PARTICIPATION AGREEMENT
Among
VANGUARD VARIABLE INSURANCE FUND
and
THE VANGUARD GROUP, INC.
and
VANGUARD MARKETING CORPORATION
and
AMERICAN UNITED LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the ____ day of ___________,
2005, by and among VANGUARD VARIABLE INSURANCE FUND (hereinafter the "Fund"), a
Delaware business trust, THE VANGUARD GROUP, INC. (hereinafter the "Sponsor"), a
Pennsylvania corporation, VANGUARD MARKETING CORPORATION (hereinafter the
"Distributor"), a Pennsylvania corporation, and AMERICAN UNITED LIFE INSURANCE
COMPANY (hereinafter the "Company"), an Indiana corporation, on its own behalf
and on behalf of each segregated asset account of the Company named in Schedule
A hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account").
WHEREAS, the Fund was organized to act as the investment vehicle for
variable life insurance policies and variable annuity contracts to be offered by
separate accounts of insurance companies which have entered into participation
agreements with the Fund and the Sponsor (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several series
of shares, each designated a "Portfolio," and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the assets of each Portfolio of the Fund are managed by several
entities (the "Advisers"), each of which is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940 and any applicable
state securities laws; and
WHEREAS, the Company has established or will establish one or more Accounts
to fund certain variable annuity contracts (the "Variable Insurance Products"),
which Accounts and Variable Insurance Products are registered under the 1940 Act
and the 1933 Act, respectively; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for each Account on Schedule A hereto, to set aside
and invest assets attributable to the Variable Insurance Products; and
WHEREAS, the Distributor is a wholly-owned subsidiary of the Sponsor, is
registered as a broker dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act")
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios on behalf
of each Account to fund the Variable Insurance Products and the Sponsor is
authorized to sell such shares to the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund, the Sponsor and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Sponsor and the Distributor agree to sell to the Company those
shares of the Portfolios of the Fund listed on Schedule B which each Account
orders. In the case of any such order received by the Fund or its designee on
any Business Day prior to the time the net asset value of shares of the Fund is
determined (the close of trading on the New York Stock Exchange, generally 4:00
p.m. Eastern time) (the "market close"), the order shall be accorded a trade
date on the Fund's accounting system that is the date of receipt of the order by
the Fund or its designee. In the case of any such order received by the Fund or
its designee on any Business Day after the market close, the order shall be
accorded a trade date on the Fund's accounting system that is the next Business
Day. For purposes of this Section 1.1, the Company shall be the designee of the
Fund for receipt of such orders from each Account and receipt by such designee
shall constitute receipt by the Fund; provided that the Fund receives notice of
such order by 8:30 a.m. Eastern time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange ("NYSE")
is open for trading and on which the Fund calculates its net asset value
pursuant to the rules of the SEC.
1.2 The Fund, subject to the provisions of Article IX of this Agreement,
agrees to make its shares available indefinitely for purchase at the applicable
net asset value per share by the Company and its Accounts on those days on which
the Fund calculates its net asset value pursuant to the rules of the SEC and the
Fund shall use its best efforts to calculate such net asset value on each day
which the NYSE is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any
Portfolio to any person including, but not limited to, the Company, or suspend
or terminate the offering of shares of any Portfolio if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board, acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the best
interests of the shareholders of such Portfolio. Further, it is acknowledged and
agreed that the availability of shares of the Fund shall be subject to the
Fund's then current prospectus and statement of additional information, federal
and state securities laws and applicable rules and regulations of the SEC and
the NASD.
1.3 The Fund and the Sponsor agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Portfolio will be sold to the general public.
1.4 The Fund and the Sponsor will not sell Fund shares to any Participating
Insurance Company or its separate account unless an agreement containing a
provision substantially the same as Section 2.6 of Article II of this Agreement
is in effect to govern such sales.
