Exhibit 99.26(h)(7)(i)
PARTICIPATION AGREEMENT
AMONG
VANGUARD VARIABLE INSURANCE FUND
AND
THE VANGUARD GROUP, INC.
AND
VANGUARD MARKETING CORPORATION
AND
MINNESOTA LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the ____ day of ________,
2007, by and among VANGUARD VARIABLE INSURANCE FUND (hereinafter the "Fund"), a
Delaware business trust, THE VANGUARD GROUP, INC. (hereinafter the "Sponsor"), a
Pennsylvania corporation, VANGUARD MARKETING CORPORATION (hereinafter the
"Distributor"), a Pennsylvania corporation, and MINNESOTA LIFE INSURANCE COMPANY
(hereinafter the "Company"), a Minnesota corporation, on its own behalf and on
behalf of each segregated asset account of the Company named in Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account").
WHEREAS, the Fund was organized to act as the investment vehicle for
variable life insurance policies and variable annuity contracts to be offered by
separate accounts of insurance companies which have entered into participation
agreements with the Fund and the Sponsor (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio," and representing the interest
in a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and its shares are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the assets of each Portfolio of the Fund are managed by several
entities (the "Advisers"), each of which is duly registered as an investment
adviser under the federal Investment Advisers Act of 1940 and any applicable
state securities laws; and
WHEREAS, the Company has established or will establish one or more
Accounts to fund certain variable insurance products (the "Variable Insurance
Products"), which Accounts and Variable Insurance Products are registered under
the 1940 Act and the 1933 Act, respectively; and
1
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for each Account on Schedule A hereto, to set aside
and invest assets attributable to the Variable Insurance Products; and
WHEREAS, the Distributor is a wholly-owned subsidiary of the Sponsor, is
registered as a broker dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act")
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios on behalf
of each Account to fund the Variable Insurance Products and the Sponsor is
authorized to sell such shares to the Accounts at net asset value;
WHEREAS, the Sponsor and State Street Bank and Trust Company ("State
Street") have entered into a Defined Contribution Clearance & Settlement
Agreement dated as of January 22, 2007 (the "State Street DCC&S Agreement"),
which sets forth, among other things, certain operational provisions governing
the purchase and redemption of shares of the Fund by State Street on behalf of
the Accounts and related matters;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund, the Sponsor and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Sponsor and the Distributor agree to sell to the Company those
shares of the Portfolios of the Fund listed on Schedule B which each Account
orders, in accordance with the terms of this Agreement and the relevant
provisions of the State Street DCC&S Agreement.
1.2 The Fund, subject to the provisions of Article IX of this Agreement,
agrees to make its shares available indefinitely for purchase at the applicable
net asset value per share by the Company and its Accounts on those days on which
the Fund calculates its net asset value pursuant to the rules of the SEC and the
Fund shall use its best efforts to calculate such net asset value on each day
which the NYSE is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Fund (hereinafter the "Board") may refuse to sell shares of any
Portfolio to any person including, but not limited to, the Company, or suspend
or terminate the offering of shares of any Portfolio if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board, acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, necessary in the best
interests of the shareholders of such Portfolio. Further, it is acknowledged and
agreed that the availability of shares of the Fund shall be subject to the
Fund's then current prospectus and statement of additional information, federal
and state securities laws and applicable rules and regulations of the SEC and
the NASD.
1.3 The Fund and the Sponsor agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Portfolio will be sold to the general public.
1.4 The Fund and the Sponsor will not sell Fund shares to any
Participating Insurance Company or its separate account unless an agreement
containing a provision substantially the same as Section 2.6 of Article II of
this Agreement is in effect to govern such sales.
2
1.5 The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by an Account, in accordance with the
relevant provisions of the State Street DCC&S Agreement. The Fund reserves the
right to suspend redemption privileges or pay redemptions in kind, as disclosed
in the Fund's prospectus or statement of additional information. The Fund agrees
to treat the Company like any other shareholder in similar circumstances in
making these determinations.
