JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 25th day of February , 1997, between JANUS ASPEN
SERIES, an open-end management investment company organized as a Delaware
business trust (the "Trust"), JANUS CAPITAL CORPORATION (the "Adviser"), a
Colorado corporation and the investment adviser to the Trust, and AMERICAN
UNITED LIFE INSURANCE COMPANY, a life insurance company organized under the laws
of the State of Indiana (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A, as may be
amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust has registered with the Securities and Exchange Commission as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"), and has registered the offer and sale of its
shares under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
to be offered by insurance companies that have entered into participation
agreements with the Trust (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several series of
shares, each series representing an interest in a particular managed portfolio
of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and Exchange
Commission granting Participating Insurance Companies and their separate
accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a) and 15(b)
of the 1940 Act, and Rules 6e- 2(b)(15) and 6e-3(T)(b)(15) thereunder, to the
extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless registration is not
required under applicable law) certain variable life insurance policies and/or
variable annuity contracts under the 1933 Act (the "Contracts"); and
WHEREAS, the Company has registered or will register (unless registration is not
required under applicable law) each Account as a unit investment trust under the
1940 Act; and
WHEREAS, the Adviser is registered with the Securities and Exchange Commission
as
an investment adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company desires to utilize shares of one or more Portfolios as an
investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties agree as
follows:
ARTICLE I
Sale of Trust Shares
1.1 The Trust and the Adviser shall make shares of the Trust's Portfolios
available to the Accounts at the net asset value next computed after receipt of
such purchase order by the Trust (or its agent), as established in accordance
with the provisions of the then current prospectus of the Trust. Shares of a
particular Portfolio of the Trust shall be ordered in such quantities and at
such times as determined by the Company to be necessary to meet the requirements
of the Contracts. The Trustees of the Trust (the "Trustees") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Trustees
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any Portfolio when
requested by the Company on behalf of an Account at the net asset value next
computed after receipt by the Trust (or its agent) of the request for
redemption. Such redemptions shall ordinarily be paid in federal funds or by any
other method mutually agreed upon by the parties hereto by the next Business Day
(as defined below) following receipt by the Trust (or its agent) of notice of
the order for redemption; however, the Fund reserves the right to postpone
payment upon redemption consistent with Section 22(e) of the 1940 Act and any
rules thereunder.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby appoints the
Company as its agent for the limited purpose of receiving and accepting purchase
and redemption orders resulting from investment in and payments under the
Contracts. Receipt by the Company shall constitute receipt by the Trust provided
that i) such orders are received by the Company in good order prior to the time
the net asset value of each Portfolio is priced in accordance with its
prospectus and ii) the Trust receives notice of such orders by 11:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance with Section
1.3 shall be paid for no later than 12:00 noon New York time on the same
Business Day that the Trust receives notice of the order. Payments shall be made
in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Shares
ordered from the Trust will be recorded in the appropriate title for each
Account or the appropriate subaccount of each Account.
1.6 The Trust shall furnish same-day notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election in
writing and to receive all such dividends and distributions in cash. The Trust
shall notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.7 The Trust shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 6 p.m. New York time.
1.8 The Trust and the Adviser agree that the Trust's shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Exemptive
Order consistent with each Portfolio being adequately diversified pursuant to
Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder. No shares of any Portfolio will be sold directly
to the general public. The Company agrees that Trust shares will be used only
for the purposes of funding the Contracts and Accounts listed in Schedule A, as
amended from time to time. The Trust and the Adviser will not sell shares of the
Portfolios to any insurance company or separate account unless an agreement
containing provisions required by the Exemptive Order is in effect and governs
such sales.
1.9 The Trust and the Adviser agree that all Participating Insurance Companies
shall have the obligations and responsibilities regarding pass-through voting
and conflicts of interest corresponding to those contained in Section 2.8 and
Article IV of this Agreement.
1.10 Price Errors.
(1) In the event adjustments are required to correct any material error in the
computation of the net asset value of the Trust's shares, the Trust or the
Adviser shall notify the Company as soon as practicable after discovering the
need for those adjustments which result in a reimbursement to an Account in
accordance with the Trust's or the Adviser's then current policies on
reimbursement, which the Trust or the Adviser represents are reasonable and
consistent with applicable standards. Notification may be made via facsimile or
via direct or indirect systems access. Any such notification shall be promptly
followed by a letter written on the Trust's or the Adviser's letterhead stating
for each day for which an error occurred the incorrect price, the correct price,
and, to the extent communicated to
the Trust's shareholders, the reason for the price change.
(2) If an adjustment is to be made in accordance with subsection (1) above to
correct an error which has caused an Account to receive an amount different than
that to which it is entitled, the Trust or the Adviser shall make all necessary
adjustments to the number of shares owned in the Account and distribute to the
Account the amount of such underpayment for credit to the Contract owners. Upon
the furnishing of an accounting to the Trust or the Adviser by the Company, the
Trust or the Adviser will immediately reimburse to the Company all reasonable
expenses incurred by the Company, including the expense of any organization that
the Company has retained to provide administration or recordkeeping services
under this Agreement, to adjust all Accounts and accounts of Contract owners
affected by such error.
ARTICLE II
Obligations of the Parties
2.1 The Trust and the Adviser shall prepare and be responsible for filing with
the Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and filing of the
documents listed in this Section 2.1 and all taxes to which an issuer is subject
on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust shall either (a) provide the Company
(at the Company's expense) with as many copies of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
as the Company shall reasonably request; or (b) provide the Company with a
camera ready copy of such documents in a form suitable for printing. The Trust
shall provide the Company with a copy of its statement of additional information
in a form suitable for duplication by the Company. The Trust (at its expense)
shall provide the Company with copies of any Trust-sponsored proxy materials in
such quantity as the Company shall reasonably require for distribution to
Contract owners.
2.3 The Company shall bear the costs of printing and distributing the Trust's
prospectus, statement of additional information, shareholder reports and other
shareholder communications to owners of and applicants for policies for which
the Trust is serving or is to serve as an investment vehicle. The Company shall
bear the costs of distributing proxy materials (or similar materials such as
voting solicitation instructions) to Contract owners. The Company assumes sole
responsibility for ensuring that such materials are delivered to Contract owners
in accordance with applicable federal and state securities laws.
2.4 (a) The Company agrees and acknowledges that the Adviser is the sole owner
of the name and xxxx "Xxxxx" and that all use of any designation comprised in
whole or part of Janus (a "Xxxxx Xxxx") under this Agreement shall inure to the
benefit of the Adviser. Except as provided in Section 2.5, the Company shall not
use any Xxxxx Xxxx on its own behalf or on behalf of the Accounts or Contracts
in any registration statement, advertisement, sales literature or other
materials relating to the Accounts or Contracts without the prior written
consent of the Adviser. Upon termination of this Agreement for any reason, the
Company shall cease all use of any Xxxxx Xxxx(s) as soon as reasonably
practicable.
(b) The Trust and the Adviser agree and acknowledge that the names "American
United Life Insurance Company "AUL", or any derivative thereof or logo
associated with those names ("XXX Xxxx") is the valuable property of the Company
and its affiliates, and that the Trust shall not use any XXX Xxxx without the
prior written consent of the Company. Upon termination of this Agreement for any
reason, the Trust and the Adviser shall cease all use of any XXX Xxxx as soon as
reasonably practicable.
2.5 The Company shall furnish, or cause to be furnished, to the Trust or its
designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or the Adviser is named prior to the filing of
such document with the Securities and Exchange Commission. The Company shall
furnish, or shall cause to be furnished, to the Trust or its designee, each
piece of sales literature or other promotional material in which the Trust or
the Adviser is named, at least ten Business Days prior to its use. No such
material shall be used if the Trust or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
2.6 The Company shall not give any information or make any representations or
statements on behalf of the Trust or concerning the Trust or the Adviser in
connection with the sale of the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Trust shares (as such registration statement and
prospectus may be amended or supplemented from time to time), reports of the
Trust, Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as required
by legal process or regulatory authorities or with the written permission of the
Trust or its designee. The Trust or its designee shall use their best efforts to
provide such approval or, if approval is not given, then to provide comments
suggesting appropriate changes to such information or representations as set
forth in Section 2.5 above.
2.7 The Trust and the Adviser shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Contracts (as such registration statement and prospectus may
be amended or supplemented from time to time), or in materials approved by the
Company for distribution including sales literature or other promotional
materials, except as required by legal process or regulatory authorities or with
the written permission of the Company.
2.8 If, and to the extent required by the Exemptive Order or that the Securities
and
Exchange Commission interprets the 1940 Act to require pass-through voting
privileges for variable Contract owners, the Company will provide pass-through
voting privileges to those owners of Contracts subject to the pass-through
voting requirements whose cash values are invested, through the Accounts, in
shares of the Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and the Company
shall be responsible for assuring that the Accounts calculate voting privileges
in the manner established by the Trust. With respect to each Account, the
Company will vote shares of the Trust held by the Account and for which no
timely voting instructions from Contract owners are received as well as shares
it owns that are held by that Account, in the same proportion as those shares
for which voting instructions are received. The Company and its agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Trust shares held by Contract owners without the prior written consent of the
Trust, which consent may be withheld in the Trust's sole discretion.