1.5 The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by an Account. In the case of any such
request for redemption received by the Fund or its designee on any Business Day
prior to the market close, the request shall be accorded a trade date on the
Fund's accounting system that is the date of receipt of the request by the Fund
or its designee. In the case of any such request for redemption received by the
Fund or its designee on any Business Day after the market close, the request
shall be accorded a trade date on the Fund's accounting system that is the next
Business Day. For purposes of this Section 1.5, the Company shall be the
designee of the Fund for receipt of requests for redemption from each Account
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such request for redemption by 8:30 a.m. Eastern
time on the next following Business Day. Notwithstanding the foregoing, if the
payment of redemption proceeds on the next Business Day would require the Fund
to dispose of Portfolio securities or otherwise incur substantial additional
costs, the Fund may determine to settle one or more redemption transactions on a
delayed basis, in which case proceeds shall be wired to the Company within seven
(7) days and the Fund shall notify the Company of such a delay by 3:00 Eastern
time on the same Business Day that the Company transmits the redemption order
the Fund. Furthermore, notwithstanding the foregoing, the Fund reserves the
right to suspend redemption privileges or pay redemptions in kind, as disclosed
in the Fund's prospectus or statement of additional information. The Fund agrees
to treat the Company like any other shareholder in similar circumstances in
making these determinations.
1.6 The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund and in accordance with the
provisions of such prospectus and the accompanying statement of additional
information.
1.7 With respect to payment of the purchase price by the Company and of
redemption proceeds by the Fund, the Company and the Fund shall net all purchase
and redemption orders on a given Business Day and shall transmit one net payment
for all of the Portfolios in accordance with Section 1.8 hereof.
1.8 In the event of net purchases, the Company shall pay for Fund shares by
4:00 p.m. Eastern time on the next Business Day after an order to purchase the
shares is received by the Company in accordance with the provisions of Section
1.1 hereof. In the event of net redemptions, the Fund shall pay the redemption
proceeds by 4:00 p.m. Eastern time on the next Business Day after an order to
redeem the shares is received by the Company in accordance with the provisions
of Section 1.5 hereof. If net redemption proceeds are not received by 4:00 p.m.
Eastern time on the next Business Day, the Fund will reimburse the Company for
all costs reasonably incurred as a result of the delay. Payment shall be in
federal funds transmitted by wire. For purposes of Section 2.10, upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
If the Company fails to pay for Fund shares as required by this Section 1.8,
then the Fund shall be entitled to redeem the shares to cover the cost. The
Company shall be responsible for any shortfall between the purchase and the
redemption; the Fund shall be entitled to retain any gain.
1.9 Issuance and transfer of a Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account. The Fund shall furnish to the
Company the CUSIP number assigned to each Portfolio of the Fund identified in
Schedule B hereto.
1.10 The Fund shall furnish advance notice, as practicable, but at the
latest same day notice (by wire or telephone, followed by written confirmation)
to the Company of any income, dividends or capital gain distributions on the
Fund's shares. The Company hereby elects to receive all such income, dividends
and capital gain distributions as are payable on the Portfolio shares in
additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of dividends and distributions.
1.11 The Fund shall make the daily net asset value, dividend and capital
gain Information for each Portfolio available on a per share basis to the
Company as soon as reasonably practical after the information is calculated
(normally by 6:30 p.m. Eastern time) and shall use its best efforts to make such
net asset value per share available by 7:00 p.m. Eastern time on each Business
Day. Related to this obligation, the Fund shall provide a contact name or names
and telephone numbers of the persons responsible for providing daily net asset
value, dividend and capital gain information to the Company. In the event of an
error in the computation of the Fund's net asset value per share which, in
accordance with procedures adopted by the Fund's Board of Trustees consistent
with views expressed by the staff of the Securities and Exchange Commission
regarding appropriate error correction standards, as shall be in effect or
amended from time to time, requires adjustment to transactions previously
effected on behalf of an Account (a "Pricing Error"), Vanguard shall notify the
Company as soon as possible after discovery of the Pricing Error. Such
notification may be oral, but shall be confirmed promptly in writing. In such
event, Vanguard shall reimburse the Fund for any loss (without taking into
consideration any positive effect of such Pricing Error) and shall make
appropriate adjustments to the Accounts' accounts, which adjustments shall net
the impact of individual gains and losses; this will result in either a net
payment to an Account from Vanguard (in the event of net Account losses) or from
an Account to Vanguard (in the event of net Account gains). In addition, in the
event that the Pricing Error causes the Company to incur any direct costs for
re-processing accounts under an Account, such as preparing and mailing revised
statements, Vanguard shall reimburse the Company for all such reasonable costs
upon receipt from the Company of an invoice or other statement documenting such
costs in reasonable detail.