1.6 The Company agrees to purchase and redeem the shares of each
Portfolio offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus and the accompanying statement of
additional information.
1.7 Issuance and transfer of a Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account. The Fund shall furnish to the
Company the CUSIP number assigned to each Portfolio of the Fund identified in
Schedule B hereto.
1.8 The Company hereby elects to receive all income, dividends and
capital gain distributions as are payable on the Portfolio shares in additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such income dividends and capital gain distributions in cash.
The Fund shall notify the Company of the number of shares so issued as payment
of dividends and distributions.
1.9 EXTRAORDINARY EVENTS. The Company is not authorized to accept as the
Fund's designee any individual purchase or redemption of shares in an amount
which equals or exceeds the "Large Transaction Amount" for a Portfolio (as
specified in Schedule C) where such order is the result of an "Extraordinary
Event" of which the Company is aware, unless the Company has notified the
Sponsor of such order as soon as practicable following the Company becoming
aware of the Extraordinary Event and, with respect to purchases or redemptions
of which the Company is aware as of 3:00 p.m. Eastern time on the trade date, in
no event later than 3:00 p.m. Eastern time on the trade date. For these
purposes, an "Extraordinary Event" shall mean an event outside normal operations
such as an entire Account moving into or out of a Portfolio or an asset transfer
arising from a merger, acquisition or divestiture. The Sponsor reserves the
right to refuse any purchase order, or to delay settlement of any redemption
order, which equals or exceeds the applicable Large Transaction Amount and
results from an Extraordinary Event, which the Sponsor, in its sole discretion,
deems disruptive or detrimental to the applicable Portfolio. The Sponsor
reserves the right to amend or revise Schedule C at any time and will provide at
least 10 days advance written notice of such revision to the Company.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that it is an insurance company
duly organized and in good standing under applicable law; that it has legally
and validly established each Account prior to any issuance or sale thereof as a
segregated asset account under Section 61A.14 of the Minnesota Insurance Code;
that it has and will maintain the capacity to issue all Variable Insurance
Products that may be sold; and that it is properly licensed, qualified and in
good standing to sell the Variable Insurance Products in all jurisdictions where
the Variable Insurance Products will be sold.
2.2 The Company represents and warrants that the Variable Insurance
Products are registered under the 1933 Act.
3
2.3 The Company represents and warrants it has registered each Account
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as segregated investment accounts for the Variable Insurance Products.
2.4 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Minnesota and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund, the
Distributor, or the Sponsor.
2.5 The Fund represents that it is qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), that it will make every effort to maintain qualification (under
Subchapter M or any successor or similar provision), and that it will notify the
Company immediately upon having a reasonable basis for believing that it ceased
to so qualify or that it might not so qualify in the future. The Fund
acknowledges that any failure to qualify as a Regulated Investment Company will
eliminate the ability of the subaccounts to avail themselves of the "look
through" provisions of Section 817(h) of the Code, and that as a result the
Variable Insurance Products will almost certainly fail to qualify as endowment
or life insurance contracts under Section 817(h) of the Code.
2.6 The Company represents that the Variable Insurance Products will be
treated as endowment or life insurance contracts under applicable provisions of
the Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Sponsor immediately upon having a reasonable
basis for believing that the Variable Insurance Products have ceased to be so
treated or that they might not be so treated in the future.
2.7 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise.
2.8 The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Minnesota and the Fund and the Sponsor represent that their respective
operations are and shall at all times remain in material compliance with the
laws of the State of Minnesota to the extent required to perform this Agreement.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Distributor further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Minnesota and all applicable state
and federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 0000 Xxx.
2.10 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does and will
comply in all material respects with the 1940 Act and any applicable regulations
thereunder.
4
2.11 The Sponsor represents and warrants that the Advisers to the Fund
are, and the Sponsor shall use its best effort to cause the Advisers to remain,
duly registered in all material respects under all applicable federal and state
securities laws and to perform their obligations for the Fund in compliance in
all material respects with the laws of the State of Minnesota and any applicable
state and federal securities laws.