2.9 The Company shall notify the Trust of any applicable state insurance laws
that restrict the Portfolios' investments or otherwise affect the operation of
the Trust and shall notify the Trust of any changes in such laws.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of Indiana and that
it has legally and validly established each Account as a segregated asset
account under such law on the date set forth
in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
an exclusion from registration under the 0000 Xxx.
3.3 The Company represents and warrants that the Contracts or interests in the
Accounts (1) are or, prior to issuance, will be registered as securities under
the 1933 Act or, alternatively (2) are not registered because they are properly
exempt from registration under the 1933 Act or will be offered exclusively in
transactions that are properly exempt from registration under the 1933 Act. The
Company further represents and warrants that the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with state insurance suitability requirements.
3.4 The Trust and the Adviser represent and warrant that the Trust is duly
organized and validly existing under the laws of the State of Delaware.
3.5 The Trust and the Adviser represent and warrant that the Trust shares
offered and sold pursuant to this Agreement are duly authorized for issuance in
accordance with applicable law and will be registered under the 1933 Act and the
Trust shall be registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6 The Trust and the Adviser will invest assets of the Portfolios in such a
manner to permit the Portfolios to be used for investment by separate accounts
of life insurance companies funding variable annuity and variable life insurance
contracts, whichever is appropriate, under the Code and the regulations
thereunder. Without limiting the scope of the foregoing, the Trust and the
Adviser represent and warrant that the investments of each Portfolio will comply
with the diversification requirements set forth in Section 817(h) of the Code,
and the rules and regulations thereunder and each Portfolio has complied with
such requirements since each Portfolio's commencement of operations.
3.7 The Trust and the Adviser shall maintain qualification of each Portfolio as
a Regulated Investment Company under Subchapter M of the Code (or any successor
or similar provisions) and shall notify the Company immediately upon having a
reasonable basis for believing that a Portfolio has ceased to so qualify or that
it might not so qualify in the future.
3.8 The Trust and the Adviser agree to use their best efforts to ensure that
each Portfolio of the Trust shall be managed consistent with its investment
objective or objectives,
investment policies, and investment restrictions as described in the Trust's
prospectus and registration statement, as amended or modified from time to time.
ARTICLE IV
Potential Conflicts
4.1 The parties acknowledge that the Trust's shares may be made available for
investment to other Participating Insurance Companies. In such event, the
Trustees will monitor the Trust for the existence of any material irreconcilable
conflict between the interests of the contract owners of all Participating
Insurance Companies. An irreconcilable material conflict may arise for a variety
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Trustees shall promptly inform the Company if they determine that an
irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing conflicts
of which it is aware to the Trustees. The Company will assist the Trustees in
carrying out their responsibilities under the Exemptive Order by providing the
Trustees with all information reasonably necessary for the Trustees to consider
any issues raised including, but not limited to, information as to a decision by
the Company to disregard Contract owner voting instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of its
disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating Insurance Companies whose contract owners are also affected,
at its expense and to the extent reasonably practicable (as determined by the
Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision by the
Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives written
notice that this provision is being implemented. Until the end of such six (6)
month period, the Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority of
the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company be required to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In the
event that the Trustees determine that any proposed action does not adequately
remedy any irreconcilable material conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within six (6)
months after the Trustees inform the Company in writing of the foregoing
determination; provided, however, that such withdrawal and termination shall be
limited to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested Trustees.
4.7 The Company shall at least annually submit to the Trustees such reports,
materials or data as the Trustees may reasonably request so that the Trustees
may fully carry out the duties imposed upon them by the Exemptive Order, and
said reports, materials and data shall be submitted more frequently if deemed
appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Exemptive Order) on terms and conditions materially different
from those contained in the Exemptive Order, then the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the
extent such rules are applicable.
ARTICLE V
Indemnification
5.1 Indemnification By the Company. The Company agrees to indemnify and hold
harmless the Trust, the Adviser, and each of their Trustees, Directors,
officers, employees and agents and each person, if any, who controls the Trust
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article V) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Company) or expenses (including the reasonable costs of
investigating or defending any alleged loss, claim, damage, liability or expense
and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in a registration statement or
prospectus for the Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company on behalf of the Contracts or
Accounts (or any amendment or supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V), 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 indemnity 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 was accurately derived from written information
furnished to the Company by or on behalf of the Trust for use in Company
Documents or otherwise for use in connection with the sale of the Contracts or
Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Trust
Documents as defined in Section 5.2(a)) or wrongful conduct of the Company or
persons under its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue
statement of a material fact contained in Trust Documents as defined in Section
5.2(a) 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 and
accurately derived from written information furnished to the Trust by or on
behalf of the Company; or
(d) arise out of or result from any failure by the Company to provide the
services or furnish the materials required under the terms of this Agreement;
or
(e) arise out of or result from any material breach of any representation and/or
warranty made by the Company in this Agreement or arise out of or result from
any other material breach of this Agreement by the Company.
5.2 Indemnification By the Adviser. The Adviser agrees to indemnify and hold
harmless the Company and each of its directors, officers, employees and agents
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act, and the Accounts (collectively, the "Indemnified Parties"
for purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Adviser) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) 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 or sales literature for the Trust prepared by the Trust or the
Adviser (or any amendment or supplement thereto), (collectively, "Trust
Documents" for the purposes of this Article V), 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 indemnity 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 was accurately derived from written information
furnished to the Trust or the Adviser by or on behalf of the Company for use in
Trust Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations (other than
statements or representations contained in and accurately derived from Company
Documents) or wrongful conduct of the Trust or persons under its control, with
respect to the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged untrue statement
of a material fact contained in Company Documents 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 and accurately derived from written
information furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to provide the services
or furnish the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation and/or
warranty made by the Trust in this Agreement or arise out of or result from any
other material breach of this Agreement by the Trust, including but not limited
to, compliance with the diversification requirements of Section 817(h) of the
Code and qualification of each Portfolio of the Trust as a regulated investment
company under Subchapter M of the
Code.
5.3 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
5.4 Neither the Company nor the Adviser shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice of
service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5.1 and 5.2.
5.5 In case any such action is brought against the Indemnified Parties, the
indemnifying party shall be entitled to participate, at its own expense, in the
defense of such action. The indemnifying party also shall be entitled to assume
the defense thereof, with counsel reasonably satisfactory to the party named in
the action. After notice from the indemnifying party to the Indemnified Party of
an election to assume such defense, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified 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.
ARTICLE VI
Termination
6.1 This Agreement may be terminated as follows:
(a) by any party for any reason by ninety (90) days advance written notice
delivered to the other parties;
(b) at the option of the Company if shares of the Trust are not reasonably
available to meet the requirements of the Contracts, as determined by the
Company, and upon written notice by the Company to the other parties to this
Agreement;
(c) at the option of the Company upon institution of formal proceedings against
the Trust or the Adviser by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body if the Company shall
determine, in its sole judgement exercised in good faith, that the Trust or the
Adviser has suffered a material
(d) at the option of the Trust or the Adviser upon institution of formal
proceedings against the Company by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body if the Trust or Adviser shall
determine, in its sole judgement exercised in good faith, that the Company has
suffered a material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement or is the subject of
material adverse publicity;
(e) at the option of any party to the Agreement upon a determination by a
majority of the Trustees of the Trust, or a majority of disinterested Trustees,
that an irreconcilable material conflict exists;
(f) at the option of the Company if the Trust fails to meet the diversification
requirements under Subchapter M or Section 817(h) of the Code as provided in
this Agreement;
(g) at the option of the Company upon a material breach of this Agreement or of
any representation or warranty herein by the Trust of the Adviser, or at the
option of the Trust or the Adviser upon a material breach of this Agreement or
any representation or warranty herein by the Company.
6.2 Notwithstanding any termination of this Agreement, the Trust shall, at the
option of the Company, continue to make available additional shares of the Trust
(or any Portfolio) pursuant to the terms and conditions of this Agreement for
all Contracts in effect on the effective date of termination of this Agreement,
provided that the Company continues to pay the costs set forth in Section 2.3.
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Trust:
Janus Aspen Series
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
General Counsel
If to the Company:
American United Life Insurance Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Associate General Counsel
ARTICLE VIII
Miscellaneous
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
8.3 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all liabilities of
the Trust arising, directly or indirectly, under this Agreement, of any and
every nature whatsoever, shall be satisfied solely out of the assets of the
Trust and that no Trustee, officer, agent or holder of shares of beneficial
interest of the Trust shall be personally liable for any such liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc., 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.
8.7 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.
8.8 The parties to this Agreement acknowledge and agree that this Agreement
shall not be exclusive in any respect.
8.9 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.10 No provisions of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by both parties.
8.11 The Trust and the Adviser agree to treat as the property of the Company
any list or compilation of names, addresses, and other information relating to
the owners of the Contracts or prospects for the sale of Contracts acquired in
the course of performing under this Agreement and agree not to use such
information for any purpose without the prior consent of the Company, or except
as required by applicable law.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Participation Agreement as of the date and year first above
written.