1.12 Extraordinary events. The Company is not authorized to accept as the
Fund's designee any individual purchase or redemption of shares in an amount
which equals or exceeds the "Large Transaction Amount" for a Portfolio (as
specified in Schedule C) where such order is the result of an "Extraordinary
Event" of which the Company is aware, unless the Company has notified the
Sponsor of such order as soon as practicable following the Company becoming
aware of the Extraordinary Event and, with respect to purchases or redemptions
of which the Company is aware as of 3:00 p.m. Eastern time on the trade date, in
no event later than 3:00 p.m. Eastern time on the trade date. For these
purposes, an "Extraordinary Event" shall mean an event outside normal operations
such as an entire Account moving into or out of a Portfolio or an asset transfer
arising from a merger, acquisition or divestiture. The Sponsor reserves the
right to refuse any purchase order, or to delay settlement of any redemption
order, which equals or exceeds the applicable Large Transaction Amount and
results from an Extraordinary Event, which the Sponsor, in its sole discretion,
deems disruptive or detrimental to the applicable Portfolio. The Sponsor
reserves the right to amend or revise Schedule C at any time and will provide at
least 24 hours' advance notice of such revision to the Company.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under applicable law; that it has legally
and validly established each Account prior to any issuance or sale thereof as a
segregated asset account under Section ______ of the Indiana Insurance Code;
that it has and will maintain the capacity to issue all Variable Insurance
Products that may be sold; and that it is properly licensed, qualified and in
good standing to sell the Variable Insurance Products in all fifty states and
the District of Columbia.
2.2 The Company represents and warrants that the Variable Insurance
Products are registered under the 0000 Xxx.
2.3 The Company represents and warrants it has registered each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as segregated investment accounts for the Variable Insurance Products.
2.4 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the State of Indiana and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 0000 Xxx. The Fund shall amend the registration statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund, the
Distributor, or the Sponsor.
2.5 The Fund represents that it is qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and that it will make every effort to maintain qualification (under
Subchapter M or any successor or similar provision) and (ii) it will notify the
Company immediately upon having a reasonable basis for believing that it ceased
to so qualify or that it might not so qualify in the future. The Fund
acknowledges that any failure to qualify as a Regulated Investment Company will
eliminate the ability of the subaccounts to avail themselves of the "look
through" provisions of Section 817(h) of the Code, and that as a result the
Variable Insurance Products will almost certainly fail to qualify as endowment
or life insurance contracts under Section 817(h) of the Code.
2.6 The Company represents that the Variable Insurance Products will be
treated as endowment or life insurance contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Sponsor immediately upon having a reasonable
basis for believing that the Variable Insurance Products have ceased to be so
treated or that they might not be so treated in the future.
2.7 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise.
2.8 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Sponsor represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Indiana to the extent required to perform this Agreement.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Indiana and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 0000 Xxx.
2.10 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Delaware and that it does and will comply in all
material respects with the 1940 Act and any applicable regulations thereunder.
2.11 The Sponsor represents and warrants that the Advisers to the Fund are,
and the Sponsor shall use its best effort to cause the Advisers to remain, duly
registered in all material respects under all applicable federal and state
securities laws and to perform their obligations for the Fund in compliance in
all material respects with the laws of the State of Indiana and any applicable
state and federal securities laws.