2.12 The Fund and the Sponsor represent and warrant that all of their
trustees, directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimum coverage required currently by Rule 17g-1 under the 1940 Act or other
applicable laws or regulations as may be promulgated from time to time. The
aforesaid bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.13 With respect to the Variable Insurance Products, which are
registered under the 1933 Act, the Company represents and warrants that:
(a) Securian Financial Services, Inc. is the principal underwriter
for each such Account and any subaccounts thereof and is a registered
broker-dealer with the SEC under the 1934 Act;
(b) the shares of the Portfolios of the Fund will be the only
investment securities held by the corresponding subaccounts of the Account;
(c) the number of Portfolios of the Fund available for investment
by the Accounts will not constitute a majority of the total number of mutual
funds or portfolio selections available for investment by the Accounts in any
Variable Insurance Product that is a variable annuity; and
(d) with regard to each Portfolio, the Company, if permitted by
law, on behalf of the corresponding subaccount, will:
(i) vote such shares held by it in the same proportion as
the vote of all other holders of such shares; and
(ii) refrain from substituting shares of another security for
such shares unless the SEC has approved such substitution in the manner provided
in Section 26 of the 0000 Xxx.
2.14 The Fund represents that it will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular the Fund will
either provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE III. OFFERING DOCUMENTS AND REPORTS
3.1 The Fund, the Sponsor or their designee shall provide the Company
(at the Sponsor's expense) with as many copies of the Fund's current prospectus
as the Company may reasonably request. The Company shall provide a copy of the
Fund's prospectus to each Variable Insurance Product owner. If requested by the
Company in lieu thereof, the Fund or the Sponsor shall provide such
documentation (including a final copy of the new prospectus as set in type at
the Fund's or the Sponsor's expense) and
5
other assistance as is reasonably necessary in order for the Company once each
year (or more frequently if the prospectus for the Fund is amended) to have the
prospectus for the Variable Insurance Products and the Fund's prospectus printed
together in one document (such printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the statement of additional
information for the Fund is available from the Sponsor (or in the Fund's
discretion, the prospectus shall state that the statement of additional
information is available from the Fund) and the Sponsor (or the Fund), at its
expense, shall print and provide such statement free of charge to the Company
and to any owner of a Variable Insurance Product or prospective owner who
requests such statement.
3.3 The Fund, at its own expense, shall provide the Company with copies
of its reports to shareholders, other communications to shareholders, and, if
required by applicable law, proxy material, in such quantity as the Company
shall reasonably require for distributing to Variable Insurance Product owners.
The Fund shall provide to the Company the prospectuses and annual reports
referenced in this Agreement within fifteen (15) days prior to the Company's
obligation to mail, and the Company agrees to provide the Fund with advance
notice of such date. If the documents are not delivered to the Company within
ten (10) days of the Company's obligation to mail, the Fund shall reimburse the
Company for any extraordinary out-of-pocket costs (including, but not limited
to, overtime for printing and mailing).
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund, its Advisers or the Sponsor is named, at least ten
Business Days prior to its use. The Company may use such material in fewer than
ten Business Days if it receives the written consent of the Fund or its
designee. No such material shall be used if the Fund or its designee reasonably
objects to such use within ten Business Days after receipt of such material. In
connection with the identification of the Portfolios in any such material, the
use of the Sponsor's name or identification of the Portfolios shall be given no
greater prominence than any other mutual fund or portfolio selection offered in
a Variable Insurance Product that is a variable annuity.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Insurance Products other than the
information or representations contained in the registration statement or
prospectus for the Fund shares, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved by the Fund or its designee or by the Sponsor, except with the
permission of the Fund or the Sponsor or the designee of either.
