Exhibit 7
FORM OF PARTICIPATION AGREEMENT WITH
AMERICAN VARIABLE INSURANCE SERIES
SERIES PARTICITATION AGREEMENT
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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
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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 X.X. Xxxxxxx 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 X.X. Xxxxxxx and other employers, Paragon Life will obtain
permission from CRMC prior to offering such program to any entity other
than X.X. Xxxxxxx. 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).
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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.
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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
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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
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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)
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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
000 Xxxxx Xxxxxxxxx Xxxx.
Xx. Xxxxx, XX 00000
American Variable Insurance Series
Capital Research and Management Company
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
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
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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
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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/ Xxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
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Attest: AMERICAN VARIABLE INSURANCE
SERIES
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxx
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Attest: CAPITAL RESEARCH AND
MANAGEMENT COMPANY
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxx Xxxxxxxx
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