2.12 The Fund and the Sponsor represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage required currently by Rule 17g-1 under the 1940 Act or other
applicable laws or regulations as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.13 With respect to the Variable Insurance Products, which are registered
under the 1933 Act, the Company represents and warrants that:
(a) OneAmerica Securities, Inc. is the principal underwriter for each such
Account and any subaccounts thereof and is a registered broker-dealer
with the SEC under the 1934 Act;
(b) the shares of the Portfolios of the Fund are and will continue to be
the only investment securities held by the corresponding subaccounts;
(c) the number of Portfolios of the Fund available for investment by the
Accounts will not constitute a majority of the total number of mutual
funds or portfolio selections available for investment by the Accounts
in any Variable Insurance Product; and
(d) with regard to each Portfolio, the Company, if permitted by law, on
behalf of the corresponding subaccount, will:
(i) vote such shares held by it in the same proportion as the vote of
all other holders of such shares; and (ii) refrain from
substituting shares of another security for such shares unless
the SEC has approved such substitution in the manner provided in
Section 26 of the 0000 Xxx.
2.14 The Fund represents that it will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE III. Offering Documents and Reports
3.1 The Fund, the Sponsor or their designee shall provide the Company (at
the Sponsor's expense) with as many copies of the Fund's current prospectus as
the Company may reasonably request. The Company shall provide a copy of the
Fund's prospectus to each Variable Insurance Product owner. If requested by the
Company in lieu thereof, the Fund or the Sponsor shall provide such
documentation (including a final copy of the new prospectus as set in type at
the Fund's or the Sponsor's expense) and other assistance as is reasonably
necessary in order for the Company once each year (or more frequently if the
prospectus for the Fund is amended) to have the prospectus for the Variable
Insurance Products and the Fund's prospectus printed together in one document
(such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the statement of additional
information for the Fund is available from the Sponsor (or in the Fund's
discretion, the prospectus shall state that the statement of additional
information is available from the Fund) and the Sponsor (or the Fund), at its
expense, shall print and provide such statement free of charge to the Company
and to any owner of a Variable Insurance Product or prospective owner who
requests such statement.
3.3 The Fund, at its own expense, shall provide the Company with copies of
its reports to shareholders, other communications to shareholders, and, if
required by applicable law, proxy material, in such quantity as the Company
shall reasonably require for distributing to Variable Insurance Product owners.
The Fund shall provide to the Company the prospectuses and annual reports
referenced in this Agreement within fifteen (15) days prior to the Company's
obligation to mail, and the Company agrees to provide the Fund with advance
notice of such date. If the documents are not delivered to the Company within
ten (10) days of the Company's obligation to mail, the Fund shall reimburse the
Company for any extraordinary out-of-pocket costs (including, but not limited
to, overtime for printing and mailing).
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material in
which the Fund, its Advisers or the Sponsor is named, at least ten Business Days
prior to its use. The Company may use such material in fewer than ten Business
Days if it receives the written consent of the Fund or its designee. No such
material shall be used if the Fund or its designee reasonably objects to such
use within ten Business Days after receipt of such material. In connection with
the identification of the Portfolios in any such material, the use of the
Sponsor's name or identification of the Portfolios shall be given no greater
prominence than any other mutual fund or portfolio selection offered in a
Variable Insurance Product.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Variable Insurance Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Sponsor, except with the permission of the Fund or the
Sponsor or the designee of either.
4.3 The Fund, Sponsor, Distributor or their designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or an Account is
named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4 The Fund, the Distributor and the Sponsor shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Variable Insurance Products other than the
information or representations contained in a prospectus for the Variable
Insurance Products, as such prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Variable Insurance Product
owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, prior to or
contemporaneously with the filing of each document with the SEC or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
prospectuses, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemption, requests for
no-action letters, and all amendments to any of the above, that relate to the
Variable Insurance Products or each Account, prior to or contemporaneously with
the filing of such document with the SEC or other regulatory authorities.
4.7 The Company and the Fund shall also each promptly inform the other of
the results of any examination by the SEC (or other regulatory authorities) that
relates to the Variable Insurance Products, the Fund or its shares, and the
party that was the subject of the examination shall provide the other party with
a copy of relevant portions of any "deficiency letter" or other correspondence
or written report regarding any such examination.