4.3 The Fund, Sponsor, Distributor or their designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or an Account is
named at least ten Business Days prior to its use. No such material shall be
used if the Company or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.4 The Fund, the Distributor and the Sponsor shall not give any
information or make any representations on behalf of the Company or concerning
the Company, each Account, or the Variable Insurance Products other than the
information or representations contained in a prospectus for the Variable
Insurance Products, as such prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Variable Insurance Product
owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
6
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, prior to or
contemporaneously with the filing of each document with the SEC or other
regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all prospectuses, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemption, requests
for no-action letters, and all amendments to any of the above, that relate to
the Variable Insurance Products or each Account, prior to or contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
4.7 The Fund and the Sponsor will provide the Company with as much
notice as is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Fund's registration statement, particularly
any change resulting in a change to the prospectus for any Account. The Fund and
the Sponsor will cooperate with the Company so as to enable the Company to
solicit voting instructions from owners of Variable Insurance Products, to the
extent a solicitation is required by applicable law, or to make changes to its
prospectus in an orderly manner.
4.8 For purposes of this Article IV, the phrase "sales literature and
other promotional material" includes, but is not limited to, sales literature
(i.e., any written communication distributed or made generally available to
customers, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published articles), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, and prospectuses, shareholder reports, and proxy materials.
4.9 CERTAIN TRANSACTIONS AND RESTRICTIONS.
(a) The Company agrees that it will provide, not later than five
Business Days after receipt of a written request by the Sponsor on behalf of the
Fund, the Taxpayer Identification Number of any or all Variable Insurance
Product owner(s) and the amount, date, name of investment professional
associated with the Variable Insurance Product owner (if any), and transaction
type (purchase, redemption, transfer, or exchange) of every purchase,
redemption, transfer, or exchange transaction by such Variable Insurance Product
owner(s) in an Account investing in the Fund through an account maintained by
the Company during the specific period covered by the request. Unless required
by applicable law, rule or regulation, the Sponsor and the Fund agree not to use
the information received under this Section for marketing or any other purpose
not related to (i) limiting or reducing abusive trading in shares issued by the
Fund or (ii) collecting purchase or redemption fees (if any).
(b) The Company agrees that it will execute written instructions
from the Sponsor on behalf of the Fund, including instructions to restrict or
prohibit purchases or exchanges of Fund shares in specific accounts or by or on
behalf of specific Variable Insurance Product owners identified by the Fund as
having engaged in transactions in Fund shares that violate policies established
by the Fund for the purpose of eliminating or reducing any dilution of the value
of the outstanding securities issued by the Fund. Any such instructions by the
Sponsor shall include the Taxpayer Identification Number or equivalent
identifying number of the Variable Insurance Product owner(s) to which the
instructions relate and the specific restriction(s) to be executed. The Company
agrees that it will execute any such instructions as soon as reasonably
practicable, but not later than five Business Days after receipt of the
instructions by the Company. The parties acknowledge that the Company's ability
to execute the
7
Sponsor's instructions may be limited by certain contractual obligations
contained in the Variable Insurance Products, certain rights contained in the
Variable Insurance Product prospectuses, and/or applicable state insurance laws
and regulations. If pursuant to any such limitation, the Company reasonably
believes that it is prevented from complying with a request from the Sponsor to
restrict or prohibit trading, the Company will notify the Sponsor within three
days of receiving such request and will work cooperatively with the Sponsor to
determine whether other actions may be taken by the Company in order to protect
Fund shareholders from dilution of the value of outstanding securities issued by
the Fund.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and Sponsor shall pay no fee or other compensation to the
Company under this Agreement. Nothing herein shall prevent the parties hereto
from otherwise agreeing to perform, and arranging for appropriate compensation
for, other services relating to the Fund and or to the Accounts.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the fees and expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing, and the Company shall
bear the expenses of distributing, the Fund's prospectus to owners of Variable
Insurance Products issued by the Company. The Company shall bear the expenses of
distributing the Fund's proxy materials (to the extent such proxy solicitation
is required by law) and reports to owners of Variable Insurance Products.