JANUS ASPEN SERIES
By:
Name:
Title:
JANUS CAPITAL CORPORATION
By:
Name:
Title:
AMERICAN UNITED LIFE INSURANCE
COMPANY
By:
Name:
Title:
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Date Contracts Funded
Established by the AUL Exec. Comm. By Separate Account
---------------------------------- -------------------
AUL American Unit Trust Registered 401, 403(b), 457, 408
(established 8/17/89) contracts
Group Retirement Annuity Qualified 401 contracts
Separate Account I
(established 8/17/89)
Group Retirement Annuity Qualified 401 contracts
Separate Account II
(established 8/17/89)
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 1st day of May, 1997, by and between the PBHG
INSURANCE SERIES FUND, INC. ("FUND"), a Maryland corporation, PILGRIM XXXXXX &
ASSOCIATES, LTD. ("Adviser"), a Delaware corporation, AMERICAN UNITED LIFE
INSURANCE COMPANY ("LIFE COMPANY"), a life insurance company organized under the
laws of the State of Indiana.
WHEREAS, FUND is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940, as amended (the "40 Act"), as an
open-end, diversified management investment company; and
WHEREAS, FUND is organized as a series fund comprised of several Portfolios
("Portfolios"), with those currently available being listed on Appendix A
hereto; and
WHEREAS, FUND was organized to act as the funding vehicle for certain variable
life insurance and/or variable annuity contracts ("Variable Contracts") offered
by life insurance companies through separate accounts ("Separate Accounts") of
such life insurance companies ("Participating Insurance Companies"); and
WHEREAS, FUND may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, FUND will apply for an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the FUND to be sold to and held by Variable Contract separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more separate
accounts ("Separate Accounts") to offer Variable Contracts and is desirous of
having FUND as one of the underlying funding vehicles for such Variable
Contracts; and
WHEREAS, ADVISER is registered with the SEC as an investment adviser under the
Investment Advisers Act of 1940 and as a broker-dealer under the Securities
Exchange Act of 1934, as amended and acts as the FUND's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
2
regulations, LIFE COMPANY intends to purchase shares of FUND to fund the
aforementioned Variable Contracts and FUND is authorized to sell such shares to
LIFE COMPANY at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY, FUND,
and ADVISER agree as follows:
Article I. SALE OF FUND SHARES
1.1 FUND agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed on Appendix B for investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in FUND's Registration Statement.
1.2 FUND agrees to sell to LIFE COMPANY those shares of the selected Portfolios
of FUND which LIFE COMPANY orders, executing such orders on a daily basis at the
net asset value next computed after receipt by FUND or its designee of the order
for the shares of FUND. For purposes of this Section 1.2, LIFE COMPANY shall be
the designee of FUND for receipt of such orders from the designated Separate
Account and receipt by such designee shall constitute receipt by FUND; provided
that LIFE COMPANY receives the order by 4:00 p.m. New York time and FUND
receives notice from LIFE COMPANY by telephone or facsimile (or by such other
means as FUND and LIFE COMPANY may agree in writing) of such order by 8:30 a.m.
New York time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which FUND
calculates its net asset value pursuant to the rules of the SEC.
1.3 FUND agrees to redeem on LIFE COMPANY's request, any full or fractional
shares of FUND held by LIFE COMPANY, executing such requests on a daily basis at
the net asset value next computed after receipt by FUND or its designee of the
request for redemption, in accordance with the provisions of this agreement and
FUND's Registration Statement. For purposes of this Section 1.3, LIFE COMPANY
shall be the designee of FUND for receipt of requests for redemption from the
designated Separate Account and receipt by such designee shall constitute
receipt by FUND; provided that LIFE COMPANY receives the request for redemption
by 4:00 p.m. New York time and FUND receives notice from LIFE COMPANY by
telephone or facsimile (or by such other means as FUND and LIFE COMPANY may
agree in writing) of such request for redemption by 8:30 a.m. New York time on
the next following Business Day.
1.4 FUND shall furnish, on or before the ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of FUND. LIFE COMPANY hereby elects to receive all such
income
3
dividends and capital gain distributions as are payable on a Portfolio's shares
in additional shares of the Portfolio. FUND shall notify LIFE COMPANY or its
designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 FUND shall make the net asset value per share for the selected Portfolio(s)
available to LIFE COMPANY on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated but shall use its best efforts
to make such net asset value available by 7:00 p.m. New York time. If FUND
provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed to reflect the correct share net asset value. Any material
error in the calculation of net asset value per share, dividend or capital gain
information shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, LIFE COMPANY shall process each such Business Day's
Separate Account transactions based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m. New York time) to determine the net dollar amount of FUND shares which
shall be purchased or redeemed at that day's closing net asset value per share.
The net purchase or redemption orders so determined shall be transmitted to FUND
by LIFE COMPANY by 8:30 a.m. New York Time on the Business Day next following
LIFE COMPANY's receipt of such requests and premiums in accordance with the
terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of FUND shares, LIFE Company
shall pay for such purchase by wiring federal funds to FUND or its designated
custodial account on the day the order is transmitted by LIFE COMPANY to FUND.
If LIFE COMPANY's order requests a net redemption resulting in a payment of
redemption proceeds to LIFE COMPANY, FUND shall wire the redemption proceeds to
LIFE COMPANY ordinarily on the next Business Day. In any event, proceeds shall
be wired to LIFE COMPANY within three Business Days or such longer period
permitted by the '40 Act or the rules, orders or regulations thereunder and FUND
shall notify the person designated in writing by LIFE COMPANY as the recipient
for such notice of any delay in wiring redemption proceeds beyond the next
Business Day by 3:00 p.m. New York Time the same Business Day that LIFE COMPANY
transmits the redemption order to FUND.
1.8 FUND agrees that all shares of the Portfolios of FUND will be sold only to
Participating Insurance Companies which have agreed to participate in FUND to
fund
4
their Separate Accounts and/or to Qualified Plans, all in accordance with the
requirements of Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and Treasury Regulation 1.817-5. Shares of the Portfolios of FUND will
not be sold directly to the general public.
1.9 FUND may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of the shares of or liquidate any Portfolio of FUND if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board of Directors of the FUND (the
"Board"), acting in good faith and in light of its duties under federal and any
applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY or the Separate Accounts. Shares
ordered from Portfolio will be recorded in appropriate book entry titles for the
Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company duly
organized and in good standing under the laws of the State of Indiana and that
it has legally and validly established each Separate Account as a segregated
asset account under such laws, and that Life Company, the principal underwriter
for the Variable Contracts, is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior to any
issuance or sale of the Variable Contracts, will register each Separate Account
as a unit investment trust ("UIT") in accordance with the provisions of the '40
Act and cause each Separate Account to remain so registered to serve as a
segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will be
registered under the Securities Act of 1933 (the "'33 Act") unless an exemption
from registration is available prior to any issuance or sale of the Variable
Contracts and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state securities laws
and further that the sale of the Variable Contracts shall comply in all material
respects with applicable state insurance law suitability requirements.
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance,
endowment or
5
annuity contracts, as pertinent, under applicable provisions of the Code, that
it will maintain such treatment and that it will notify FUND immediately upon
having a reasonable basis for believing that the Variable Contracts have ceased
to be so treated or that they might not be so treated in the future.
2.5 FUND represents and warrants that the Fund shares offered and sold pursuant
to this Agreement will be registered under the '33 Act and sold in accordance
with all applicable federal and state laws, and FUND shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such shares.
FUND, subject to Section 1.9 above, shall amend its registration statement under
the '33 Act and the '40 Act from time to time as required in order to effect the
continuous offering of its shares. FUND shall register and qualify its shares
for sale in accordance with the laws of the various states only if and to the
extent deemed advisable by FUND.
2.6 FUND represents and warrants that each Portfolio will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the
rules and regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing any Portfolio has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance.
2.7 FUND represents and warrants that each Portfolio invested in by the Separate
Account intends to elect to be treated as a "regulated investment company" under
Subchapter M of the Code, and each Portfolio will qualify for such treatment for
each taxable year and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8. ADVISER represents and warrants that it is and will remain duly registered
and licensed in all material respects under all applicable federal and state
securities laws and shall perform its obligations hereunder in compliance in all
material respects with any applicable state and federal securities laws. Adviser
represents and warrants that each Portfolio shall be managed consistent of its
investment objective or objectives, investment policies, and investment
restrictions as described in the Fund's prospectus and registration statement,
as amended or modified from time to time.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 FUND shall prepare and be responsible for filing with the SEC and any state
regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of FUND. FUND
shall bear the costs of registration
5
and qualification of shares of the Portfolios, preparation and filing of the
documents listed in this Section 3.1 and all taxes and filing fees to which an
issuer is subject on the issuance and transfer of its shares.
3.2 At least annually, FUND or its designee shall provide LIFE COMPANY, free of
charge, with as many copies of the current prospectus for the shares of the
Portfolios as LIFE COMPANY may reasonably request for distribution to existing
Variable Contract owners whose Variable Contracts are funded by such shares.