4.8 The Fund and the Sponsor will provide the Company with as much notice
as is reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Fund's registration statement, particularly any
change resulting in a change to the prospectus for any Account. The Fund and the
Sponsor will cooperate with the Company so as to enable the Company to solicit
voting instructions from owners of Variable Insurance Products, to the extent a
solicitation is required by applicable law, or to make changes to its prospectus
in an orderly manner.
4.9 For purposes of this Article IV, the phrase "sales literature and other
promotional material" includes, but is not limited to, sales literature (i.e.,
any written communication distributed or made generally available to customers,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, reprints or excerpts of any other advertisement, sales
literature, or published articles), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and prospectuses, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1 The Fund and Sponsor shall pay no fee or other compensation to the
Company under this Agreement. Nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate compensation
for, other services relating to the Fund and or to the Accounts.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the fees and
expenses for the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, all taxes on the
issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing, and the Company shall
bear the expenses of distributing, the Fund's prospectus to owners of Variable
Insurance Products issued by the Company. The Company shall bear the expenses of
distributing the Fund's proxy materials (to the extent such proxy solicitation
is required by law) and reports to owners of Variable Insurance Products.
ARTICLE VI. Diversification
6.1 The Fund will at all times invest money from the Variable Insurance
Products in such a manner as to ensure that the Variable Insurance Products will
be treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund and the
Sponsor represent and warrant that each Portfolio of the Fund will meet the
diversification requirements of Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for endowment
or life insurance contracts and any amendments or other modifications to such
Section or Regulations, as if those requirements applied directly to each such
Portfolio. In the event of a breach of this Article VI by the Fund, it will take
all reasonable steps (a) to notify Company of such breach and (b) to adequately
diversify, each Portfolio of the Fund so as to achieve compliance within the
grace period afforded by Regulation 817-5.
6.2 The Fund and the Sponsor represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code and
they will maintain such qualification (under Subchapter M or any successor or
similar provision).
ARTICLE VII. Indemnification
7.1 Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any,
who controls the Fund within the meaning of Section 15 of the
1933 Act, the Sponsor and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against
any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the
Company) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Variable Insurance
Products and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Variable
Insurance Products or contained in the contract or policy or
sales literature for the Variable Insurance Products (or any
amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein
not misleading, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use
in the registration statement or prospectus for the Variable
Insurance Products or in the contract or policy sales
literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Insurance
Products or the Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of
the Fund not supplied by the Company, or persons under its
control) or unlawful conduct of the Company or persons under
its control, with respect to the sale or distribution of the
Variable Insurance Products or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund (or
any amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission was
made in reliance upon information furnished to the Fund by
or on behalf of the Company; or
(iv) result from any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any material breach
of this Agreement by the Company;
as limited by and in accordance with the provisions of Section
7.1(b) and 7.1(c) hereof.
(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Fund, whichever is
applicable.
(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such
service on a designated agent), but failure to notify the Company
of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such action.
The Company also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Company to such a party of the Company's election
to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it,
and the Company will not be liable to such party under this
agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund shares or the
Variable Insurance Products or the operation of the Fund.
7.2 Indemnification by the Sponsor
(a) The Sponsor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Sponsor) or litigation (including legal
and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Variable Insurance
Products and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Sponsor or Fund
by or on behalf of the Company for use in the registration
statement or prospectus for the Fund or in sales literature
(or any amendment or supplement thereto) or otherwise for
use in connection with the sale of the Variable Insurance
Products or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for
the Variable Insurance Products not supplied by the Sponsor
or persons under its control) or unlawful conduct of the
Fund, the Advisers or persons under their control, with
respect to the sale or distribution of the Variable
Insurance Products or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus or sales literature covering the
Variable Insurance Products (or any amendment or supplement
thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) result from any failure by the Sponsor or the Fund to
provide the services and furnish the materials under the
terms of this Agreement (including a failure to comply with
the diversification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Sponsor or the
Fund in this Agreement or arise out of or result from any
other material breach of this Agreement by the Sponsor or
the Fund;
as limited by and in accordance with the provisions of Sections
7.2(b) and 7.2(c) hereof.