ARTICLE VI. DIVERSIFICATION
6.1 The Fund will at all times invest money from the Variable Insurance
Products in such a manner as to ensure that the Variable Insurance Products will
be treated as variable contracts under the Code and the regulations issued
thereunder. Without limiting the scope of the foregoing, the Fund and the
Sponsor represent and warrant that each Portfolio of the Fund will meet the
diversification requirements of Section 817(h) of the Code and Treasury
Regulation 1.817-5, relating to the diversification requirements for endowment
or life insurance contracts and any amendments or other modifications to such
Section or Regulations, as if those requirements applied directly to each such
Portfolio. In the event of a breach of this Article VI by the Fund, it will take
all reasonable steps (a) to notify Company of such breach and (b) to adequately
diversify, each Portfolio of the Fund so as to achieve compliance within the
grace period afforded by Regulation 817-5.
6.2 The Fund and the Sponsor represent that each Portfolio will elect to
be qualified as a Regulated Investment Company under Subchapter M of the Code
and they will maintain such qualification (under Subchapter M or any successor
or similar provision).
8
ARTICLE VII. INDEMNIFICATION
7.1 Indemnification by the Company
(a) The Company agrees to indemnify and hold harmless the Fund and
each trustee of the Board and officers and each person, if any, who controls the
Fund within the meaning of Section 15 of the 1933 Act, the Sponsor and the
Distributor (collectively, the "Indemnified Parties" for purposes of this
Section 7.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Company) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the registration
statement or prospectus for the Variable Insurance Products or contained in the
contract or policy or sales literature for the Variable Insurance Products (or
any amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with information furnished
to the Company by or on behalf of the Fund for use in the registration statement
or prospectus for the Variable Insurance Products or in the contract or policy
sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Insurance Products or the Fund shares;
or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
registration statement, prospectus or sales literature of the Fund not supplied
by the Company, or persons under its control) or unlawful conduct of the Company
or persons under its control, with respect to the sale or distribution of the
Variable Insurance Products or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement, prospectus,
or sales literature of the Fund (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) result from any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or arise
out of or result from any material breach of this Agreement by the Company;
as limited by and in accordance with the provisions of Section 7.1(b) and 7.1(c)
hereof.
(b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Fund, whichever is applicable.
9
(c) The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on a designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such a party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
(d) The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Insurance Products
or the operation of the Fund.
7.2 Indemnification by the Sponsor
(a) The Sponsor agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Sponsor) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Fund's shares or the Variable Insurance Products and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Sponsor or Fund by or on behalf of the Company for use in the registration
statement or prospectus for the Fund or in sales literature (or any amendment or
supplement thereto) or otherwise for use in connection with the sale of the
Variable Insurance Products or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
registration statement, prospectus or sales literature for the Variable
Insurance Products not supplied by the Sponsor or persons under its control) or
unlawful conduct of the Fund, the Advisers or persons under their control, with
respect to the sale or distribution of the Variable Insurance Products or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement, prospectus
or sales literature covering the Variable Insurance Products (or any amendment
or supplement thereto), or the omission or alleged omission to
10
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund; or
(iv) result from any failure by the Sponsor or the Fund to
provide the services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Sponsor or the Fund in this Agreement
or arise out of or result from any other material breach of this Agreement by
the Sponsor or the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
(b) The Sponsor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Accounts, whichever is applicable.
(c) The Sponsor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Sponsor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
any such service on any designated agent), but failure to notify the Sponsor of
any such claim shall not relieve the Sponsor from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In any case any such action is
brought against the Indemnified Parties, the Sponsor will be entitled to
participate, at its own expense, in the defense thereof. The Sponsor also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Sponsor to such party of the
Sponsor's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Sponsor will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by each party independently in connection
with the defense thereof other than reasonable costs of investigation.
(d) The Company agrees promptly to notify the Sponsor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Insurance
Products or the operation of each Account.