FUND or its designee shall provide LIFE COMPANY, at LIFE COMPANY's expense, with
as many copies of the current prospectus for the shares as LIFE COMPANY may
reasonably request for distribution to prospective purchasers of Variable
Contracts. If requested by LIFE COMPANY in lieu thereof, FUND or its designee
shall provide such documentation (including a "camera ready" copy of the new
prospectus as set in type or, at the request of LIFE COMPANY, as a diskette in
the form sent to the financial printer) and other assistance as is reasonably
necessary in order for the parties hereto once a year (or more frequently if the
prospectus for the shares is supplemented or amended) to have the prospectus for
the Variable Contracts and the prospectus for the FUND shares printed together
in one document. The expenses of such printing will be apportioned between (a)
LIFE COMPANY and (b) FUND in proportion to the number of pages of the Variable
Contract and FUND's prospectus, taking account of other relevant factors
affecting the expense of printing, such as covers, columns, graphs and charts;
FUND to bear the cost of printing the FUND's prospectus portion of such document
for distribution only to owners of existing Variable Contracts funded by the
FUND's shares and LIFE COMPANY to bear the expense of printing the portion of
such documents relating to the Separate Account; provided, however, LIFE COMPANY
shall bear all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Variable
Contracts not funded by the FUND's shares. In the event that LIFE COMPANY
requests that FUND or its designee provide FUND's prospectus in a "camera ready"
or diskette format, FUND shall be responsible for providing the prospectus in
the format in which it is accustomed to formatting prospectuses and shall bear
the expense of providing the prospectus in such format (e.g. typesetting
expenses), and LIFE COMPANY shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.3 FUND will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios promptly after the
filing of each such document with the SEC or other regulatory authority. LIFE
COMPANY will provide FUND with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account
7
promptly after the filing of each such document with the SEC or other regulatory
authority.
3.4 The FUND, at its expense, shall provide the LIFE COMPANY with copies of its
proxy materials, periodic reports to shareholders and other communications to
shareholders in such quantity as the LIFE COMPANY shall reasonably require for
purposes of distributing to owners of Variable Contacts issued by the LIFE
COMPANY. The FUND, at the LIFE COMPANY's expense, shall provide the LIFE COMPANY
with copies of its periodic reports to shareholders and other communications to
shareholders in such quantity as the LIFE COMPANY shall reasonably request for
use in connection with offering the Variable Contracts issued by the LIFE
COMPANY. If requested by the LIFE COMPANY in lieu thereof, the FUND shall
provide such documentation (including a final copy of the FUND's proxy
materials, periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other assistance as
reasonably necessary in order for the LIFE COMPANY to print such shareholder
communications for distribution to owners of Variable Contacts issued by the
LIFE COMPANY.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to FUND and
ADVISER, each piece of sales literature or other promotional material in which
FUND or ADVISER is named, at least ten (10) Business Days prior to its intended
use. No such material will be used if FUND or ADVISER objects to its use in
writing within ten (10) Business Days after receipt of such material.
Notwithstanding the above, FUND and ADVISER agree that total return information
of the FUND's Portfolios may be used in sales literature or other promotional
material developed by LIFE COMPANY without first furnishing such sales
literature or other promotional material to FUND and ADVISER, provided that such
total return information is derived from the prospectus or registration
statement of the FUND or from reports provided by FUND or ADVISER or the
designee of either to LIFE COMPANY and provided that FUND and ADVISER have been
provided prior to its intended use within the time period described above the
form of the sales literature or other promotional material that contains or will
contain the total return information, and that neither FUND nor ADVISER has
objected to its use in writing and provided further that LIFE COMPANY shall be
responsible for using such total return information in conformity with the
information it is provided.
4.2 FUND and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days
prior to its intended use. No such material will be used if LIFE COMPANY objects
to its use in writing within ten (10) Business Days after receipt of such
material.
8
4.3 FUND and its affiliates and agents shall not give any information or make
any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY, the
Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other than
the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any information or
make any representations on behalf of FUND or concerning FUND other than the
information or representations contained in a registration statement or
prospectus for FUND, as such registration statement and prospectus may be
amended or supplemented from time to time, or in sales literature or other
promotional material supplied or approved by FUND or its designee, except with
the written permission of FUND or its designee.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules, the '40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that FUND will be filing an application with the SEC
to request an order granting relief from various provisions of the '40 Act and
the rules thereunder to the extent necessary to permit FUND shares to be sold to
and held by Variable Contract separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and Qualified Plans. It is
anticipated that the Exemptive Order, when and if issued, shall require FUND and
each Participating Insurance Company to
9
comply with conditions and undertakings substantially as provided in this
Section 5. If the Exemptive Order imposes conditions materially different from
those provided for in this Section 5, the conditions and undertakings imposed by
the Exemptive Order of which Life Company is provided with a copy shall govern
this Agreement and the parties hereto agree to amend this Agreement consistent
with the Exemptive Order. The Fund will not enter into a participation agreement
with any other Participating Insurance Company unless it imposes the same
conditions and undertakings as are imposed on LIFE COMPANY hereby.
5.2 The Board will monitor FUND for the existence of any material irreconcilable
conflict between the interests of Variable Contract owners of all separate
accounts investing in FUND. An irreconcilable material conflict may arise for a
variety of reasons, which may include: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling or any similar action by insurance, tax or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant
proceeding; (d) the manner in which the investments of FUND are being managed;
(e) a difference in voting instructions given by Variable Contract owners; (f) a
decision by a Participating Insurance Company to disregard the voting
instructions of Variable Contract owners and (g) if applicable, a decision by a
Qualified Plan to disregard the voting instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts to the Board.
LIFE COMPANY will be responsible for assisting the Board in carrying out its
duties in this regard by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. The responsibility
includes, but is not limited to, an obligation by the LIFE COMPANY to inform the
Board whenever it has determined to disregard Variable Contract owner voting
instructions. These responsibilities of LIFE COMPANY will be carried out with a
view only to the interests of the Variable Contract owners.
5.4 If a majority of the Board or majority of its disinterested Directors,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Directors), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
including; (a) withdrawing the assets allocable to some or all of the Separate
Accounts from FUND or any Portfolio thereof and reinvesting those assets in a
different investment medium, which may include another Portfolio of FUND, or
another investment company; (b) submitting the question as to whether such
segregation should be implemented to a vote of all affected Variable Contract
owners and as appropriate, segregating the assets of any appropriate group (i.e
variable annuity or variable life insurance Contract owners of one
10
or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract owners the option of
making such a change; and (c) establishing a new registered management
investment company (or series thereof) or managed separate account. If a
material irreconcilable conflict arises because of LIFE COMPANY's decision to
disregard Variable Contract owner voting instructions, and that decision
represents a minority position or would preclude a majority vote, LIFE COMPANY
may be required, at the election of FUND, to withdraw the Separate Account's
investment in FUND, and no charge or penalty will be imposed as a result of such
withdrawal. The responsibility to take such remedial action shall be carried out
with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested members of
the Board shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict but in no event will FUND or ADVISER (or
any other investment adviser of FUND) be required to establish a new funding
medium for any Variable Contract. Further, LIFE COMPANY shall not be required by
this Section 5.4 to establish a new funding medium for any Variable Contracts if
any offer to do so has been declined by a vote of a majority of Variable
Contract owners materially and adversely affected by the irreconcilable material
conflict.
5.5 The Board's determination of the existence of an irreconcilable material
conflict and its implications shall be made known promptly and in writing to
LIFE COMPANY.
5.6 No less than annually, LIFE COMPANY shall submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out its obligations. Such reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all owners of
Variable Contract funded by Separate Accounts that are registered with the SEC
as investment companies so long as the SEC continues to interpret the '40 Act as
requiring pass-through voting privileges for such Variable Contract owners.
Accordingly, LIFE COMPANY, where applicable, will vote shares of the Portfolio
held in its registered Separate Accounts in a manner consistent with voting
instructions timely received from its Variable Contract owners. LIFE COMPANY
will be responsible for following reasonable instructions provided by Fund so
that each of its Separate Accounts that participates in FUND calculates voting
privileges in a manner consistent with other Participating Insurance Companies.
LIFE COMPANY will vote shares held by its registered Separate Accounts for which
it has not received timely voting instructions
11
in the same proportion as its votes those shares for which it has received
voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3
is adopted, to provide exemptive relief from any provision of the '40 Act or the
rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Exemptive
Order, then FUND, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
7.1 Indemnification by LIFE COMPANY. LIFE COMPANY agrees to indemnify and hold
harmless FUND, ADVISER and each of their directors, principals, officers,
employees and agents and each person, if any, who controls FUND or ADVISER
within the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for purposes of this Article VII) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of LIFE COMPANY, which consent shall not be unreasonably withheld) 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:
(a) 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 Contracts or contained in the Variable Contracts (or
any amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to LIFE COMPANY by or on behalf of FUND or Adviser for use in the registration
statement or prospectus for the Variable Contracts or in the Variable Contracts
or sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature of FUND not supplied by LIFE COMPANY,
12
or persons under its control) or wrongful conduct of LIFE COMPANY or persons
under its control, with respect to the sale or distribution of the Variable
Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus, or sales literature of
FUND or any amendment thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement or
omission or such alleged statement or omission was made in reliance upon and in
conformity with information furnished to FUND by or on behalf of LIFE COMPANY;
or
(d) arise as a result of any failure by LIFE COMPANY to provide substantially
the services and furnish the materials under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation and/or
warranty made by LIFE COMPANY in this Agreement or arise out of or result from
any other material breach of this Agreement by LIFE COMPANY.