(b) The Sponsor shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or the Accounts,
whichever is applicable.
(c) The Sponsor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the
Sponsor in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of any
such service on any designated agent), but failure to notify the
Sponsor of any such claim shall not relieve the Sponsor from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
indemnification provision. In any case any such action is brought
against the Indemnified Parties, the Sponsor will be entitled to
participate, at its own expense, in the defense thereof. The
Sponsor also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from the Sponsor to such party of the Sponsor's election
to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it,
and the Sponsor will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred
by each party independently in connection with the defense
thereof other than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Sponsor of the
commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or
sale of the Variable Insurance Products or the operation of each
Account.
7.3 Indemnification by the Fund
(a) The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this
Section 7.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and
other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
such losses, claims damages, liabilities or expenses (or action
in respect thereof) or settlements resulting from the gross
negligence, bad faith or willful misconduct of the Board or any
member thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
7.3(b) and 7.3(c) hereof.
(b) The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or
litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of
such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Fund, the Sponsor or each
Account, whichever is applicable.
(c) The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in
writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Fund of any such
claim shall not relieve the Fund from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties,
the Fund will be entitled to participate, at its own expense, in
the defense thereof. The Fund also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Fund to such party or the
Fund's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel
retained by it, and the Fund will not be liable to such party
independently in connection with the defense thereof other than
reasonable costs of litigation.
(d) The Company and the Sponsor agree promptly to notify the Fund of
the commencement of any litigation or proceedings against it or
any of its respective officers or directors in connection with
this Agreement, the issuance or sale of the Variable Insurance
Products, with respect to the operation of an Account, or the
sale or acquisition of shares of the Fund.
7.4 Indemnification by the Distributor
(a) The Distributor agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 7.4) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Sponsor) or litigation (including legal
and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Variable Insurance
Products and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Distributor or
the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in
sales literature (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the
Variable Insurance Products or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for
the Variable Insurance Products not supplied by the
Distributor or persons under its control) or unlawful
conduct of the Fund, the Advisers or persons under their
control, with respect to the sale or distribution of the
Variable Insurance Products or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus or sales literature covering the
Variable Insurance Products (or any amendment or supplement
thereto), or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein not
misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) result from any failure by the Distributor or the Fund to
provide the services and furnish the materials under the
terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or
the Fund in this Agreement or arise out of or result from
any other material breach of this Agreement by the
Distributor of the Fund;
as limited by and in accordance with the provisions of Sections
7.4(b) and 7.4(c) hereof.
(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company or the Accounts,
whichever is applicable.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the
Distributor in writing within a reasonable time after the summons
or other first legal process giving information of the nature of
the claim shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of any
such service on any designated agent), but failure to notify the
Distributor of any such claim shall not relieve the Distributor
from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of
this indemnification provision. In any case any such action is
brought against the Indemnified Parties, the Distributor will be
entitled to participate, at its own expense, in the defense
thereof. The Sponsor also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the
Distributor's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not
be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by each party independently
in connection with the defense thereof other than reasonable
costs of investigation.
(d) The Company agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any
of its officers or directors in connection with the issuance or
sale of the Variable Insurance Products or the operation of each
account.