7.3 Indemnification by the Fund
(a) The Fund agrees to indemnify and hold harmless the Company,
and each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims damages, liabilities
or expenses (or action in respect thereof) or settlements resulting from the
gross negligence, bad
11
faith or willful misconduct of the Board or any member thereof, are related to
the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide
the services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements specified
in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or arise out
of or result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Sponsor or each Account, whichever is applicable.
(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party or the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party independently in connection with the defense thereof other
than reasonable costs of litigation.
(d) The Company and the Sponsor agree promptly to notify the Fund
of the commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Variable Insurance Products, with respect to the operation of an
Account, or the sale or acquisition of shares of the Fund.
7.4 Indemnification by the Distributor
(a) The Distributor agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.4)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Sponsor) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Fund's shares or the Variable
Insurance Products and:
12
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to the
Distributor or the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement thereto) or otherwise for use in connection with the
sale of the Variable Insurance Products or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in the
registration statement, prospectus or sales literature for the Variable
Insurance Products not supplied by the Distributor or persons under its control)
or unlawful conduct of the Fund, the Advisers or persons under their control,
with respect to the sale or distribution of the Variable Insurance Products or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement, prospectus
or sales literature covering the Variable Insurance Products (or any amendment
or supplement thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of the Fund;
or
(iv) result from any failure by the Distributor or the Fund
to provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the Fund in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Distributor of the Fund;
as limited by and in accordance with the provisions of Sections 7.4(b) and
7.4(c) hereof.
(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Accounts, whichever is applicable.
(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Distributor in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
any such service on any designated agent), but failure to notify the Distributor
of any such claim shall not relieve the Distributor from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In any case any such action
is brought against the Indemnified Parties, the Distributor will be entitled to
participate, at its own expense, in the defense thereof. The Sponsor also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Distributor to such party of
the Distributor's election to assume the defense thereof,
13
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Distributor will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by each party
independently in connection with the defense thereof other than reasonable costs
of investigation.
(d) The Company agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Insurance
Products or the operation of each account.
ARTICLE VIII. APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Minnesota.
8.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. TERMINATION
9.1 This Agreement shall continue in full force and effect until the
first to occur of
(a) termination by any party for any reason by sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Sponsor with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Insurance Products; or
(c) termination by the Company by written notice to the Fund and
the Sponsor with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Variable Insurance Products issued or to be
issued by the Company; or
(d) termination by the Company by written notice to the Fund and
the Sponsor with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify (in the event of such termination,
the Company shall withdraw all assets allocable to the separate accounts from
the Portfolio and shall reinvest such assets in a different investment medium,
including, but not limited to, another Portfolio of the Fund); or
(e) termination by the Company by written notice to the Fund and
the Sponsor with respect to any Portfolio in the event that such Portfolio fails
to meet the diversification requirements as specified in Article VI hereof (in
the event of such termination, the Company shall withdraw all assets allocable
to the separate accounts from the Portfolio and shall reinvest such assets in a
different investment medium, including, but not limited to, another Portfolio of
the Fund); or
14
(f) termination by the Fund, the Sponsor, or the Distributor by
written notice to the Company, if any of the Fund, the Sponsor, or the
Distributor shall determine, in its sole judgment exercised in good faith, that
the Company and/or its affiliated companies has suffered a material adverse
change in its business, operations, or financial condition since the date of
this Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Sponsor, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund, the Sponsor, or the Distributor has suffered a
material adverse change in its business, operations or financial condition since
the date of this Agreement or is the subject of material adverse publicity.
9.2 Notwithstanding any termination of this Agreement, the Fund and the
Sponsor shall, at the option of the Company, continue to make available shares
of the Fund pursuant to the terms and conditions of this Agreement, for all
Variable Insurance Products in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts.