7.2 LIFE COMPANY shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations or duties under this Agreement.
7.3 LIFE 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 LIFE COMPANY in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify LIFE COMPANY of any such claim shall not relieve
LIFE 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 an
Indemnified Party, LIFE COMPANY shall be entitled to participate at its own
expense in the defense of such action. LIFE COMPANY also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from LIFE COMPANY to such party of LIFE COMPANY's election
to
13
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and LIFE 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.
7.4 Indemnification by ADVISER. ADVISER agrees to indemnify and hold harmless
LIFE COMPANY and each of its directors, officers, employees, and agents and each
person, if any, who controls LIFE COMPANY within the meaning of Section 15 of
the '33 Act (collectively, the "Indemnified Parties" for the purposes of this
Article VII) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of ADVISER which consent
shall not be unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(a) 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 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 ADVISER or FUND by or on
behalf of LIFE COMPANY for use in the registration statement or prospectus for
FUND or in sales literature (or any amendment or supplement) or otherwise for
use in connection with the sale of the Variable Contracts or FUND shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by
ADVISER or persons under its control) or wrongful conduct of FUND or ADVISER or
persons under their control, with respect to the sale or distribution of the
Variable Contracts or FUND shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
14
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts, or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to LIFE COMPANY for inclusion therein by or on behalf of FUND; or
(d) arise as a result of (i) a failure by FUND to provide substantially the
services and furnish the materials under the terms of this Agreement; or (ii) a
failure by a Portfolio(s) invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or (iii) a failure
by a Portfolio(s) invested in by the Separate Account to qualify as a "regulated
investment company" under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any representation and/or
warranty made by ADVISER or FUND in this Agreement or arise out of or result
from any other material breach of this Agreement by ADVISER or FUND.
7.5 ADVISER 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.
7.6 ADVISER 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 ADVISER 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 ADVISER of any such claim shall not relieve
ADVISER 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,
ADVISER shall be entitled to participate at its own expense in the defense
thereof. ADVISER also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from ADVISER
to
15
such party of ADVISER's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and ADVISER 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.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall continue
in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following provisions:
(a) At the option of LIFE COMPANY or FUND at any time from the date hereof upon
60 days' notice, unless a shorter time is agreed to by the parties;
(b) At the option of LIFE COMPANY, if FUND shares are not reasonably available
to meet the requirements of the Variable Contracts as determined by LIFE
COMPANY. Prompt notice of election to terminate shall be furnished by LIFE
COMPANY, said termination to be effective ten days after receipt of notice
unless FUND makes available a sufficient number of shares to reasonably meet the
requirements of the Variable Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal proceedings
against FUND by the SEC, the NASD, or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in LIFE COMPANY's
reasonable judgment, materially impair FUND's ability to meet and perform FUND's
obligations and duties hereunder. Prompt notice of election to terminate shall
be furnished by LIFE COMPANY with said termination to be effective upon receipt
of notice;
(d) At the option of FUND, upon the institution of formal proceedings against
LIFE COMPANY by the SEC, the NASD, or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in FUND's reasonable
judgment, materially impair LIFE COMPANY's ability to meet and perform its
obligations and duties hereunder. Prompt notice of election to terminate shall
be furnished by FUND with said termination to be
16
effective upon receipt of notice;
(e) In the event FUND's shares are not registered, issued or sold in accordance
with applicable state or federal law, or such law precludes the use of such
shares as the underlying investment medium of Variable Contracts issued or to be
issued by LIFE COMPANY. Termination shall be effective upon such occurrence
without notice;
(f) At the option of FUND if the Variable Contracts cease to qualify as annuity
contracts or life insurance contracts, as applicable, under the Code, or if FUND
reasonably believes that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon FUND's breach of any material provision
of this Agreement, which breach has not been cured to the satisfaction of LIFE
COMPANY within ten days after written notice of such breach is delivered to
FUND;
(h) At the option of FUND, upon LIFE COMPANY's breach of any material provision
of this Agreement, which breach has not been cured to the satisfaction of FUND
within ten days after written notice of such breach is delivered to LIFE
COMPANY;
(i) At the option of FUND, if the Variable Contracts are not registered, issued
or sold in accordance with applicable federal and/or state law. Termination
shall be effective immediately upon such occurrence without notice;
(j) In the event this Agreement is assigned without the prior written consent of
LIFE COMPANY, FUND, and ADVISER, termination shall be effective immediately upon
such occurrence without notice.
(k) At the option of either party, in the event of a material irreconcilable
conflict as provided in Article V.
8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2
hereof, FUND at its option may elect to continue to make available additional
FUND shares, as provided below, for so long as FUND desires pursuant to the
terms and conditions of this Agreement, for all Variable Contracts in effect on
the effective date of
17
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if FUND so elects to make additional FUND
shares available, the owners of the Existing Contracts or LIFE COMPANY,
whichever shall have legal authority to do so, shall be permitted to reallocate
investments in FUND, redeem investments in FUND and/or invest in FUND upon the
payment of additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 8.2 hereof, FUND and ADVISER,
as promptly as is practicable under the circumstances, shall notify LIFE COMPANY
whether FUND elects to continue to make FUND shares available after such
termination. If FUND shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or LIFE COMPANY may terminate the Agreement, as so
continued pursuant to this Section 8.3, upon sixty (60) days prior written
notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified FUND of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested 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 FUND:
PBHG Insurance Series Fund, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
With a copy to:
PBHG Insurance Series Fund, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
18
If to the ADVISER:
PBHG Insurance Series Fund, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxxxx
With a copy to:
PBHG Insurance Series Fund, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq.
If to LIFE COMPANY:
American United Life Insurance Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 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.
10.2 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of the Agreement shall not
be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Pennsylvania. It
shall
19
also be subject to the provisions of the federal securities laws and the rules
and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the shareholders of
shares of any Portfolio nor the Directors or officers of FUND or any Portfolio
shall be personally liable hereunder. No Portfolio shall be liable for the
liabilities of any other Portfolio. All persons dealing with FUND or a Portfolio
must look solely to the property of FUND or that Portfolio, respectively, for
enforcement of any claims against FUND or that Portfolio. It is also understood
that each of the Portfolios shall be deemed to be entering into a separate
Agreement with LIFE COMPANY so that it is as if each of the Portfolios had
signed a separate Agreement with LIFE COMPANY and that a single document is
being signed simply to facilitate the execution and administration of the
Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
10.7 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.
10.8 No provision of this Agreement may be amended or modified in any manner
except by a written agreement properly authorized and executed by FUND, ADVISER
and the LIFE COMPANY.
20
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Fund Participation Agreement as of the date and year first above
written.
PBHG INSURANCE SERIES FUND, INC.
By: /s/ Xxx X. Xxxxxxxx
Name: Xxx X. Xxxxxxxx
Title: Vice President
PILGRIM XXXXXX & ASSOCIATES, LTD.
By: /s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: CFO
AMERICAN UNITED LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Associate General Counsel
Appendix A
PBHG Insurance Series Fund, Inc. - Portfolios*
PBHG Growth II Portfolio
PBHG Technology & Communications Portfolio
* Expected to begin investment operations on May 1, 1997.
Appendix B
Separate Accounts and Associated Contracts
Name of Separate Account and Date Contracts Funded
Established by the AUL Exec. Comm. By Separate Account Selected Portfolios
---------------------------------- ------------------- ---------------------
AUL American Unit Trust Registered 401, 403(b), Growth II
(established 8/17/89) 457 & 408 contracts Technology &
Communications
Group Retirement Annuity Separate Qualified 401 contracts Growth II
Account I (established 8/17/89) Technology &
Communications
Group Retirement Annuity Separate Qualified 401 contracts Growth II
Account II (established 8/17/89) Technology &
Communications
FUND PARTICIPATION AGREEMENT
American United Life (the "Company"), SAFECO Resource Series Trust, an
unincorporated business trust organized under the laws of the state of Delaware
(the "Trust"), and its investment adviser, SAFECO Asset Management Company, a
Washington corporation ("XXX"), hereby agree to an arrangement whereby shares of
the series funds comprising the Trust (the "Portfolios") shall be made available
to serve as underlying investment media for variable annuity and/or variable
life insurance contracts ("Variable Contracts") to be issued by the Company,
subject to the following provisions:
1. Establishment of Accounts: Availability of Portfolios.
(a) The Company represents that it has established variable annuity accounts and
variable life accounts (the "Accounts"), each of which is a separate account
under the insurance laws of the state of the Company's domicile, and has
registered each of the Accounts as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"), unless such Account is exempt from
registration, to serve as an investment vehicle for the Variable Contracts. Each
Variable Contract provides for the allocation of net amounts received by the
Company to an Account for investment in the shares of one or more specified
open-end investment companies available through that Account as underlying
investment media. Selection of a particular underlying investment and changes in
such selection from time to time may be made by the person covered under the
Variable Contract ("Participant") or Variable Contract owner, as applicable
under the particular Variable Contract.