ARTICLE VIII. Applicable Law
8.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Indiana.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant, and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1 Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party for any reason by sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Variable Insurance
Products; or
(c) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such law
precludes the use of such shares as the underlying investment
media of the Variable Insurance Products issued or to be issued
by the Company; or
(d) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event that such
Portfolio ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor or similar
provision, or if the Company reasonably believes that the Fund
may fail to so qualify (in the event of such termination, the
Company shall withdraw all assets allocable to the separate
accounts from the Portfolio and shall reinvest such assets in a
different investment medium, including, but not limited to,
another Portfolio of the Fund); or
(e) termination by the Company by written notice to the Fund and the
Sponsor with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements as
specified in Article VI hereof (in the event of such termination,
the Company shall withdraw all assets allocable to the separate
accounts from the Portfolio and shall reinvest such assets in a
different investment medium, including, but not limited to,
another Portfolio of the Fund); or
(f) termination by the Fund, the Sponsor, or the Distributor by
written notice to the Company, if any of the Fund, the Sponsor,
or the Distributor shall determine, in its sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, or financial condition since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Sponsor, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund, the Sponsor, or
the Distributor has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity.
9.2 Notwithstanding any termination of this Agreement, the Fund and the
Sponsor shall, at the option of the Company, continue to make available shares
of the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Insurance Products in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts.
9.3 The Company shall not redeem Fund shares attributable to the Variable
Insurance Products (as opposed to Fund shares attributable to the Company's
assets held in the Accounts) except (a) as necessary to implement Variable
Insurance Products owner initiated or approved transactions, or (b) as required
by state and/or federal laws or regulations or judicial or other legal precedent
of general application (hereinafter referred to as a "Legally Required
Redemption"). Upon request, the Company will promptly furnish to the Fund and
the Sponsor the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Sponsor) to the effect that any
redemption pursuant to clause (b) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, the Company shall not prevent owners of Variable Insurance
Products from allocating payments to a Portfolio that was otherwise available
under the Variable Insurance Products without first giving the Fund or the
Sponsor 90 days' notice of its intention to do so.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund: Vanguard Variable Insurance Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Sponsor: The Vanguard Group, Inc.
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: R. Xxxxxxx Xxxxxx
If to the Distributor: Vanguard Marketing Corporation
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: R. Xxxxxxx Xxxxxx
If to the Company: American United Life Insurance Company
Xxx Xxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxxxx, XX 00000-0000
Attn:
ARTICLE XI. Miscellaneous
11.1 It is understood and stipulated that neither the shareholders of any
Portfolio nor the officers or trustees of the Fund shall be personally liable
hereunder.
11.2 Subject to the requirements of the legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Insurance Products and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not (unless it has obtained the express
written consent of the affected party) disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it may
come into the public domain.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 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.
11.6 Each party hereto shall cooperate with each party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
11.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
11.9 The Company shall furnish, or cause to be furnished, to the Fund or
its designee copies of the following reports:
(a) the Company's Annual Financial Statement on Statutory Basis as
soon as practical and in any event within 90 days after the end
of each fiscal year; and
(b) any registration statement, prospectus or other materials
distributed in connection with the sale of the Variable Insurance
Products to the extent such registration statement, prospectus or
other materials reference the Fund.
11.10 This Agreement, including any Schedule hereto, may be amended or
modified only by written instrument, executed by duly authorized officers of the
parties.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
as of the date specified above.
VANGUARD VARIABLE INSURANCE FUND
By: ____________________________________
Name: _________________________________
Title: __________________________________
THE VANGUARD GROUP, INC.
By: ____________________________________
Name: _________________________________
Title: __________________________________
VANGUARD MARKETING CORPORATION
By: ____________________________________
Name: _________________________________
Title: __________________________________
AMERICAN UNITED LIFE INSURANCE COMPANY
By: ____________________________________
Name: _________________________________
Title: __________________________________
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account Contracts Funded by Separate Account
OneAmerica Variable Annuity
SCHEDULE B
PORTFOLIOS
The following Portfolios of the Vanguard Variable Insurance Funds shall be
made available as investments underlying the Variable Insurance Products,
subject to the limitations set forth in Section 2.13(c) hereof:
Total Bond Market Index Portfolio
Mid-Cap Index Portfolio
Small Company Growth Portfolio
SCHEDULE C
LARGE TRANSACTION AMOUNTS
Portfolio Large Transaction Amount
Total Bond Market Index Portfolio $ 100,000
Mid-Cap Index Portfolio 25,000
Small Company Growth Portfolio 100,000
