
(Home Office Use Only)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DECLINATION OF COVERAGE
I hereby certify that I have been given the opportunity to apply for the
insurance and after careful consideration have decided not to apply at this
time. I also understand that a later application may require submission of
evidence of insurability and that as a result coverage may be denied at that
time.
______________________ ___________________________ _______________________
Date Employee Name (please print) Signature of Employee
- --------------------------------------------------------------------------------
10357
(4/92)
<PAGE>
Exhibit 14
PROPOSED FORM OF APPLICATION SUPPLEMENT (10349)
<PAGE>
APPLICATION SUPPLEMENT
- --------------------------------------------------------------------------------
1. Proposed Insured____________________________________________________________
Last First MI Maiden
2. Date of Birth / / 3. Sex: [_] Male [_] Female
4. Applicant (if other than proposed insured)_________________________________
Last First MI
5. Owner_______________________ 6. Owner Social Security Number____-_____-__
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VARIABLE LIFE INFORMATION (REQUIRED IF APPLYING FOR FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE - ___________________________________
7. Premium Allocation (0 or minimum of 10%. Percentages must be total 100%):
[_] Cash Management Fund.............................._______ %
[_] High-Yield Bond Fund.............................._______ %
[_] Growth-Income Fund................................_______ %
[_] Growth Fund......................................._______ %
[_] U.S. Government/AAA-Rated Securities Fund........._______ %
[_] Asset Allocation Fund............................._______ %
[_] International Fund................................_______ %
[_] Bond Fund........................................._______ %
[_] Global Growth Fund................................_______ %
[_] Global Small Capitalization Fund.................._______ %
8. Suitability Information:
a. Have you received a prospectus for the policy/certificate
applied for? Yes [_] No[_]
Date of Prospectus: / /
Date of any supplement: / /
b. 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 or minimum
death benefit? [_] Yes [_] No
c. Do you believe that the policy/certificate applied for meets
your insurance objectives and your anticipated financial
needs? [_] Yes [_] No
9. Signatures: Dated at _________________________ on ________________________
City, State Month Day Year
________________ _______________________________
Proposed Insured Owner (if other than Applicant)
__________________________________________
Applicant (if other than Proposed Insured)
- --------------------------------------------------------------------------------
This is a part of the application and will be part of the
policy/certificate, if one is issued.
10349 1a
(5/98)
<PAGE>
Exhibit 15
ISSUE, TRANSFER, and REDEMPTION MEMO
<PAGE>
Return Pursuant to Rule 418(b) of Regulation C under the
Securities Act of 1933
PARAGON LIFE INSURANCE COMPANY
DESCRIPTION OF ISSUANCE, TRANSFER
AND REDEMPTION PROCEDURES FOR
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)
and
METHOD OF COMPUTING ADJUSTMENTS IN
PAYMENTS AND CASH VALUES UPON
CONVERSION TO FIXED BENEFIT POLICIES
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)
This document sets forth the administrative procedures that will be
followed by Paragon Life Insurance Company (the "Company") in connection with
the issuance of Flexible Premium Variable Life Insurance Policies for use in the
employer-sponsored marketing, the transfer of assets held thereunder, and the
redemption by Owners of their interests in such Policies. In circumstances where
a Group Contract is issued, Individual Policies or Certifications setting forth
or summarizing the rights and privileges of the Owners and/or Insured, will be
issued under the Group Contract. Individual policies can also be issued in
connection with employer-sponsored insurance programs in circumstances where a
Group Contract is not issued. The terms of the Certificate and the Individual
Policy, whether or not the Individual Policy is issued under a Group Contract,
are substantially the same and are collectively referred to as "Policy" or
"Policies". The document also explains the method that the Company will follow
in making a cash adjustment when a Policy is exchanged for a fixed benefit
insurance policy pursuant to Rule 6e3(T) (b) (13) (v) (B).
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES
Exhibit A attached to this document illustrates the flow of transactions
involved in this process.