(b) The Trust and XXX represent and warrant that the investments of the
Portfolios will at all times be adequately diversified within the meaning of
Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder (the "Regulations"), and
that at all times while this Agreement is in effect (i) all beneficial interests
in the Portfolios will be owned by one or more insurance companies or qualified
plans (through trustees), or by any other party permitted under Section
1.817-5(f)(3) of the Regulations, and (ii) no shares of any Portfolio will be
sold to the general public.
(c) XXX represents and warrants that it is registered as an investment adviser
with the Securities and Exchange Commission ("SEC").
2
2. Marketing and Promotion.
(a) The Company agrees to make every reasonable effort to market its Variable
Contracts, whether directly or through its affiliates. In marketing and
administering the Variable Contracts, the Company and its affiliates will comply
with all applicable State and Federal laws.
(b) XXX agrees to provide the Company with monthly and/or quarterly performance
information with respect to the Portfolios, and such other information as the
parties deem appropriate for the promotion of the Portfolios, within five
business days of the end of each month for monthly information and within ten
days of the end of each calendar quarter for quarterly information.
3. Pricing Information; Orders; Settlement.
(a) XXX will make shares of the Portfolios available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf of each
Account, at the net asset value applicable to each order on each day on which
the Trust calculates its net asset value pursuant to the rules of the SEC.
Portfolio shares shall be purchased and redeemed in such quantity and at such
time determined by the Company to be necessary to meet the requirements of those
Variable Contracts for which the Portfolios serve as underlying investment
media.
(b) XXX will provide to the Company closing net asset value, dividend and
capital gain information at the close of trading each day that the New York
Stock Exchange (the "Exchange") is open (each such day, a "business day"). The
Company hereby elects to reinvest in the Portfolios all dividends and
distributions payable on a Portfolio's shares and to receive such dividends and
distributions in additional shares of such Portfolio. The Company reserves the
right to revoke this election in writing and to receive all such dividends and
distributions in cash.
(c) The Company will send via facsimile transmission to XXX, or to such other
agent as the Trust may specify, orders to purchase and/or redeem Portfolio
shares. Orders from Variable Contract owners or Participants received by the
Company which are sent by the Company prior to the close of the Exchange on any
given business day via facsimile transmission to XXX or such other agent as the
Trust may specify by 8:00 a.m., Pacific Time, the following business day will be
executed by XXX or such agent at the net asset value determined as of the close
of the Exchange on such prior business
3
day. Any orders received by the Company after the close of the Exchange on such
prior business day (or not meeting the foregoing sentence's requirements) will
be deemed to be received by the Company on the following business day, and will
be executed by XXX at the net asset value determined as of the close of the
Exchange on the next business day following the day such order was received.
Payment for net purchases will be wired by the Company to a custodial account
designated by the Trust to coincide with the order for shares of the Portfolios.
(d) Payments for net redemptions of shares of the Portfolios will be wired from
the Trust's custodial account to an account designated by the Company. Such
redemptions shall ordinarily be paid in federal funds or by any other method
mutually agreed upon by the parties hereto by the next business day following
receipt by the Trust (or its agent) of notice of the order of redemption.
(e) Each party has the right to rely on information or confirmations provided by
the other party (or by any affiliate of the other party), including Portfolio
net asset values provided to the Company by XXX or an affiliate of XXX, and
shall not be liable in the event that an error is a result of any misinformation
supplied by the other party or any such affiliate. If a mistake is caused in
supplying such information or confirmations, which results in a reconciliation
with incorrect information, the amount required to make a Variable Contract
owner's or a Participant's account whole shall be borne by the party providing
the incorrect information.
(f) XXX shall advise the Company on each business day of the net asset value per
share for each Portfolio as soon as reasonably practical after the net asset
value per share is calculated, which is normally by 6 p.m. Eastern Standard time
and shall use its best efforts to make such net asset value per share available
by 9:00 p.m. Eastern Standard time.
(g) Price Errors.
(1) In the event adjustments are required to correct any error in the
computation of the net asset value of a Portfolio's shares, XXX or the Trust
shall notify the Company as soon as practicable after discovering the need for
those adjustments which result in a reimbursement to an Account in accordance
with SAM's or the Trust's then current policies on reimbursement, which XXX or
the Trust, as appropriate, represents are reasonable and consistent with
applicable standards. Notification may be made via facsimile or via direct or
indirect systems access. Any such notification shall be
4
promptly followed by a letter written on SAM's or the Trust's letterhead stating
for each day for which an error occurred the incorrect price, the correct price,
and, to the extent communicated to the Trust's shareholders, the reason for the
price change.
(2) If an adjustment is to be made in accordance with subsection (1) above to
correct an error which has caused an Account to receive an amount different than
that to which it is entitled, XXX or the Trust shall make all necessary
adjustments to the number of shares owned in the Account and distribute to the
Account the amount of such underpayment for credit to the Contract owners. Upon
the furnishing of an accounting to XXX or the Trust by the Company, XXX or the
Trust will immediately reimburse to the Company all reasonable expenses incurred
by the Company, or any organization that the Company has retained to provide
administration or recordkeeping services under this Agreement to adjust all
Accounts and accounts of Contract owners affected by such error.
4. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident to the
performance by the Trust or XXX under this Agreement shall be paid by XXX,
including the cost of registration of the Trust and shares of its Portfolios
with the Securities and Exchange Commission (the "SEC") and in states where
required.
(b) XXX shall distribute to the Company proxy material with respect to the
Trust, periodic reports to shareholders and other material that are required by
law to be sent to Variable Contract owners. In addition, XXX shall provide the
Company with a sufficient quantity of prospectuses for the Trust to be used in
connection with the offerings and transactions contemplated by this Agreement.
Subject to subsection (c) below, the cost of preparing and printing such
materials shall be paid by XXX or its affiliates, and the cost of distributing
such materials shall be paid by the Company. However, if the Trust makes changes
to its prospectus for its own benefit or the benefit of someone other than the
Company resulting in the need to print and distribute one or more supplements to
Variable Contract holders, all costs associated with printing and distributing
any such supplement shall be borne by XXX.
(c) In lieu of XXX providing printed copies of prospectuses and periodic fund
reports to shareholders, the Company shall have the right to request that XXX
provide a copy of such materials in an electronic or camera-ready format, which
the Company may use to have such materials printed together with similar
materials of other Account
5
funding media that the Company or any distributor will distribute to existing or
prospective Variable Contract owners or Participants.
(d) XXX and the Trust shall provide (1) at the Trust's expense, one copy of the
Trust's current Statement of Additional Information ("SAI") to the Company and
to any owner of a Contract issued by the Company who requests such SAI; (2) at
the Company's expense, such additional copies of the Trust's current SAI as the
Company shall reasonably request and that the Company shall require in
accordance with applicable law in connection with offering the Variable
Contracts issued by the Company.
(e) The Trust currently does not make and does not intend to make any payments
to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it may make such payments in the future. To the extent that
it decides to finance distribution expenses pursuant to Rule 12b-1, the Trust
undertakes to have its board of trustees, a majority of whom are not interested
persons of the Trust, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
5. Representations.
(a) The Company agrees that it and its agents shall not, without the written
consent of XXX, make representations concerning the Trust or the Portfolio
shares except those contained in the then current prospectuses, statement of
additional information and in current printed sales literature of the Trust
previously approved, or provided to the Company, by XXX.
(b) The Company represents and warrants that interests in certain Variable
Contracts are or will be registered under the Securities Act of 1933 ("1933
Act") or are exempt from registration thereunder, that the Variable Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws and that the sale of the Variable Contracts
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law and
that it has legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account and that each Account is or will
be registered as a unit investment trust or will be exempt from registration as
such in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Variable Contracts.
6
(c) The Company represents that the Variable Contracts are currently treated as
annuity and/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 XXX and the Trust immediately upon having a reasonable basis for
believing that the Variable Contracts have ceased to be so treated or that they
might not be so treated in the future.
(d) The Company represents and warrants that its directors, officers, and
employees, if any, dealing with the money and/or securities of the Accounts are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Accounts in an amount not less than $2
million. The aforesaid bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
(e) XXX and the Trust make no representation as to whether any aspect of the
Trust's operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states.
(f) XXX represents that shares of the Portfolios will be sold and distributed in
accordance with all applicable federal and state securities laws, including
without limitation, the 1933 Act, the Securities Exchange Act of 1934, and the
0000 Xxx.
(g) The Trust represents that it is currently qualified as a regulated
investment company under Subchapter M of the Code and XXX and the Trust
represent that they will make every effort to maintain such qualification (under
Subchapter M or any successor or similar provision) and that XXX or the Trust
will notify the Company immediately upon having a reasonable basis for believing
that a Portfolio has ceased to so qualify or might not so qualify in the future.
The Trust and XXX acknowledge that any failure of the Trust to qualify as a
regulated investment company under Subchapter M of the Code would constitute a
breach of their representations and warranties under Item 1(b) of this
Agreement.
(h) The Trust and XXX represent and warrant that the shares of the Portfolios
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
Washington and all applicable federal and state securities laws and that the
Portfolios are and shall remain registered under the 1940 Act. The Trust shall
amend the registration statement for such shares under the 1933 Act and 1940 Act
from time to time as required in order to effect the continuous offering of its
shares. The Trust shall also register and qualify its shares
7
for sale in accordance with the laws of the various states only if and to the
extent deemed advisable by the Trust or XXX.
