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EXHIBIT 8.8
FORM OF PARTICIPATION AGREEMENT WITH SAFECO RESOURCE SERIES TRUST
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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 (1)
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 (11) 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").
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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
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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 require-
ments) 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
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promptly followed by a letter written on SAM's or the Trust's letter-
head 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
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funding media that the Company or any distributor will distribute to exis-
ting 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.
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(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
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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
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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;
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(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 falls 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
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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 affiliate's 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.
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(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
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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 I I 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:
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(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
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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 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
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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 XX
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Institutional Division
To the Trust: SAFECO Resource Series Trust
0000 Xxxxxxxx Xxxxxx XX
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.
(1) 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 /s/ Xxxx X. Xxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxx
Title: Vice President and Controller
SAFECO ASSET MANAGEMENT COMPANY
By /s/ Xxxxxx Xxxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Vice President
AMERICAN UNITED LIFE INSURANCE COMPANY
By /s/ Xxxxx Xxxxxxx
--------------------------------------
Name Xxxxx Xxxxxxx
Title: Vice President Marketing