A. Premium Payments and Underwriting
Premiums for the Policies will not be the same for all owners of Policies
("Owners"). Payment of or payroll deduction authorization for the initial
premium, together with a completed application, must be received by the Company
before a Policy will be issued. The Company requires that the initial premium
for a Policy be at least equal to one-twelfth of the planned annual premium.
Minimum first year planned annual premiums will be established.
<PAGE>
Following the initial premium, subject to the limitations described below,
premiums may be paid in any amount and at any interval. For the first Policy
year, the amount of the planned premiums can be no less than the minimum annual
premium. We establish a billed or planned premium for each Policy. Although not
required, the typical payment of planned premiums is through payroll deduction
by the sponsoring employer while the Owner is employed. While the employee is a
part of the sponsoring employer relationship this is typically a monthly premium
or annual premium divided by thirteen. Failure to pay planned premiums, however,
will not itself cause the Policy to lapse.
Once the employee is no longer eligible for group coverage (the group
arrangement is terminated or the employee's relationship with the sponsoring
employer ceases) the Policy will automatically continue on an individual basis.
Each Certificate is amended to make it an Individual Policy. The planned premium
billed quarterly, semiannually, or annually at the Owner's option. Premium
payments need not be made on this scheduled basis, however. This procedure is
only for Company billing.
An Owner may make unscheduled premium payments at any time in any amount,
or skip planned premium payments, subject to the following limitations. Every
premium payment must be at lease $20. In no event may the total of all premiums
paid in any Policy year exceed the current maximum premium limitations for that
year established by Federal tax laws. 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 limitations referred to on section 7702 (c) of the
Internal Revenue Code of 1986, as amended, or any successor provision. If at any
time a premium is paid which would result in total premiums exceeding the
current maximum premium limitation, 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 by the current maximum
premium limitations prescribed by Federal tax law. The Company may require
additional evidence of insurability if any premium payment would cause an
increase in the Policy's death benefit exceeding the premium received.
Net premiums will be priced based upon the share price as of the close of
the day the premiums are received. We have two main methods of premium receipt
for premium received via payroll deduction method. If the employee is no longer
a part of the sponsoring employer or pays unscheduled premiums, these are
received by cash (or check). The first is through a sponsoring employer for a
lump-sum check attached to a list billing for each policyowner with the employer
or via an automated medium to verify the amount. The Company does not reconcile
receipts to billed amounts. We do verify that the amount received matches the
supporting data indicating the amount paid per individual. For receipts received
through a sponsoring employer, allocations among multiple policies for one
employee Owner are made for the employee Owner based upon the following
procedure. Premiums are applied as billed for the spouse Policy (where employee
is ___________ but not the insured), and the balance of the amount received is
allocated to the employee's Policy.
<PAGE>
A Policy will remain in force so long as the cash surrender value is
sufficient to pay the monthly deduction. Thus, the amount of a premium, if any,
that must be paid to keep the Policy in force depends upon the cash value of the
Policy, which in turn depends upon on such factors as the investment experience
and the cost of insurance charge. The cost of insurance rate utilized in
computing the cost of insurance charge will not be the same for each insured.
The chief reason is that the principle if pooling and distribution of mortality
risks is based in the assumption that each insured incurs an insurance rate
commensurate with his mortality risks which is actuarially determined based on
such factors as attained age and rate class. Accordingly, while not all insured
will be subject to the same cost of insurance rate, there will be a single
"rate" for all insures in a given actuarial category.
Current cost of insurance rates will be determined by the Company based
upon expectations as to future mortality experience. The cost of insurance rates
are guarenteed not to exceed rates based upon 125% of the Commissioners' 1980
Standard Ordinary Mortality Table C.
The Policies will be offered and sold pursuant to established underwriting
standards and in accordance with state insurance laws. State insurance laws may
prohibit unfair discrimination among insured but recognize that premiums may be
based upon factors such as age, sex, health, and occupation.