(i) The Trust represents that it is lawfully organized and validly existing
under the laws of its state of domicile, that the shares of the Portfolios are
duly authorized for issuance in accordance with applicable law, and that it is
and will comply in all material respects with the 1940 Act.
(j) XXX represents and warrants that it is duly organized under the laws of its
state of domicile, and is and shall remain duly registered in all material
respects under any applicable federal and state securities laws, and further
that it shall perform its obligations for the Trust and the Portfolios in
compliance in all material respects with applicable federal and state securities
laws.
(k) The Trust and XXX represent and warrant that all of their respective
directors, officers, and employees dealing with the money and/or securities of
the Trust are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Trust and its
Portfolios in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated
from time to time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
(1) The Trust and XXX agree to use their best efforts to ensure that each
Portfolio of the Trust will be managed consistent with its investment objective
or objectives, investment policies, and investment restrictions as described in
the Trust's prospectus and registration statement, as modified from time to
time.
6. Administration of Accounts.
(a) Administrative services to Variable Contract owners and Participants shall
be the responsibility of the Company and shall not be the responsibility of the
Trust or XXX. XXX recognizes the Company as the sole shareholder of fund shares
issued under this Agreement. From time to time, XXX may pay amounts from its
past profits to the Company for providing certain administrative services for
the Trust or its Portfolios, or for providing Variable Contract owners with
other services that relate to the Trust. These services may include, among other
things, sub-accounting services, answering inquiries of Variable Contract owners
regarding the Portfolios, transmitting, on behalf of the Trust, proxy
statements, annual reports, updated prospectus and other communications to
8
Variable Contract owners regarding the Trust and its Portfolios and such other
related services as the Trust or a Variable Contract holder may request. In
consideration of the savings resulting from such arrangement, and to compensate
the Company for these services, XXX agrees to pay to the Company an amount equal
to 25 basis points (0.25%) per annum of the average aggregate amount invested by
the Company in the Portfolios under this Agreement. Payment of such amounts by
XXX will not increase the fees paid by the Trust, the Portfolios or their
shareholders.
(b) The parties agree that SAM's payments to the Company are for administrative
services only and do not constitute payment in any manner for investment
advisory services or for costs of distribution.
(c) For the purposes of computing the amount of the administrative fee
contemplated by this Section 6, the average aggregate amount invested by the
Company over a one month period shall be computed by adding the Company's
aggregate investment (share net asset value multiplied by total number of shares
held by the Company) on the first day of each month to the Company's aggregate
investment on the last day of each month and dividing by two.
(d) XXX will calculate the amount of the administrative fee at the end of each
calendar quarter and payment of such fee will be made to the Company within 30
days thereafter. The check for the administrative services will be accompanied
by a statement showing the calculation of the monthly amounts payable by XXX and
such other supporting data as may be reasonably requested by the Company.
7. Termination.
(a) This agreement shall terminate as to the sale and issuance of new Variable
Contracts:
(i) at the option of either the Company or the Trust, upon 60 days advance
written notice to the other;
(ii) at the option of the Company, upon written notice to the Trust if shares of
the Portfolios are not available for any reason to meet the requirements of
Variable Contracts as determined by the Company;
9
(iii) at the option of either the Company or the Trust, immediately upon
institution of formal proceedings against the broker-dealer or broker-dealers
serving as distributor for the Variable Contracts, the Accounts, the Company,
the Trust, or XXX by the National Association of Securities Dealers, Inc. (the
"NASD"), the SEC or any other regulatory body having jurisdiction over the
operations of such entities. Further, each of XXX, the Trust, and the Company
shall promptly notify the other parties hereto of the institution of any such
formal proceedings;
(iv) upon substitution of shares of the Portfolios with the shares of another
investment company in accordance with the terms of the applicable Variable
Contracts. The Company will give 60 days written notice to XXX of any pending
substitution to replace the Portfolio's shares;
(v) upon assignment of this Agreement, unless made with the written consent of
all other parties hereto;
(vi) if the shares of the Portfolios are not registered, issued or sold in
conformance with Federal law or such law precludes the use of the Portfolios'
shares as underlying investment media for Variable Contracts issued or to be
issued by the Company. Prompt notice shall be given by either party should such
situation occur;
(vii) at the option of any party to the Agreement upon a determination by a
majority of the Trustees of the Trust, or a majority of disinterested Trustees,
that an irreconcilable material conflict exists;
(viii) at the option of the Company if the Trust or a Portfolio fails to meet
the requirements under the Code specified in Section 1(b) hereof;
(ix) at the option of the Company upon a material breach of this agreement or of
any representation or warranty herein by XXX or the Trust, or at the option of
the Trust or XXX upon a material breach of this Agreement or of any
representation or warranty herein by the Company.
(b) If the need for substitution of the shares of another investment company,
pursuant to Section 26(b) of the 1940 Act, arises out of the failure of the
Portfolio shares to be registered, issued or sold in conformance with federal
law, or such law precludes the use of shares of the Portfolios as underlying
investment media for Variable Contracts issued or to be issued by the Company,
the expenses of obtaining such order shall be
10
reimbursed by XXX. XXX shall cooperate with the Company in connection with such
application.
8. Continuation of Agreement. Termination as the result of any cause listed in
Section 7 shall not affect the obligation of the Trust to furnish shares of the
Portfolios to Variable Contracts then in force for which such shares serve or
may serve as the underlying media unless such further sale of shares of the
Portfolios is proscribed by law or the SEC or other regulatory body.
9. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Portfolios prepared by
the Company or its agents for use in marketing its Variable Contracts will be
submitted to XXX for review before such material is submitted to any regulatory
body for review, and in no event less than 10 days prior to its use. The Company
shall not use any such material if XXX or the Trust objects to such use within
10 days after receipt.
(b) XXX or the Trust shall furnish to the Company or its designee each piece of
sales literature or other promotional material in which the Company or its
Accounts are named, and no such material shall be used without the prior
approval of the Company or its designee. XXX and the Trust agree that each and
the affiliates of each shall not give any information or make any representation
on behalf of the Company or concerning the Company, the Accounts, or the
Variable Contracts issued by the Company, other than the information or
representations contained in a registration statement or prospectus for such
contracts, as such registration statement may be amended or supplemented from
time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such contracts, or in sales literature or other
promotional material approved by the Company or its designee, except with the
prior permission of the Company.
(c) XXX will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and semiannual reports, proxy statements and all amendments or
supplements to any of the above that relate to the Trust and its Portfolios
promptly after the filing of such document with the SEC or other regulatory
authorities. The Trust's prospectus shall state that the statement of additional
information for the Trust is available from the Trust or its designated agent
and shall be provided free of charge to the Company and to any Variable Contract
owner or Participant who requests a copy.
11
(d) The Company will provide to XXX at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and semi-annual reports, proxy statements, and all amendments or
supplements to any of the above that relate to each Account promptly after the
filing of such document with the SEC or other regulatory authority.
10. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on shares of the
Portfolios to all owners and Participants of Variable Contracts funded by
Accounts that are registered as investment companies with the SEC to the extent
the SEC continues to interpret the 1940 Act as requiring such privileges. If
shares are held in any other Account not required to be registered under the
1940 Act, those shares will be voted in the Company's sole discretion.
(b) The Company will distribute to Variable Contract owners and Participants, as
provided for in paragraph 10(a) above, all proxy material furnished by XXX and
will vote shares of the Portfolios in accordance with instructions received from
Variable Contract owners and Participants. The Company, with respect to each
Variable Contract and each Account, shall vote Portfolio shares for which no
instructions have been received in the same proportion as shares for which such
instructions have been received. The Company agrees that it and its affiliates
shall not oppose or interfere with the solicitation of proxies for Portfolio
shares held for such Variable Contract owners and Participants.
11. Indemnification
(a) The Company agrees to indemnify and hold harmless the Trust and its
Portfolios, XXX, and each of their respective directors, officers, employees,
agents and each person, if any, who controls the Trust, its underwriter or
investment adviser within the meaning of the Securities Act of 1933 (the "1933
Act") against any losses, claims, damages or liabilities to which the Trust, the
Portfolios, XXX, or any such director, officer employee, agent, or controlling
person may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon:
(i) Any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectus or sales literature of the
Company, or arising
12
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
or representations therein not misleading (other than statements or
representations contained in the prospectuses or sales literature of the Trust),
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written materials
furnished to the Company by the Trust, the Portfolios or XXX specifically for
use either therein or otherwise in connection with the sale of the Variable
Contracts or Trust shares;
(ii) Any untrue statement or alleged untrue statement of a material fact
contained in sales literature pertaining to the Company, the Accounts or the
Variable Contracts which has been prepared by XXX or the underwriter for the
Trust if such statement was made in reliance upon written information furnished
by the Company specifically for use therein; or
(iii) The breach by the Company of any representation or warranty in this
Agreement.
The Company will reimburse any legal or other expenses reasonably incurred by
the indemnified parties in connection with investigating or defending any such
loss, claim, damage, liability or action. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) The Company shall not be liable under this Section 11 with respect to any
losses, claims, damages or liabilities (or actions in respect thereof) incurred
or assessed against any such indemnified party to the extent such may arise from
such party's willful misfeasance, bad faith, or negligence in the performance of
such party's duties or by reason of such party's reckless disregard of
obligations or duties under this Agreement.