9.3 The Company shall not redeem Fund shares attributable to the
Variable Insurance Products (as opposed to Fund shares attributable to the
Company's assets held in the Accounts) except (a) as necessary to implement
Variable Insurance Products owner initiated or approved transactions, or (b) as
required by state and/or federal laws or regulations or judicial or other legal
precedent of general application (hereinafter referred to as a "Legally Required
Redemption"). Upon request, the Company will promptly furnish to the Fund and
the Sponsor the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund and the Sponsor) to the effect that any
redemption pursuant to clause (b) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Variable
Insurance Products, the Company shall not prevent owners of Variable Insurance
Products from allocating payments to a Portfolio that was otherwise available
under the Variable Insurance Products without first giving the Fund or the
Sponsor 90 days' notice of its intention to do so.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund: Vanguard Variable Insurance Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Sponsor: The Vanguard Group, Inc.
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
If to the Distributor: Vanguard Marketing Corporation
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxx
15
If to the Company: Minnesota Life Insurance Company
000 Xxxxxx Xxxxxx Xxxxx
Xx. Xxxx, XX 00000
Attn: Vice President - Law
ARTICLE XI. MISCELLANEOUS
11.1 It is understood and stipulated that neither the shareholders of any
Portfolio nor the officers or trustees of the Fund shall be personally liable
hereunder.
11.2 Subject to the requirements of the legal process and regulatory
authority, the Fund, the Sponsor and the Distributor shall treat as confidential
the names and addresses of the owners of the Variable Insurance Products and all
information reasonably identified as confidential in writing by the Company and,
except as permitted by this Agreement, shall not (unless it has obtained the
express written consent of the Company) disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it may
come into the public domain.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
11.6 Each party hereto shall cooperate with each party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
11.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
11.9 Upon the Fund's written request, the Company shall furnish, or cause
to be furnished, to the Fund or its designee copies of the following reports:
(a) the Company's Annual Financial Statement on Statutory Basis as
soon as practical and in any event within 90 days after the end of each fiscal
year; and
16
(b) any registration statement, prospectus or other materials
distributed in connection with the sale of the Variable Insurance Products to
the extent such registration statement, prospectus or other materials reference
the Fund.
11.10 This Agreement, including any Schedule hereto, may be amended or
modified only by written instrument, executed by duly authorized officers of the
parties.
17
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative as of the date specified above.
VANGUARD VARIABLE INSURANCE FUND
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
THE VANGUARD GROUP, INC.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
VANGUARD MARKETING CORPORATION
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
MINNESOTA LIFE INSURANCE COMPANY
By:
--------------------------------
Name: Xxxxx X. Xxxx
-----------------------------
Title: Senior Vice President
------------------------------------
18
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT CONTRACTS FUNDED BY SEPARATE ACCOUNT
------------------------ ------------------------------------
Minnesota Life Individual Variable Minnesota Life Accumulator Variable Universal
Universal Life Account Life Policy
19
SCHEDULE B
PORTFOLIOS
The following Portfolios of Vanguard Variable Insurance Fund shall be made
available as investments underlying the Variable Insurance Products, subject to
the limitations set forth in Section 2.13(c) hereof:
Money Market Portfolio
Short-Term Investment-Grade Portfolio
Total Bond Market Index Portfolio
High Yield Bond Portfolio
Balanced Portfolio
Equity Income Portfolio
Diversified Value Portfolio
Total Stock Market Index Portfolio
Capital Growth Portfolio
Small Company Growth Portfolio
International Portfolio
20
SCHEDULE C
LARGE TRANSACTION AMOUNTS
PORTFOLIO LARGE TRANSACTION AMOUNT
--------- ------------------------
Money Market Portfolio $ 500,000
Short-Term Investment-Grade Portfolio 750,000
Total Bond Market Index Portfolio 200,000
High Yield Bond Portfolio 500,000
Balanced Portfolio 1,000,000
Equity Income Portfolio 500,000
Diversified Value Portfolio 1,000,000
Total Stock Market Index Portfolio 500,000
Capital Growth Portfolio 250,000
Small Company Growth Portfolio 1,000,000
International Portfolio 1,000,000
21