B. Application and Initial Premium Processing
Upon receipt of a completed application, the Company will follow certain
insurance underwriting (e.g., evaluation of risks) procedures designed to
determine whether the applicant is insurable. The process may involve such
verification procedures as Medical Information Bureau and may require that
further information be provided by the proposed insured before a determination
can be made. A Policy will not be issued until the underwriting procedure has
been completed.
The underwriting will be based upon the particular application received.
The first time an employee is given the opportunity to purchase a Policy, the
applicant may qualify for guaranteed issue if he/she is actively at work and has
not missed 10 consecutive days or a total of 30 days of work within the past
year. No medical or paramedical examination is required. The maximum face amount
that an employee can generally apply for under the guaranteed issue procedure is
three times the employee's salary up to a ceiling that is based in the number of
eligible employees under a group arrangement.
Where the face amount exceeds the guaranteed issue limits, where the Policy
has been offered previously to the employee, or where the guaranteed issue
requirements set for the in the application are not met, the employee must
submit to a simplified underwriting procedure which requires the employee to
respond satisfactorily to certain health questions must be answered if, in
connection with the issuance of any spouse of children's rider, if the employee
is not eligible for guaranteed issue underwriting, or, even when the employee is
eligible, if the spouse or child does not satisfy the guaranteed issue
requirements set forth in the application. However, regardless of which
underwriting procedure is used, acceptance of an application is subject to the
Company's underwriting rules, and the Company reserves the right to reject an
application for any reason.
<PAGE>
I. REDEMTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
Set forth below is a summary of the principal Policy provisions and
administrative procedures which might be deemed to constitute, either directly
or indirectly, a "redemption" transaction. The summary shows that because of the
insurance nature of the Policies, the procedures involved necessarily differ in
certain significant respects from the redemption procedures for mutual funds and
contractual plans.
A. Surrenders and Partial Withdrawals
At any time during the lifetime of the insured and while a Policy is in
effect, the Owner may surrender or make a partial withdrawal under, the Policy
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 upon
surrender of a partial withdrawal will ordinarily be paid within seven days of
receipt of the written request.
If the Policy is being surrendered, the Policy itself must be returned to
the Company along with the request. If the Policy cannot be returned, a lost
policy affidavit is required. Upon surrender, the Company will pay the cash
surrender value (the cash value less any indebtedness or surrender charge).
Surrender proceeds will be paid in a single sum. Coverage under a Policy will
terminate as the date of surrender.
After the first Policy year, an Owner may make up to one partial withdrawal
each Policy month from the Separate Account. The total amount of a partial
withdrawal request, net of any applicable surrender charges, must be at least
$500 of the Policy's cash value if smaller. The minimum amount that can be
withdrawn from any one division is $50, or the cash value in the division, if
smaller. The maximum amount that may be withdrawn from a division is the
Policy's cash value in that division. The total that may be obtained by partial
withdrawal including the partial withdrawal transaction charge is the Loan
Value. A transaction charge equal to the lesser of $25 or two percent of the
amount withdrawn applies to each partial withdrawal.
The Owner may allocate the amount withdrawn, subject to the above
conditions, among the divisions of the Separate Account. If no allocation is
specified, then the partial withdrawal will be allocated among the division of
the Separate Account in the same proportion that the Policy's cash value in each
Division 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.
Generally, any surrender charge imposed in connection with a partial
withdrawal and any transaction charge will be allocated among the divisions of
the Separate Account in the same proportion as the partial withdrawal is
allocated. An Owner may request, however, that a surrender charge applicable to
an amount withdrawn from a division be paid from the cash value in another
division. No amount may be withdrawn that would result in there being
insufficient cash value to meet any surrender charge that would be payable
immediately following the withdrawal upon the surrender of the remaining cash
value.
<PAGE>
The death benefit will be affected by a partial withdrawal. If Option A is
in effect 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 plus the applicable surrender charge resulting from the change in
face amount. If the death benefit is based on a percentage of the cash value,
then a partial withdrawal will decrease the face amount by the amount by which
the partial withdrawal plus the applicable surrender charge exceeds the
difference between the death benefit and the face amount. If 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 $25,000 or the applicable minimum issue amount. Any request for a
partial withdrawal that would reduce the face amount below this amount will not
be implemented. Partial withdrawals will be applied first to reduce the initial
face amount and the to each increase in face amount in order, starting with the
first increase.
If a Policy is surrendered, the surrender charge, of any, will be a
percentage of premiums paid during the first Policy year up to the guideline
annual premium for the Policy. The charge decreases evenly each year to zero (0)
at the end of ten Policy years. Additional surrender charges will be deducted if
the Policy is surrendered following one or more increases in face amount. The
surrender charge applicable to each increase will be a percentage of the lesser
of premiums associated with the increase which are received within 12 Policy
months of the increase and the guideline annual premium for the increase. The
surrender charge applicable to an increase in face amount decreases evenly each
year to zero at the end of ten years from the effective date of the increase.
A surrender charge also will apply to any decrease in face amount. The
amount of the surrender charge assessed because of a decrease in face amount is
a portion of the surrender charge that would be deducted upon surrender of
lapse. The portion is based on the relationship between the decrease in face
amount and face amount before the decrease.
B. Changes in Face Amount
An Owner may increase or decrease the face amount of a Policy (without
changing the death benefit option) once each Policy year after the first Policy
anniversary. A written request is required for a change in the face amount. Any
change is subject to the following conditions:
1. Any decrease will become effective on the monthly anniversary on or
next following receipt of the written request.
2. The minimum decrease allowed is $5,000, and the face amount may not be
decreased below $25,000. If, following the decrease in face amount,
the Policy would not comply with maximum premium limitations required
by Federal tax law, the decrease may be limited or cash value may be
returned to the Owner, at his or her election, to the extent necessary
to meet these requirements. Any decrease will reduce the face amount
in the following order:
a. The face amount provided by the most recent increase:
b. The next most recent increases successively; and
<PAGE>
c. The initial face amount.
1. For an increase in the face amount, the Company required that
satisfactory evidence if insurability be submitted. If approved, the
increase will become effective as of the monthly anniversary following
receipt of satisfactory evidence of insurability. In addition, the
insureds must have and attained age of not greater that 80 on the
effective date of the increase. The increase may not be less than
$5,000.
A. Change in Death Benefit Option
After the first Policy Anniversary, the Owner may request in writing to
change the death benefit option. If the request is to change from Option A to
Option B, the face amount will be decreased by the amount of the cash value.
Evidence of insurability satisfactory to the Company will be required on a
change from Option A to Option B. The change cannot be made if it would result
in a face amount of less than $5,000. If the request is to change from Option B
to Option A, the face amount will be increase by the amount to the cash value.
The effective date of a change will be the monthly anniversary on or following
the date the request for change is received by the Company. A change from Option
A to Option B may result in the application of a surrender charge since the
change would result in a decrease in face amount.
B. Benefit Claims
While the Policy remains in force, the Company will pay a death benefit to
the named beneficiary in accordance with the designated death benefit option
within seven days after receipt in its home office of due proof of death of the
insured. Payment of death benefits may be postponed under certain circumstances,
such as the New York Stock Exchange being closed for reasons other than
customary weekend and holiday closings.
The amount of the death benefit is determined at the end of the valuation
period during which the insured dies. The amount of the death benefit will never
be less than the current face amount of the Policy as long as the Policy remains
in force. The proceeds will be reduced by any outstanding indebtedness. The
proceeds 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. The
death benefit may exceed the face amount of the Policy depending on the death
benefit option in effect, the cash value of the Policy, and the applicable
percentage in effect at the date of death. Under Option A, the death benefit is
the greater of the face amount to the cash value on the date of death multiplied
by the applicable percentage. Under Death Benefit Option B, the death benefit is
equal to the face amount plus the cash value in the date of death or, if
greater, the applicable percentage (as per Option A) of the cash value on the
date of death.
If the insured is living on the maturity date (the date on which the
insured reaches attained age 95), the Company will pay the greater of the face
amount and the cash surrender value of the Policy on the maturity date.
<PAGE>
Death benefit proceeds may be paid in a single sum, or under one of the
settlement options described in the Policy. The election may be made by the
Owner during the insured's lifetime, or, if no election is in effect at death,
by the beneficiary. An option is available only if the proceeds to be applied
are $5,000 or more. The settlement options are subject to the restrictions and
limitation set forth in the Policy.
C. Policy Loans
After the first Policy anniversary, 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. The loan value is equal to 85% of
the cash value of the Policy on the date the Policy loan is requested, reduced
by the amount of any existing loans and interest payable on those loans, and any
surrender charges. The minimum amount that may be borrowed is $100. Any amount
due to an owner under a loan ordinarily will be paid within seven days after the
Company received a loan request at its home office, although payments may be
postponed under certain circumstances.
When a loan is made, cash value equal to the amount of the loan will be
transferred to the "Loan Account" (part of the Company's general assets) as
security for the loan. Unless the Owner requests a different allocation, amounts
will be transferred from the divisions of the Separate Account in the same
proportion that the Policy's cash value in each division bears to the total cash
value, less the cash value in the Loan Account. Cash value transferred to the
Loan Account will accrue interest daily at an annual rate of 5%. The interest
rate charged will be 8%.
A Policy loan may be repaid in while or in part at any time prior to the
death of the insured and as long as a Policy is in effect. 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 in
the same proportion that cash value in the Land Account bears to the cash value
in each Loan Subaccount. A Loan Subaccount exists for each Division of the
Separate Account.
III. TRANSFERS
The Separate Account currently has five divisions. Under the Company's
current rules, a Policy's cash value, except amount credited to the Loan
Account, may be transferred amount the divisions of the Separate Account.
Requests for transfers from or among divisions of the Separate Account must be
in writing and may be made once each Policy month. Transfers must be in amount
at least $250 or, if smaller, the Policy's cash value in a division. The Company
will effectuate transfers and determine all values in connection with transfers
as of the end of the valuation period during which the transfer request is
received.
The Company currently intends to continue to permit transfers for the
foreseeable future. The Policy provides that the Company may be at any time
modify the transfer privilege, including the minimum amount transferable, and
may in the future impose a charge of no more than $25 per transfer request.
<PAGE>
IV. REFUNDS
A. Right to Examine Policy Period
An Owner may cancel a Policy within the latest of 20 days after receiving
it, 45 days after the application was signed, or 10 days of mailing a notice of
the cancellation right. If a Policy is canceled within this time period, a
refund will be paid. The refund will equal all premiums paid under the Policy.
The Company will apply premiums to the divisions of the separate account as
initially requested. Any refund of premiums due to the "free look" provisions
would be paid from the separate account. Any insufficiencies in funds from the
Separate Account will be paid from our general assets.
To cancel the Policy, the Owner must mail or deliver the Policy directly to
the Company. A refund of premiums paid by check may be delayed until the check
has cleared the Owner's bank.
A request for an increase in face amount may also be canceled. The request
for cancellation must be made within the latest of 20 days from the date the
Owner received the new Policy specifications page from the increase, 45 days
after the application for the increase was signed, or 10 days of mailing the
right to cancellation notice.
Upon cancellation of an increase, the Owner may request that the Company
refund the amount of the additional shares deducted in connection with the
increase. This will equal the amount by which the monthly deductions since the
increase went into effect exceeded the monthly deductions which would have been
made absent the increase.
If no request is made, the Company will increase the Policy's cash value by
the amount of these additional charges. This amount will be allocated among the
divisions of the Separate Account in the same manner as it was deducted.
B. Suicide
In the event the insured commits suicide, whether sane or insane, within
two years of the issue date (or within the maximum period permitted by the laws
of the state in which the policy was delivered, if less than two years), the
amount payable will be limited to the return of premiums paid, less any
indebtedness or partial withdrawals. In the event of suicide within two years of
the effective date of any increase in face amount, the death benefit for that
increase will be limited to the amount of the monthly deduction for the
increase.
C. Incontestability Clause
The Policy is incontestable after it has been in force for two years from
the issue date during the lifetime of the insured. An increase in the face
amount or addition of a rider after the issue date is incontestable after such
increase or addition has been in force for two years from its effective data
during the lifetime of the insured. Any reinstatement of a Policy is
incontestable, except for nonpayment of premiums, only after it has been in
<PAGE>
force during the lifetime of the insured for two years after the effective data
of the reinstatement.
D. Misstatement of Age.
If the age of the insured 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.
V. METHOD OF COMPUTING EXCHANGE ADJUSTMENTS PURSUANT TO PARAGRAPH (b) (13) (V)
(B) of Rule 6e-3(T) UNDER THE INVESTMENT COMPANY ACT OF 1940.
Once during the first 24 Policy months following the issue date of the
Policy, the Owner may, upon written request, convert a Policy still in force to
a life insurance policy that provides for benefits that do not vary with the
investment return of the divisions of the Separate Account. No evidence of
insurability will be required with this right is exercised. However, the Company
will require that the Policy be in force and that the Owner repay any existing
indebtedness. At the time of the conversion, the new Policy will have, at the
Owner's option, either the same death benefit or the same net amount at risk as
the original Policy. The new Policy will also have the same issue date and issue
age as the original Policy. The premiums for the new Policy will be based on the
company's rates in effect for the same issue age and rate class as the original
Policy.
In addition, once during the first 24 Policy months following the effective
date of a requested increase in face amount (i.e., an increase that is not the
result of a change in death benefit options), the Owner may, upon written
request, convert the amount of the increase in face amount to a life insurance
policy which also provides for fixed benefits. Premiums under the new contract
will be based on the Company's rates in effect for the same issue age and rate
class of the insured as were applied on the effective date of the increase in
the face amount. The conditions and principles, described above, which are
applicable to a conversion of the entire Policy, will be equally applicable to
the conversion of an increase in face amount to a fixed-benefit policy.
<PAGE>
Exhibit 16
OPINION AND CONSENT of MATTHEW P. MCCAULEY,
ESQUIRE, GENERAL COUNSEL of PARAGON LIFE INSURANCE COMPANY
<PAGE>
5 April 1989
Paragon Life Insurance Company
100 South Brentwood
St. Louis, MO 63105
RE: Registration Statement #33-18341
Paragon Life Insurance Company
Gentlemen:
This opinion is furnished in connection with the offering of certain group
variable life insurance contracts ("Group Contracts") and certain individual
variable life insurance contracts ("Individual Contracts") (collectively,
"Contract") under Registration Statement No. 33-18341, and Post-Effective
Amendment No. 1, filed by Paragon Life Insurance Company ("Paragon") and
Separate Account A of Paragon Life Insurance Company (the "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
it 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 on Form S-6 in connection with the registration, under the Act, of
the Contracts. I supervised the establishment of the Separate Account on October
30, 1987, 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. Both the Group Contracts and the Individual Contracts to be issued
pursuant to the terms of the Registration Statement, as amended, 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>
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 23, March 1989
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.
Respectfully submitted,
/s/ Matthew P. McCauley
Matthew P. McCauley
Vice President and
General Counsel
<PAGE>
Exhibit 17
OPINION AND CONSENT OF CRAIG K. NORDYKE, F.S.A., M.A.A.A.,
EXECUTIVE VICE PRESIDENT AND CHIEF ACTUARY
<PAGE>
RE: 33-18341
Gentlemen:
In my capacity as Executive Vice President and Chief Actuary of Paragon Life
Insurance Company, I have provided actuarial advice concerning: (a) the
preparation of a registration statement for Separate Account A filed on Form S-6
with the Securities and Exchange Commission under the Securities Act of 1933
(the "Registration Statement") regarding the offer and sale of flexible premium
variable life insurance policies (the "Policies"); and (b) the preparation of
policy forms for the Policies described in the Registration Statement.
It is my professional opinion that:
1. The illustrations of cash values, cash surrender values, death benefits,
and accumulated premiums in the Appendix to the prospectus contained in
the Registration Statement, are based on the assumptions stated in the
illustration, and are consistent with the provisions of the Policies. The
rate structure of the Policies has not been designed so as to make the
relationship between premiums and benefits, as shown in the illustrations,
appear to be more favorable to prospective purchasers of Policies aged 40
in the rate class illustrated than to prospective purchasers of Policies
at other ages.
2. The information contained in the examples set forth in the section of the
prospectus entitled "Death Benefits", is based on the assumption stated in
the examples, and is consistent with the provisions of the Policies.
I hereby consent to the filing of this opinion as an exhibit to the Post-
Effective Amendment No. 12 to the Registration Statement and to the use of my
name under the heading "Experts" in the prospectus.
/s/ Craig K. Nordyke
Craig K. Nordyke, FSA, MAAA
Executive Vice President and Chief Actuary
<PAGE>
Exhibit 18
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
<PAGE>
Independent Auditors' Consent
The Board of Directors
Paragon Life Insurance Company
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Registration Statement and Prospectus
of Separate Account A of Paragon Life Insurance Company.
KPMG LLP
St. Louis, Missouri
April 28, 2000
<PAGE>
Exhibit 19
WRITTEN CONSENT OF SUTHERLAND ASBILL & BRENNAN LLP
<PAGE>
April 25, 2000
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 Post-Effective Amendment No. 12 to
the registration statement on Form S-6 for Separate Account A of Paragon Life
Insurance Company (File No. 33-18341). 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
<PAGE>
Exhibit 20
POWERS OF ATTORNEY
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above-mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Carl H. Anderson President 2/3/1989
- ------------------------- ---------------------------- --------
Carl H. Anderson
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard A. Liddy Director 2/2/1989
- ------------------------- ---------------------------- --------
Richard A. Liddy
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Vice President,
/s/ Mathew P. McCauley General Counsel and Director 2/2/1989
- ------------------------- ---------------------------- --------
Mathew P. McCauley
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Phillip A. Schorr Director 2/2/1989
- ------------------------- ---------------------------- --------
Phillip A. Schorr
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dean E. Williams Director 2/2/1989
- ------------------------- ---------------------------- --------
Dean E. Williams
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Phillip A. Schorr Director 2/2/1989
- ------------------------- ---------------------------- --------
Phillip A. Schorr
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Vice President, Employer
Sponsored Mass Marketing
/s/ Sharon L. Baysinger And Director 2/4/1989
- ------------------------- ---------------------------- --------
Sharon L. Baysinger
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ H. Edwin Trusheim Director 2/3/1989
- ------------------------- ---------------------------- --------
H. Edwin Trusheim
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Leonard M. Rubenstein Director and Treasurer 2/3/1989
- ------------------------- ---------------------------- --------
Leonard M. Rubenstein
- -------------------------
Name (printed or typed)
</TABLE>
<PAGE>
POWER OF ATTORNEY
-----------------
I, the undersigned, as a director of officer of Paragon Life Insurance Company,
hereby constitute Matthew P. McCauley, Carl H. Anderson, and Craig K. Nordyke,
and each of them singly, with full power to them and each of them singly to sign
for me, and in my name and in the capacity mentioned below, any and all
Registration Statements, documents, instruments, and exhibits related thereto,
and any and all amendments to Registration Statements filed with the Securities
and Exchange Commission for the purpose of registering Variable Contracts issued
by Paragon Life Insurance Company, and I hereby ratify and confirm my signature
as it may be signed by the above--mentioned people to said Registration
Statements and to any and all amendments thereto.
Witness my hand on the date set forth below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Helen Couranz Director 2/3/1989
- ------------------------- ---------------------------- --------
Helen Couranz
- -------------------------
Name (printed or typed)
</TABLE>