(c) The Trust and XXX agree, jointly and severally, to indemnify and hold
harmless the Company and its directors, officers, employees, the distributor for
the Variable Contracts, the Company's agents and each person, if any, who
controls the Company within the meaning of the 1933 Act, against any losses,
claims, damages or liabilities to which the Company or any such director,
officer, employee, distributor, agent or controlling person may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
13
(i) Any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales literature of the
Trust, or 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 however, that neither XXX, the Trust nor any Portfolio will
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon a Registration Statement or
prospectuses which are in conformity with written materials furnished to the
Trust or XXX by the Company specifically for use therein;
(ii) Any untrue statement or alleged untrue statement of a material fact
contained in a registration statement, prospectus, periodic report or sales
literature covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, if such statement was made in reliance
upon written information furnished by XXX or by or on behalf of the Trust
specifically for use therein; or
(iii) The breach of any representation or warranty in this Agreement by XXX or
the Trust, including but not limited to a finding or claim that the Portfolios
are not adequately diversified within the meaning of Section 817(h) of the Code
and/or that while this Agreement is in effect, all beneficial interests will be
owned by one or more insurance companies or by any other party permitted under
Section 1.817-5(f)(3) of the Regulations promulgated under the Code.
XXX will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee, distributor, agent, or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action. This indemnity agreement will be in addition
to any liability which XXX or the Trust may otherwise have.
(d) Neither XXX, the Trust nor any Portfolio will be liable under this Section
11 to the Company or other parties covered under Section 11(c) with respect to
any losses, claims, damages or liabilities (or actions in respect thereof)
incurred or assessed against any such party (including the Company) as such may
arise from such party's willful misfeasance, bad faith, or negligence in the
performance of such party's duties or by reason of such party's reckless
disregard of obligations or duties under this Agreement.
(e) Promptly after receipt by an indemnified party hereunder of notice of the
commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party of the commencement of such action; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 11. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the
14
commencement of such action, the indemnifying party will be entitled to
participate in such action and, to the extent that it may wish to, assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 11 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
12. Potential Conflicts
(a) The Company has received a copy of an application for exemptive relief, as
amended, filed by Trust and certain affiliates on December 20, 1995 with the SEC
and the order issued by the SEC on January 17, 1996, in response thereto (the
"Shared Funding Exemptive Order"). The Company has reviewed the conditions to
the requested relief set forth in such application for exemptive relief. As set
forth in such application, the Board of Trustees of the Trust (the "Board") will
monitor the Trust for the existence of any material irreconcilable conflict
between the interests of the Variable Contract holders of all separate accounts
("Participating Companies") investing in the Portfolios. An irreconcilable
material conflict may arise for a variety of reasons, including (i) a state
insurance regulatory action; (ii) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax or securities regulatory authorities; (iii) an administrative or
judicial decision in any relevant proceeding; (iv) the manner in which the
investments of a Portfolio are being managed; (v) a difference among voting
instructions given by Variable Contract owners/Participants; or (vi) a decision
by a Participating Company to disregard the voting instructions of Variable
Contract owners or Participants. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications of such conflict.
(b) The Company will report any potential or existing conflicts of which it
becomes aware to the Board. The Company will assist the Board in carrying out
its responsibilities under the Shared Funding Exemptive Order by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This
15
assistance shall include, but is not limited to, an obligation by the Company
(i) to inform the Board whenever the voting instructions of Variable Contract
owners or Participants are disregarded, and (ii) to submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out the obligations imposed upon it by the Shared Funding Order,
and such reports, materials and data shall be submitted more frequently if
deemed appropriate by the Board. The Company will carry out its responsibility
under this subsection (b) with a view only to the interests of the Variable
Contract owners and Participants.
(c) If a majority of the Board, or a majority of the disinterested trustees of
the Board ("Independent Trustees"), determine that a material irreconcilable
conflict exists with regard to Variable Contract owner or Participant
investments in the Portfolios, the Board shall give prompt notice to all
Participating Companies. If the Trust or XXX is responsible for causing or
creating such conflict, XXX shall at its sole cost and expense, and to the
extent reasonably practicable (as determined by a majority of the Independent
Trustees), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. If a majority of the Board or a majority of
the Independent Trustees determine that the Company is responsible for causing
or creating such conflict, the Company shall at its sole cost and expense, and
to the extent reasonably practicable (as determined by a majority of the
Independent Trustees), take whatever steps are necessary to remedy or eliminate
the irreconcilable material conflict. Such necessary action may include but
shall not be limited to:
(i) withdrawing the assets allocable to the Accounts from the Portfolios and
reinvesting those assets in a different investment medium or submitting the
question of whether such segregation should be implemented to a vote of all
affected Variable Contract owners and Participants, and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract owners,
life insurance contract owners, or Variable Contract owners of one or more
Participating Companies) that votes in favor of such segregation, or offering to
the affected Variable Contract owners or Participants the option of making such
a change; and/or
(ii) establishing a new registered management investment company or managed
separate account.
(d) If a material irreconcilable conflict arises as a result of a decision by
the Company to disregard the voting instructions of its Variable Contract owners
or Participants, and that decision represents a minority position or would
preclude a
16
majority vote, the Company at its sole cost, may be required, to withdraw an
Account's investment in the affected Portfolio and no charge or penalty will be
imposed by XXX or the Trust as a result of such withdrawal; provided, however,
that such withdrawal and termination shall be limited to the extent required to
remedy the foregoing material irreconcilable conflict as determined by a
majority of the Independent Trustees. The Company's responsibility under this
subsection (d) shall be carried out with a view only to the interests of the
Variable Contract owners and Participants. In addition, no Variable Contract
owner shall be required to bear, directly or indirectly, the costs of remedial
actions taken to remedy a material irreconcilable conflict
(e) For the purpose of this Section 12, a majority of the Independent Trustees
shall determine whether or not any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Trust or XXX be
required to establish a new funding medium for any Variable Contract. The
Company shall not be required by this Section 12 to establish a new funding
medium for any Variable Contract if an offer to do so has been declined by vote
of a majority of the Variable Contract owners or Participants materially
affected by the irreconcilable material conflict.
(f) All reports received by the Board regarding potential or existing conflicts,
and all action of the Board with respect to determining the existence of a
conflict, notifying Participating Companies of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes or other appropriate records of the Trust.
13. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision hereof, may
be amended, waived, discharged or terminated orally, but only by an instrument
in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be given or
made in writing and shall be delivered personally, or sent by telex, telecopier
or registered or certified mail, postage prepaid, return receipt requested, to
the party or parties to whom they are directed at the following addresses, or at
such other addresses as may be designated by notice from such party to all other
parties.
17
To the Company: American United Life Insurance Company
Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: General Counsel
To XXX: SAFECO Asset Management Co.
0000 Xxxxxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Institutional Division
To the Trust: SAFECO Resource Series Trust
0000 Xxxxxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Controller
Any notice, demand or other communication given in a manner prescribed in this
subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
(d) Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any party hereto
may execute this Agreement by signing any such counterpart.
(e) Severability. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Washington.
18
(h) Cooperation. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (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.
(i) SEC Rules. The Trust and the Company agree that if and to the extent Rule
6e-2 or 6e- 3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable the Portfolios and the Company shall each
take such steps as may be necessary to comply with such Rules as amended or
adopted in final form.
(j) Name. The Trust and XXX agree and understand that the names "American United
Life Insurance Company", "AUL", or any derivative thereof or logo associated
with those names (an "XXX Xxxx") is the valuable property of the Company and its
affiliates, and that the Trust and/or XXX shall not use any XXX Xxxx without the
prior written consent of the Company. Upon termination of this Agreement for any
reason, the Trust and/or XXX shall cease all use of any XXX Xxxx as soon as
reasonably practicable.
(k) Customers. The Trust and XXX agree to treat as the property of the Company
any list or compilation of names, addresses, and other information relating to
the owners of the Variable Contracts or prospects for the sale of Variable
Contracts acquired in the course of performing under this Agreement and agree
not to use such information for any purpose without the prior consent of the
Company.
(l) Captions. 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.
(m) Assignment. This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement. For
purposes of this provision, the term "assigned" shall include a change in
control of a party to the Agreement.
14. Limitation on Liability of Trustees. This Agreement has been executed on
behalf of the Trust by the undersigned officer of the Trust in his/her capacity
as an officer of the Trust. The obligations of this Agreement that pertain to
the Trust shall be binding only upon the assets and property of the Trust and
shall not be binding upon any individual
19
trustee, officer or shareholder of the Trust or its Portfolios. This provision
shall not affect the obligations or liabilities of XXX under this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly
authorized officers as of this 24th day of February, 1997.
SAFECO RESOURCE SERIES TRUST
By ______________________________
Name: Xxxx X. Xxxxxx
Title: Vice President and Controller
SAFECO ASSET MANAGEMENT COMPANY
By _____________________________
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
AMERICAN UNITED LIFE INSURANCE COMPANY
By ______________________________
Name:
Title:
