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As filed with the Securities and Exchange Commission on April 30, 1998
=========================================================================
File No. 333-32531
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE
[X] SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ____
[X] Post-Effective Amendment No. 1
and/or
REGISTRATION STATEMENT UNDER THE
[ ] INVESTMENT COMPANY ACT OF 1940
[ ] Amendment No._____
(Check appropriate box or boxes)
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
(Exact Name of Registrant)
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
(Name of Depositor)
One American Square, Indianapolis, Indiana 46282
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number: (317) 263-1877
John C. Swhear, Esq.
Counsel
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
(Name and Address of Agent for Service)
Title of Securities Being Registered: Interests in individual variable life
contracts
It is proposed that this filing will become effective (Check appropriate Space)
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
_____ --------------
_____ 60 days after filing pursuant to paragraph (a) (i) of Rule 485
_____ on (date) pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a) (ii) of Rule 485
_____ this post-effective amendment designates a new effective date for a
previously filed amendment.
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AUL American Individual Variable Life Unit Trust of
American United Life Insurance Company(R)
Flexible Premium Adjustable
Variable Life Insurance Policies
RECONCILIATION AND TIE
(Form N-8B-2 Items required by Instruction as
to the Prospectus in Form S-6)
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<S> <C> <C>
Form N-8B-2 Form S-6
Item Number Heading in Prospectus
I. Organization and General Information
1. (a) Name of trust............................ Prospectus front cover
(b) Title of securities issued.............. Prospectus front cover
2. Name and address of each depositor.......... Prospectus front cover
3. Name and address of trustee................. N/A
4. Name and address of each principal
underwriter............................... Sale of the Policies
5. State of organization of trust.............. Separate Account
6. Execution and termination of trust
agreement................................. Separate Account
9. Litigation................................. Other Information About the
Policies and AUL - Litigation
II. General Description of the Trust
and Securities of the Trust
10. (a) Registered or bearer Summary and Diagram
securities........................ of the Policy
(b) Cumulative or distributive Summary and Diagram
securities......................... of the Policy
i
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(c) Withdrawal or Redemption............... Cash Benefits - Policy Loans; Cash
Benefits - Surrendering the Policy for
Net Cash Value
(d) Conversion, transfer, etc................ Premium Payments and Allocations -
Transfer Privilege; Premium Payments and Allocations
- Dollar Cost Averaging Program;
Premium Payments and Allocations -
Portfolio Rebalancing Program; Cash Benefits
- Policy Loans; Cash Benefits - Partial
Surrenders; Other Policy Benefits and
Provisions Exchange for Paid-Up Policy
(e) Lapse or Default.......................... Premium Payments and Allocations - Premium Payments to Prevent Lapse;
Other Policy Benefits and Provisions - Reinstatement
(f) Voting rights............................. Other Information About the Policies and AUL - Voting Rights
(g) Notice to security holders............... Other Policy Benefits and Provisions -
Changes in the Policy or Benefits;
Other Policy Benefits and Provisions
Reports to Policy Owners; Other
Information About the Policies and
AUL - Addition, Deletion or
Substitution of Investments
(h) Consents required........................ Other Information About the
Policies and AUL - Voting Rights;
Other Policy Benefits and Provisions
- Changes in the Policy or
Benefits; Other Information About
the Policies and AUL - Voting
Rights; Other Information About
the Policies and AUL - Addition,
Deletion or Substitution of Investments
ii
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(i) Other provisions......................... Premium Payments and Allocations; Charges and Deductions;
Death Benefits and Changes in Face Amount; Cash
Benefits; Summary and Diagram of the
Policy; Fixed Account
11. Type of securities comprising units........... Prospectus front cover; General
Information About AUL, the Separate
Account and the Funds
12. Certain information regarding periodic
payment plan certificates.................... General Information About AUL, the
Separate Account and the Funds- The Funds
13. (a) Load, fees, expenses, etc............. Charges and Deductions
(b) Certain information regarding
periodic payment plan
certificates........................ N/A
(c) Certain percentages................... Charges and Deductions
(d) Certain other fees, etc............... Charges and Deductions
(e) Certain other profits or benefits..... Premium Payments and Allocations
- Transfer Privilege; Fixed Account
Transfers from Fixed Account; Illustrations
of Account Values, Cash Values,
Death Benefits and Accumulated
Premium Payments
(f) Other benefits.......................... General Information About AUL, the
Separate Account and the Funds - The Funds
(g) Ratio of annual charges to
income.................................. N/A
iii
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14. Issuance of trust's securities................ Summary and Diagram of the Policy; Premium Payments
and Allocations
15. Receipt and handling of payments Premium Payments and
from purchasers............................. Allocations
16. Acquisition and disposition of General Information About AUL,
underlying securities ...................... the Separate Account and the Funds; Charges and
Deductions- Fund Expenses
17. Withdrawal or redemption...................... Premium Payments and Allocations-Transfer
Privilege; Fixed Account Transfers from
Fixed Account; Fixed Account - Payment
Deferral; Charges and Deductions -
Surrender Charge; Cash Benefits -
Surrendering the Policy for Net Cash Value;
Cash Benefits - Policy Loans; Cash Benefits
- Partial Surrenders; Cash Benefits -
Settlement Options; Other Information
About the Policies and AUL - Reinstatement
18. (a) Receipt, custody and General Information About AUL,
disposition of income ............... the Separate Account and the
Funds - Separate Account; Other
Policy Benefits and Provisions -
Dividends; Tax Considerations
(b) Reinvestment of
distributions...................... N/A
(c) Reserves or special funds............ N/A
(d) Schedule of distributions............ N/A
19. Records, accounts and reports................. Other Policy Benefits and Provisions - Reports to Policy Owners
iv
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20. Certain miscellaneous provisions
of trust agreement:
(a) Amendment............................ N/A
(b) Termination.......................... N/A
(c) and (d) Trustee, removal and
successor.......................... N/A
(e) and (f) Depositors, removal
and successor...................... N/A
21. Loans to security holders..................... Cash Benefits - Policy Loans
22. Limitations on liability...................... N/A
23. Bonding arrangements.......................... N/A
24. Other material provisions of
trust agreement.............................. Other Information About the
Policies and AUL
III. Organizations, Personnel and
Affiliated Persons of Depositor
25. Organization of depositor..................... AUL
26. Fees received by depositor
(a) Under the policies................... N/A
(b) From the Funds....................... General Information About AUL, the
Separate Account and the Funds - The Funds
27. Business of depositor......................... General Information About AUL, the
Separate Account and the Funds - AUL
28. Certain information as to officials
and affiliated persons of depositor.......... Other Information About the
Policies and AUL - AUL Directors and
Executive Officers
v
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29. Voting securities of depositor................ N/A
30. Persons controlling depositor................. N/A
31. Payments by depositor for certain
services rendered to trust.................. N/A
32. Payments by depositor for certain
other services rendered to
trust....................................... N/A
33. Remuneration of employees of
depositor for certain services
rendered to trust........................... N/A
34. Remuneration of other persons
for certain services rendered
to trust.................................... N/A
IV. Distribution and Redemption of Securities
35. Distribution of trust's securities
by states................................... N/A
37. Revocation of authority to
distribute.................................. N/A
38. (a) Method of distribution.................. Other Information About the Policies
and AUL - Sale of the Policies
(b) Underwriting agreements................. Other Information About the Policies
and AUL - Sale of the Policies
(c) Selling agreements...................... Other Information About the Policies
and AUL - Sale of the Policies
39. (a) Organization of principal
underwriters....................... See Item 25
vi
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(b) N.A.S.D. membership of
principal underwriters.............. Other Information About the Policies
and AUL - Sale of the Policies
40. Certain fees received by principal
underwriters................................ See Item 26
41. (a) Business of each principal
underwriter........................ See Item 27
42. Ownership of trust's securities
by certain persons.......................... N/A
43. Certain brokerage commissions
received by principal
underwriters................................ N/A
44. (a) Method of valuation.................. How Your Account Values Vary
(b) Schedule as to offering
price.............................. Charges and Deductions
(c) Variation in offering price
to certain persons................. Charges and Deductions
45. Suspension of redemption rights............... N/A
46. (a) Redemption Valuation..................... How Your Account Value Varies; Cash
Benefits - Surrender Charge
(b) Schedule as to redemption
price.................................... Cash Benefits - Surrender Charge
47. Maintenance of position in
underlying securities........................ General Information About AUL,
the Separate Account and the
Funds Separate Account; General
Information About AUL, the
Separate Account and the Funds
- The Funds; Premium Payments
and Allocations - Premium Allocations
and Crediting
vii
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V. Information Concerning the Trustee or Custodian
48. Organization and regulation of
trustee..................................... N/A
49. Fees and expenses of trustees................. N/A
50. Trustee's lien................................ N/A
VI. Information Concerning Insurance of
Holders of Securities
51. Insurance of holders of trust's Summary and Diagram of the
securities................................... Policy; General Information
About AUL, the Separate Account and the
Funds; Death Benefit and Changes in
Face Amount; Cash Benefits; Other
Policy Benefits and Provisions; Other
Information About the Policies and AUL;
Premium Payments and Allocations
VII. Policy of Registrant
52. (a) Provisions of trust agreement
with respect to selection or
elimination of underlying
securities......................... Other Information About the Policies
and AUL - Addition, Deletion or
Substitution of Investments; General
Information About AUL, the Separate
Account and the Funds
(b) Transactions involving elimination
of underlying securities........... N/A
(c) Policy regarding substitution
or elimination of under-
lying securities................... See Item 52(a)
(d) Fundamental policy not other-
wise covered....................... N/A
53. Tax status of trust........................... Tax Considerations
viii
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VIII. Financial and Statistical Information
54. Trust's securities during last
ten years................................... N/A
55. Trust's securities during last
ten years................................... N/A
</TABLE>
<PAGE>
PROSPECTUS
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46282
This Prospectus describes a flexible premium adjustable variable life insurance
policy (the "Policy") offered by American United Life Insurance Company(R)
("AUL," "we," "us" or "our"). The Policy is designed to provide insurance
protection on the Insured (or Insureds if you choose the Last Survivor Rider)
named in the Policy, and at the same time provide you with the flexibility to
vary the amount and timing of premium payments and to change the amount of death
benefits payable under the Policy. This flexibility allows you to provide for
your changing insurance needs under a single insurance Policy.
You also have the opportunity to allocate Net Premiums and Account Value to one
or more Investment Accounts of the AUL American Individual Variable Life Unit
Trust (the "Separate Account") and to AUL's general account (the "Fixed
Account"), within limits. This Prospectus generally describes only that portion
of the Account Value allocated to the Separate Account. For a brief summary of
the Fixed Account, see "Fixed Account." The assets of each Investment Account
are invested in a corresponding mutual fund portfolio (each, a "Portfolio") of
AUL American Series Fund, Inc., Alger American Portfolio, American Century
Variable Portfolios, Inc., Fidelity Variable Insurance Products Fund, Fidelity
Variable Insurance Products Fund II, and T. Rowe Price Equity Series, Inc. (each
a "Fund"). Each Fund, and its Portfolio(s), is managed by the investment adviser
shown below:
<TABLE>
<S> <C>
Fund Investment Adviser
AUL American Series Fund, Inc. AUL
AUL American Equity Portfolio
AUL American Bond Portfolio
AUL American Money Market Portfolio
AUL American Managed Portfolio
Alger American Fund Fred Alger & Company
Alger American Growth Portfolio
American Century Variable Portfolios, Inc. American Century Investment Management, Inc.
American Century VP Capital Appreciation Portfolio
American Century VP International Portfolio
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Fidelity Variable Insurance Products Fund Fidelity Management & Research Company
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP High Income Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund II Fidelity Management & Research Company
VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
T. Rowe Price Equity Series, Inc. T. Rowe Price Associates, Inc.
T. Rowe Price Equity Income Portfolio
</TABLE>
The prospectuses for the Funds describe their respective Portfolios, including
the risks of investing in the Portfolios, and provide other information on the
Funds.
You can select from two death benefit options available under the Policy: a
level death benefit ("Option 1") and a death benefit that fluctuates with the
Account Value ("Option 2"). AUL guarantees that the Death Benefit Proceeds will
never be less than the specified Death Benefit in force (less any outstanding
loan and loan interest and plus any benefits provided by rider) so long as
sufficient premiums are paid to keep the Policy in force.
The Policy provides for a Net Cash Value that can be obtained by surrendering
the Policy. Because this value is based on the performance of the Portfolios of
the Funds, to the extent of allocations to the Separate Account, there is no
guaranteed minimum Net Cash Value.
If the Net Cash Value is insufficient to cover the Monthly Deduction under the
Policy, the Policy will lapse without value. However, AUL guarantees to keep the
Policy in force during the Guarantee Period, so long as we receive from you the
Required Premium for the Guarantee Period, and so long as certain other
conditions are met. The Policy also permits loans and Partial Surrenders, within
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or exchange it for a paid-up
policy for a reduced Death Benefit that provides benefits that do not vary with
the investment results of a separate account.
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THIS PROSPECTUS PRESENTS INFORMATION YOU SHOULD KNOW BEFORE DECIDING TO PURCHASE
A POLICY. IT SHOULD BE RETAINED FOR FUTURE REFERENCE. PROSPECTUSES FOR THE FUNDS
SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. AN INVESTMENT IN THE POLICY
IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, NOR
IS THE POLICY FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN THE POLICY INVOLVES CERTAIN RISKS,
INCLUDING THE LOSS OF PREMIUM PAYMENTS (PRINCIPAL).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is May 1, 1998.
2
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TABLE OF CONTENTS
Page
DEFINITIONS OF TERMS..........................................................4
SUMMARY AND DIAGRAM OF THE POLICY............................................ 5
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT AND THE FUNDS............ 8
AUL................................................................. 8
Separate Account.................................................... 8
The Funds........................................................... 8
AUL American Series Fund, Inc....................................... 8
Alger American Fund................................................. 8
American Century Variable Portfolios, Inc........................... 8
Fidelity Variable Insurance Products Fund........................... 9
Fidelity Variable Insurance Products Fund II........................ 9
T. Rowe Price Equity Series, Inc.................................... 9
FUND EXPENSE TABLE...........................................................10
PREMIUM PAYMENTS AND ALLOCATIONS.............................................11
Applying for a Policy...............................................11
Right to Examine Policy.............................................11
Premiums............................................................11
Premium Payments to Prevent Lapse...................................11
Premium Allocations and Crediting...................................12
Transfer Privilege..................................................12
Dollar Cost Averaging Program.......................................13
Portfolio Rebalancing Program.......................................13
FIXED ACCOUNT................................................................14
Minimum Guaranteed and Current Interest Rates.......................14
Calculation of the Fixed Account Value..............................14
Transfers from the Fixed Account....................................14
Payment Deferral....................................................14
CHARGES AND DEDUCTIONS.......................................................14
Premium Expense Charges.............................................14
Monthly Deduction...................................................14
Mortality and Expense Risk Charge...................................15
Surrender Charge....................................................15
Taxes...............................................................15
Special Uses........................................................15
Fund Expenses.......................................................16
HOW YOUR ACCOUNT VALUES VARY.................................................16
Determining the Account Value.......................................16
Cash Value and Net Cash Value.......................................17
DEATH BENEFIT AND CHANGES IN FACE AMOUNT.....................................17
Amount of Death Benefit Proceeds....................................17
Death Benefit Options...............................................17
Initial Face Amount and Death Benefit Option........................17
Changes in Death Benefit Option.....................................17
Changes in Face Amount..............................................18
Selecting and Changing the Beneficiary..............................18
CASH BENEFITS................................................................18
Policy Loans........................................................18
Surrendering the Policy for Net Cash Value..........................19
Partial Surrenders..................................................19
Settlement Options..................................................19
Specialized Uses of the Policy......................................20
Life Insurance Retirement Plans.....................................20
Risks of Life Insurance Retirement Plans............................20
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS AND
ACCUMULATED PREMIUM PAYMENTS................................................30
OTHER POLICY BENEFITS AND PROVISIONS.........................................30
Limits on Rights to Contest the Policy..............................30
Changes in the Policy or Benefits...................................30
Change of Insured...................................................30
Exchange for Paid-Up Policy.........................................30
When Proceeds Are Paid..............................................30
Dividends...........................................................30
Reports to Policy Owners............................................30
Assignment..........................................................31
Reinstatement.......................................................31
Rider Benefits......................................................31
TAX CONSIDERATIONS...........................................................32
Tax Status of the Policy............................................32
Tax Treatment of Policy Benefits....................................33
Estate and Generation Skipping Taxes................................34
Life Insurance Purchased for Use in Split Dollar Arrangements.......34
Taxation under Section 403(b) Plans.................................34
Non-Individual Ownership of Contracts...............................35
Possible Charge for AUL's Taxes.....................................35
OTHER INFORMATION ABOUT THE POLICIES AND AUL.................................35
Policy Termination..................................................35
Resolving Material Conflicts........................................35
Addition, Deletion or Substitution of Investments...................35
Voting Rights.......................................................36
Sale of the Policies................................................36
AUL Directors and Executive Officers................................37
State Regulation....................................................39
Additional Information..............................................39
Independent Auditors................................................39
Litigation..........................................................39
Legal Matters.......................................................39
Year 2000 Issues and Readiness......................................39
Financial Statements................................................39
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUSES OF THE FUNDS, OR THE STATEMENTS OF ADDITIONAL
INFORMATION OF THE FUNDS.
3
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DEFINITIONS OF TERMS
ACCOUNT VALUE
The Account Value is the sum of your interest in the Variable Account,
the Fixed Account, and the Loan Account.
AGE
Issue Age means the Insured's age as of the Contract Date. Attained Age
means the Issue Age increased by one for each complete Policy Year.
CASH VALUE
The Cash Value is the Account Value less the Surrender Charge.
CONTRACT DATE
The date from which Monthiversaries, Policy Years, and Policy
Anniversaries are measured. Suicide and incontestability periods are
measured from the Contract Date.
DEATH BENEFIT AND DEATH BENEFIT PROCEEDS
This Policy has two death benefit options. The Death Benefit Proceeds
are the Death Benefit less any outstanding loan and loan interest,
plus any benefits provided by rider.
FACE AMOUNT
The Face Amount shown on the Policy Data Page of the Policy, or as
subsequently changed.
FIXED ACCOUNT
An account which is part of our general account, and is not part of or
dependent on the investment performance of the Variable Account.
GUARANTEE PERIOD
The period shown on the Policy Data Page during which the Policy will
remain in force if cumulative premiums less any outstanding loan and
loan interest and Partial Surrenders equal or exceed the Required
Premium for the Guarantee Period. The Guarantee Period terminates on
any Monthiversary that this test fails.
HOME OFFICE
The Variable Products Service office at AUL's principal business office
One American Square, Indianapolis, Indiana 46282.
INSURED
The insured named on the Policy Data Page of the Policy. The Insured
may or may not be the Owner. An available rider provides for coverage
on the lives of two Insureds.
INVESTMENT ACCOUNTS
One or more of the subdivisions of the Separate Account. Each
Investment Account is invested in a corresponding Portfolio of a
particular mutual fund.
ISSUE DATE
The date the Policy is issued.
LOAN ACCOUNT
A portion of the Account Value which is collateral for loan amounts.
MINIMUM INSURANCE PERCENTAGE
The minimum percentage of insurance required to qualify the Policy as
life insurance under the Internal Revenue Internal Revenue Code. A
table of these amounts is on the Policy Data Page of your Policy.
MODIFIED ENDOWMENT
A classification of policies determined under the Internal Revenue
Internal Revenue Code to be modified endowment contracts which affects
the tax status of distributions from the Policy.
MONTHIVERSARY
The same date of each month as the Contract Date. If a Monthiversary
falls on a day which is not a Valuation Date, the processing of the
Monthiversary will be the next Valuation Date.
NET CASH VALUE
Cash Value less outstanding loans and loan interest.
NET PREMIUM
The total premium paid reduced by premium expense charges.
OWNER
The owner named in the application for a Policy, unless changed.
PARTIAL SURRENDER
A withdrawal of a portion of the Account Value.
POLICY ANNIVERSARY
The same date each year as the Contract Date.
POLICY DATA PAGE
The Policy Data Page in your Policy, or the supplemental Policy Data
Page most recently sent to you by us.
POLICY YEAR
One year from the Contract Date and from each Policy Anniversary.
PORTFOLIO
A separate investment fund in which the Separate Account invests.
PROPER NOTICE
Notice that is received at our Home Office in a form acceptable to us.
REQUIRED PREMIUM FOR THE GUARANTEE PERIOD
The amount that must be paid on a cumulative basis to keep this Policy
in force during the Guarantee Period.
RISK AMOUNT
The Death Benefit divided by 1.00246627 less the Account Value.
SEPARATE ACCOUNT
AUL American Individual Variable Life Unit Trust. The Separate Account
is segregated into several Investment Accounts each of which invests in
a corresponding mutual fund portfolio.
VALUATION DATE
Valuation Dates are the dates on which the Investment Accounts are
valued. A Valuation Date is any date on which the New York Stock
Exchange is open for trading and we are open for business.
Traditionally, in addition to federal holidays, AUL is not open for
business on the day after Thanksgiving and either the day before or
after Christmas or Independence Day.
VALUATION PERIOD
A Valuation Period begins at the close of one Valuation Date and ends
at the close of the next succeeding Valuation Date.
VARIABLE ACCOUNT
The Account Value of this Policy which is invested in one or more
Investment Accounts.
WE
"We", "us" or "our" means AUL.
YOU
"You" or "your" means the Owner of this Policy.
4
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SUMMARY AND DIAGRAM OF THE POLICY
The following summary of Prospectus information and diagram of the Policy should
be read in conjunction with the detailed information appearing elsewhere in this
Prospectus. Unless otherwise indicated, the description of the Policy in this
Prospectus assumes that the Policy is in force, that the Last Survivor Rider is
not in force, and that there are no outstanding loans and loan interest.
The Policy is similar in many ways to fixed-benefit life insurance. As with
fixed-benefit life insurance, typically the Owner of a Policy pays premium
payments for insurance coverage on the Insured. Also, like fixed-benefit life
insurance, the Policy provides for accumulation of Net Premiums and a Net Cash
Value that is payable if the Policy is surrendered during the Insured's
lifetime. As with fixed-benefit life insurance, the Net Cash Value during the
early Policy Years is likely to be lower than the premium payments paid.
However, the Policy differs from fixed-benefit life insurance in several
important respects. Unlike fixed-benefit life insurance, the Death Benefit may
and the Account Value will increase or decrease to reflect the investment
performance of the Investment Accounts to which Account Value is allocated.
Also, there is no guaranteed minimum Net Cash Value. Nonetheless, AUL guarantees
to keep the Policy in force during the Guarantee Period shown on the Policy Data
Page of your Policy if, on each Monthiversary, the sum of the premiums paid to
date, less any Partial Surrenders, loans and loan interest, equals or exceeds
the Required Premium for the Guarantee Period (shown on the Policy Data Page of
your Policy) multiplied by the number of Policy Months since the Policy Date.
Otherwise, if the Net Cash Value is insufficient to pay the Monthly Deduction,
the Policy will lapse without value after a grace period. See "Premium Payments
to Prevent Lapse." If a Policy lapses while loans are outstanding, adverse tax
consequences may result. See "Tax Considerations."
The most important features of the Policy, such as charges, cash surrender
benefits, Death Benefits, and calculation of Cash Values, are summarized in the
diagram on the following pages.
Purpose of the Policy. The Policy is designed to provide long-term
insurance benefits, and may also provide long-term accumulation of Cash Value.
The Policy should be evaluated in conjunction with other insurance policies that
you own, as well as the need for insurance and the Policy's long-term potential
for growth. It may not be advantageous to replace existing insurance coverage
with this Policy. In particular, replacement should be carefully considered if
the decision to replace existing coverage is based solely on a comparison of
Policy illustrations. See "Illustrations" and "Specialized Uses of the Policy."
Illustrations. Illustrations included in this Prospectus or used in
connection with the purchase of a Policy that illustrate Policy Cash Values and
Death Benefit Proceeds for prototype insureds are based on hypothetical rates of
return.
The illustrations show Policy values based on current charges and,
alternatively, guaranteed charges. See "Illustrations of Account Values, Cash
Values, Death Benefits and Accumulated Premium Payments."
Policy Tax Compliance. AUL intends for the Policy to satisfy the
definition of a life insurance policy under Section 7702 of the Internal Revenue
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). Under
certain circumstances, a Policy will be treated as a Modified Endowment under
federal tax law. AUL will monitor the Policies and will attempt to notify you on
a timely basis if your Policy is in jeopardy of violating the federal tax
definition of life insurance or becoming a Modified Endowment. However, we do
not undertake to give you such notice or to take corrective action. We reserve
the right to refund any premiums that may cause the Policy to become a Modified
Endowment. For further discussion of the tax status of a Policy and the tax
consequences of being treated as a life insurance contract or a Modified
Endowment, see "Tax Considerations."
Right to Examine Policy and Policy Exchange. For a limited time, you
have the right to cancel your Policy and receive a refund. See "Right to Examine
Policy." Net Premiums are generally allocated to the Fixed Account and
Investment Accounts on the later of the day the "right to examine" period
expires, or the date we receive the premium at our Home Office. See "Premium
Allocations and Crediting."
You may exchange the Policy for a paid-up whole life policy with a level face
amount, not greater than the Policy's Face Amount, that can be purchased by the
Policy's Net Cash Value. See "Exchange for Paid-Up Policy."
Owner Inquiries. If you have any questions, you may write or call our Home
Office at One American Square, P.O. Box 7127, Indianapolis, Indiana 46206-7127,
1-800-863-9354.
5
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Diagram of Contract
Premium Payments
You select a payment plan but are not required to pay premium payments according
to the plan. You can vary the amount and frequency.
The Policy's minimum initial premium payment depends on the Insured's age, sex
and risk class, Initial Face Amount selected, any supplemental and/or rider
benefits, and any planned periodic premiums.
Unplanned premium payments may be made, within limits.
Extra premium payments may be necessary to prevent lapse.
Deductions from Premium Payments
For state and local premium taxes (2.5% of premium payments).
For sales charges (3.5% of each premium paid during the first ten Policy Years;
1.5% of each premium paid thereafter).
Net Premium Payments
You direct the allocation of Net Premium payments among 16 Investment Accounts
of the Separate Account and the Fixed Account. (See rules and limits on Net
Premium payment allocations.)
Each Investment Account invests in a corresponding portfolio of a mutual fund:
<TABLE>
<S> <C>
Mutual Fund Portfolio
AUL American Series Fund, Inc. Equity Portfolio
Bond Portfolio
Managed Portfolio
Money Market Portfolio
Alger American Fund Alger American Growth Portfolio
American Century Variable Portfolios, Inc. American Century VP Capital Appreciation Portfolio
American Century VP International Portfolio
Fidelity Variable Insurance Products Fund VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP High Income Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund II VIP II Asset Manager Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
T. Rowe Price Equity Series, Inc. T. Rowe Price Equity Income Portfolio
</TABLE>
Interest is credited on amounts allocated to the Fixed Account at a minimum
guaranteed rate of 3%. (See rules and limits on transfers from the Fixed Account
allocations).
6
<PAGE>
Deductions
From Account Value
Monthly deduction for cost of insurance, administration fees and charges for any
supplemental and/or rider benefits. Administration fees are currently $30.00 per
month for the first Policy Year and $5.00 per month thereafter.
From Investment Accounts
Monthly charge at a guaranteed annual rate of 0.75% from the Investment Accounts
during the first 10 Policy Years and 0.25% thereafter. This charge is not
deducted from the Fixed Account value.
Investment advisory fees and operating expenses are deducted from the assets of
each Portfolio.
Account Value
Account Value is equal to Net Premiums, as adjusted each Valuation Date to
reflect Investment Account investment experience, interest credited on Fixed
Account value, charges deducted and other Policy transactions (such as
transfers, loans and surrenders).
Varies from day to day. There is no minimum guaranteed Account Value. The Policy
may lapse if the Net Cash Value is insufficient to cover a Monthly Deduction
due.
Can be transferred among the Investment Account and Fixed Account. A transfer
fee of $25.00 may apply if more than 12 transfers are made in a Policy Year.
Is the starting point for calculating certain values under a Policy, such as the
Cash Value, Net Cash Value and the Death Benefit used to determine Death Benefit
Proceeds.
<TABLE>
<S> <C>
Cash Benefits Death Benefits
Loans may be taken for amounts up to 90% of the Income tax free to beneficiary.
Account Value, less loan interest due on the next
Policy Anniversary and any surrender charges. Available as lump sum or under a variety of
settlement options.
Partial Surrenders generally can be made provided
there is sufficient remaining Net Cash Value. For all policies, the minimum Face Amount of $50,000.
The policy may be surrendered in full at any time Two death benefit options available: Option 1, equal to
for its Net Cash Value. A surrender charge will the Face Amount, and Option 2, equal to the Face Amount
apply during the first fifteen Policy Years after plus Account Value.
any increase in Face Amount.
Flexibility to change the death benefit option and
Settlement options are available. Face Amount.
Loans, Partial Surrenders, and Full Surrenders Any outstanding loan and loan interest is deducted
may have adverse tax consequences. from the amount payable.
Supplemental and/or rider benefits may be available.
</TABLE>
7
<PAGE>
GENERAL INFORMATION ABOUT AUL, THE SEPARATE ACCOUNT
AND THE FUNDS
AUL
The Policies are issued by AUL which is a mutual life insurance company
organized under the laws of the State of Indiana. It was originally incorporated
as a fraternal society in 1877 under the laws of the federal government, and
reincorporated under the laws of the State of Indiana in 1933. AUL is currently
licensed to transact life insurance business in 48 states and the District of
Columbia. AUL conducts a conventional life insurance, reinsurance, and annuity
business. At December 31, 1997, AUL had admitted assets of $8,597,755,587 and a
policy owners' surplus of $664,638,385.
AUL is subject to regulation by the Department of Insurance of the State of
Indiana as well as by the insurance departments of all other states and
jurisdictions in which it does business. We submit annual statements on our
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Policy described in this Prospectus are filed with and (where
required) approved by insurance officials in each state and jurisdiction in
which Policies are sold. State specific policy forms may reflect some variances
in the provisions outlined in this prospectus.
Separate Account
The Separate Account was established as a segregated investment account under
Indiana law on July 10, 1997. It is used to support the Policies and may be used
to support other variable life insurance contracts, and for other purposes
permitted by law. The Separate Account is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"). AUL has established other segregated
investment accounts, some of which also are registered with the SEC.
The Separate Account is divided into Investment Accounts. The Investment
Accounts available under the Policies invest in shares of Portfolios of the
Funds. The Separate Account may include other Investment Accounts that are not
available under the Policies and are not otherwise discussed in this Prospectus.
The assets in the Separate Account are owned by AUL.
Income, gains and losses, realized or unrealized, of an Investment Account are
credited to or charged against the Investment Account without regard to any
other income, gains or losses of AUL. Applicable insurance law provides that
assets equal to the reserves and other contract liabilities of the Separate
Account are not chargeable with liabilities arising out of any other business of
AUL. AUL is obligated to pay all benefits provided under the Policies.
The Funds
Each Fund is registered with the SEC as a diversified, open-end management
investment company under the 1940 Act, although the SEC does not supervise their
management or investment practices and policies. Each of the Funds comprises one
or more of the Portfolios and other series that may not be available under the
Policies. The investment objectives of each of the Portfolios is described
below.
AUL American Series Fund, Inc.
AUL American Equity Portfolio. The primary investment objective of the
AUL American Equity Portfolio is long-term capital appreciation. The Portfolio
seeks current investment income as a secondary objective. The Portfolio attempts
to achieve these objectives by investing primarily in equity securities selected
on the basis of fundamental investment research for their long-term growth
prospects.
AUL American Bond Portfolio. The primary investment objective of the
AUL American Bond Portfolio is to provide a high level of income consistent with
prudent investment risk. As a secondary objective, the Portfolio seeks to
provide capital appreciation to the extent consistent with the primary
objective. The Portfolio attempts to achieve these objectives by investing
primarily in corporate bonds and other debt securities.
AUL American Managed Portfolio. The investment objective of the AUL
American Managed Portfolio is to provide a high total return consistent with
prudent investment risk. The Portfolio attempts to achieve this objective
through a fully managed investment policy utilizing publicly traded common
stock, debt securities (including convertible debentures), and money market
securities.
AUL American Money Market Portfolio. The investment objective of the
AUL American Money Market Portfolio is to provide a high level of current income
while preserving assets and maintaining liquidity and investment quality. The
Portfolio attempts to achieve this objective by investing in short-term money
market instruments that are of the highest quality.
Alger American Fund
Alger American Growth Portfolio. The Alger American Growth Portfolio is
a growth portfolio that seeks to obtain long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have a total market capitalization of one billion dollars or greater.
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation Portfolio. The American
Century VP Capital Appreciation Portfolio seeks capital growth by investing
primarily in common stocks (including securities convertible into common stocks
and other equity equivalents) and other securities that meet certain fundamental
and technical standards of selection and have, in the opinion of the Portfolio's
investment manager, better than average potential for appreciation. The
Portfolio tries to stay fully invested in such securities, regardless of the
movement of prices generally.
American Century VP International Portfolio. The American Century VP
International Portfolio seeks to achieve its investment objective of capital
growth by investing primarily
8
<PAGE>
in securities of foreign companies that meet certain fundamental and technical
standards of selection and have, in the opinion of the investment manager,
potential for appreciation. The Portfolio will invest primarily in common stocks
(defined to include depository receipts for common stock and other equity
equivalents) of companies located in developed markets. Investment in securities
of foreign issuers typically involves a greater degree of risk than investment
in domestic securities.
Fidelity Variable Insurance Products Fund
VIP Equity-Income Portfolio. The VIP Equity-Income Portfolio seeks
reasonable income by investing primarily in income-producing equity securities;
the Portfolio will also consider the potential for capital appreciation.
VIP Growth Portfolio. The VIP Growth Portfolio seeks to achieve capital
appreciation. The Portfolio normally purchases common stocks, although the
Portfolio's investments are not restricted to any one type of security. Capital
appreciation may also be found in other types of securities, including bonds and
preferred stocks.
VIP High Income Portfolio. The VIP High Income Portfolio seeks to
obtain a high level of current income by investing primarily in high-yielding,
lower-rated, fixed-income securities, while also considering growth of capital.
These include securities commonly referred to as junk bonds, the risks of which
are described in the prospectus for the Fund.
VIP Money Market Portfolio. The VIP Money Market Portfolio seeks to
maintain a stable $1.00 share price and a high level of current income while
preserving capital and liquidity. The Portfolio invests its assets in
high-quality, U.S. dollar-denominated money market securities of domestic and
foreign issuers.
VIP Overseas Portfolio. The VIP Overseas Portfolio seeks long-term
growth of capital primarily through investments in foreign securities. The
Overseas Portfolio provides a means for investors to diversify their own
portfolios by participating in companies and economies outside of the United
States.
Fidelity Variable Insurance Products Fund II
VIP II Asset Manager Portfolio. The VIP II Asset Manager Portfolio seeks
high total return with reduced risk over the long-term by allocating its assets
among domestic and foreign stocks, bonds and short-term money market
instruments.
VIP II Contrafund Portfolio. The VIP II Contrafund Portfolio seeks capital
appreciation by investing primarily in securities of companies that the
investment adviser believes are not fully recognized by the public.
VIP II Index 500 Portfolio. The VIP II Index 500 Portfolio seeks to provide
investment results that correspond to the total return (i.e., the combination of
capital changes and income) of a broad range of common stocks publicly traded in
the United States. In seeking this objective, the Portfolio attempts to
duplicate the composition and total return of the Standard & Poor's Composite
Index of 500 Stocks.
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio. The T. Rowe Price Equity Income
Portfolio seeks to provide substantial dividend income as well as long-term
capital appreciation through investments in common stocks of established
companies.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
9
<PAGE>
FUND EXPENSE TABLE
The purpose of the following table is to assist investors in understanding the
various costs and expenses that Owners bear indirectly. The table reflects
expenses of the Funds for the fiscal year ended December 31, 1997. Expenses of
the Funds as shown under "Fund Annual Expenses" are not fixed or specified under
the terms of the Policy and may vary from year to year. The fees in this expense
table have been provided by the Funds and have not been independently verified
by AUL. The information contained in the table is not generally applicable to
amounts allocated to the Fixed Account or to payments under Settlement Option.
Fund Annual Expenses (as a percentage of net assets of each Fund)
<TABLE>
<S> <C> <C> <C>
Management/ Total Fund
Portfolio Advisory Fee Other Expenses Annual Expenses
AUL American Series Fund, In.
American Equity Portfolio 0.50%(1) 0.16% 0.66%
American Bond Portfolio 0.50%(1) 0.17% 0.67%
American Managed Portfolio 0.50%(1) 0.17% 0.67%
American Money Market Portfolio 0.50%(1) 0.16% 0.66%
Alger American Fund
Alger American Growth Portfolio 0.75% 0.04% 0.79%
American Century Variable Portfolios, Inc.
American Century VP Capital Appreciation Portfolio 1.00% 0.00% 1.00%
American Century VP International Portfolio 1.50% 0.00% 1.50%
Fidelity Variable Insurance Products Fund
VIP Equity-Income Portfolio 0.50% 0.08% 0.58%(2)
VIP Growth Portfolio 0.60% 0.09% 0.69%(2)
VIP High Income Portfolio 0.59% 0.12% 0.71%
VIP Money Market Portfolio 0.21%% 0.30% 0.51%
VIP Overseas Portfolio 0.75% 0.17% 0.92%(2)
Fidelity Variable Insurance Products Fund II
VIP II Asset Manager Portfolio 0.55% 0.10% 0.65%(2)
VIP II Contrafund Portfolio 0.60% 0.11% 0.71%(2)
VIP II Index 500 Portfolio 0.24% 0.04% 0.28%(3)
T. Rowe Price Equity Series, Inc.
T. Rowe Price Equity Income Portfolio 0.85% 0.00% 0.85%
<FN>
(1)AUL has currently agreed to waive its advisory fee if the ordinary
expenses of a Portfolio exceed 1% and, to the extent necessary, assume any
expenses in excess of its advisory fee so that the expenses of each Portfolio,
including the advisory fee but excluding extraordinary expenses, will not exceed
1% of the Portfolio's average daily net asset value per year. The Adviser may
terminate the policy of reducing its fee and/or assuming Fund expenses upon 30
days written notice to the Fund and such policy will be terminated automatically
by the termination of the Investment Advisory Agreement. With the exception of
the Tactical Asset Allocation Portfolio, during 1997, expenses did not exceed 1%
of the average daily net asset value.
(2) A portion of the brokerage commissions that certain funds pay was used
to reduce funds expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including these
reductions, the total operating expenses presented in the table would have been
0.57% for the Equity-Income portfolio, 0.67% for the Growth portfolio, 0.90% for
the Overseas portfolio, 0.64% for the Asset Manager portfolio, and 0.68% for the
Contrafund portfolio.
(3) Fidelity Management & Research Company agreed to reimburse a portion of
Index 500 Portfolio's expenses during the period. Without this reimbursement,
the fund's management fee, other expenses and total expenses would have been
0.27%, 0.13%, and 0.40% respectively for Index 500 Portfolio on an annualized
basis.
</FN>
</TABLE>
More detailed information concerning the investment objectives, policies, and
restrictions pertaining to the Funds and Portfolios and their expenses,
investment advisory services and charges and the risks involved with investing
in the Portfolios and other aspects of their operations can be found in the
current prospectus for each Fund or Portfolio and the current Statement of
Additional Information for each Fund or Portfolio. The prospectuses for the
Funds or Portfolios should be read carefully before any decision is made
concerning the allocation of Net Premium payments or transfers among the
Investment Accounts.
AUL has entered into agreements with the Distributors/Advisers of American
Century Variable Portfolios, Inc. and Fidelity Investments and under which AUL
has agreed to render certain services and to provide information about these
Funds to Owners who invest in these Funds. Under these agreements and for
providing these services, AUL receives compensation from the Distributor/Advisor
of these Funds ranging from zero basis points until a certain level of Fund
assets have been purchased to 15 basis points on the net average aggregate
deposits made.
AUL cannot guarantee that each Fund or Portfolio will always be available for
the Policies; but, in the unlikely event that a Fund or Portfolio is not
available, AUL will take reasonable steps to secure the availability of a
comparable fund. Shares of each Portfolio are purchased and redeemed at net
asset value, without a sales charge.
10
<PAGE>
PREMIUM PAYMENTS AND ALLOCATIONS
Applying for a Policy
AUL requires satisfactory evidence of the proposed Insured's insurability, which
may include a medical examination of the proposed Insured. The available Issue
Ages are 0 through 85 on a standard basis, and 20 through 85 on a preferred
non-tobacco user and tobacco user basis. Issue Age is determined based on the
Insured's age as of the Contract Date. Acceptance of an application depends on
AUL's underwriting rules, and AUL reserves the right to reject an application.
Coverage under the Policy is effective as of the later of the date the initial
premium is paid or the Issue Date.
As the Owner of the Policy, you may exercise all rights provided under the
Policy while the Insured is living, subject to the interests of any assignee or
irrevocable beneficiary. The Insured is the Owner, unless a different Owner is
named in the application. In accordance with the terms of the Policy, the Owner
may in the application or by Proper Notice name a contingent Owner or a new
Owner while the Insured is living. The Policy may be jointly owned by more than
one Owner. The consent of all joint Owners is required for all transactions
except when proper forms have been executed to allow one Owner to make changes.
Unless a contingent Owner has been named, on the death of the last surviving
Owner, ownership of the Policy passes to the estate of the last surviving Owner,
which then will become the Owner. A change in Owner may have tax consequences.
See "Tax Considerations."
Right to Examine Policy
You may cancel your Policy for a refund during your "right to examine" period.
This period expires 10 days after you receive your Policy (or a longer period if
required by law). We assume you receive your Policy within 5 days after the
Issue Date. If you decide to cancel the Policy, you must return it by mail or
other delivery method to the Home Office or to the authorized AUL representative
who sold it. Immediately after mailing or delivery of the Policy to AUL, the
Policy will be deemed void from the beginning. Within seven calendar days after
AUL receives the returned Policy, AUL will refund the greater of premiums paid
or the Account Value.
Premiums
The minimum initial premium payment required depends on a number of factors,
such as the Age, sex and risk class of the proposed Insured, the initial Face
Amount, any supplemental and/or rider benefits and the planned premium payments
you propose to make. Consult your AUL representative for information about the
initial premium required for the coverage you desire.
The initial premium is due on or before delivery of the Policy. There will be no
coverage until this premium is paid or until the Issue Date, whichever is later.
You may make other premium payments at any time and in any amount, subject to
the limits described in this section. The actual amount of premium payments will
affect the Account Value and the period of time the Policy remains in force.
Premium payments after the initial payment must be made to our Home Office. Each
payment must be at least equal to the minimum payment shown on the Policy Data
Page in your Policy. All premiums combined may not be more than $1,000,000,
unless a higher amount is agreed to by us.
The planned premium is the amount for which we will bill you or, in the case of
our automatic premium plan (which deducts the planned premium from your checking
account), the amount for which we will charge your account. The amount and
frequency of the planned premium are shown on the Policy Data Page in your
Policy. You may change the amount and the frequency of the planned premium by
Proper Notice. We reserve the right to change the planned premium to comply with
our rules for billing amount and frequency.
Unless otherwise indicated, premiums received in excess of planned premium will
be applied first to any loan interest due; next, to any outstanding loan
balance; and last, as additional premium.
If the payment of any premium would cause an increase in Risk Amount because of
the Minimum Insurance Percentage, we may require satisfactory evidence of
insurability before accepting it. If we accept the premium, we will allocate the
Net Premium to your Account Value on the date of our acceptance. If we do not
accept the premium, we will refund it to you.
If the payment of any premium would cause this Policy to fail to meet the
federal tax definition of a life insurance contract in accordance with the
Internal Revenue Code, we reserve the right to refund the amount to you with
interest no later than 60 days after the end of the Policy Year when we receive
the premium, but we assume no obligation to do so.
If the payment of any premium would cause the Policy to become a Modified
Endowment, we will attempt to so notify you upon allocating the premium, but we
assume no obligation to do so. In the event that we notify you, consistent with
the terms of the notice you may choose whether you want the premium refunded to
you. We reserve the right to refund any premiums that cause the Policy to become
a Modified Endowment. Upon request, we will refund the premium, with interest,
to you no later than 60 days after the end of the Policy Year in which we
receive the premium.
Planned Premiums. When applying for a Policy, you may select a plan for
paying level premium payments semi-annually or annually. If you elect, AUL will
also arrange for payment of planned premiums on a monthly basis under a
pre-authorized payment arrangement. You are not required to pay premium payments
in accordance with these plans; rather, you can pay more or less than planned,
or skip a planned premium entirely. (See, however, "Premium Payments to Prevent
Lapse" and "Guarantee Period and Required Premium for the Guarantee Period."
Each premium after the initial premium must be at least $50. AUL may increase
this minimum 90 days after we send you a written notice of such increase.
Subject to the limits described above, you can change the amount and frequency
of planned premiums whenever you want by sending Proper Notice to the Home
Office. However AUL reserves the right to limit the amount of a premium payment
or the total premium payments paid.
Premium Payments to Prevent Lapse
Failure to pay planned premiums will not necessarily cause a
11
<PAGE>
Policy to lapse. Conversely, paying all planned premiums will not guarantee that
a Policy will not lapse. The conditions that will result in your Policy lapsing
will vary depending on whether a Guarantee Period is in effect, as follows:
Grace Period. The Policy goes into default at the start of the grace
period, which is a period to make a premium payment sufficient to prevent lapse.
A Grace Period starts if the Net Cash Value on a Monthiversary will not cover
the Monthly Deduction. AUL will send notice of the grace period and the amount
required to be paid during the grace period to your last known address. The
grace period shall terminate as of the date indicated in the notice, which shall
comply with any applicable state law. Your Policy will remain in force during
the grace period. If the Insured should die during the grace period, the Death
Benefit proceeds will still be payable to the beneficiary, although the amount
paid will be equal to the Death Benefit immediately prior to the start of the
grace period, plus any benefits provided by rider, and less any outstanding loan
and loan interest and overdue Monthly Deductions and mortality and expense risk
charges as of the date of death. See "Amount of Death Benefit Proceeds." If the
grace period premium payment has not been paid before the grace period ends,
your Policy will lapse. It will have no value, and no benefits will be payable.
See "Reinstatement."
A grace period also may begin if any outstanding loan and loan interest becomes
excessive. See "Policy Loans."
Guarantee Period and Required Premium for the Guarantee Period. The
Guarantee Period is the period shown in the Policy during which the Policy will
remain in force and will not begin the grace period, if on each Monthiversary,
the sum of the premiums paid to date, less any Partial Surrenders, loans and
loan interest, equals or exceeds the Required Premium for the Guarantee Period
multiplied by the number of Policy Months since the Contract Date. If this test
fails on any Monthiversary, the continuation of insurance guarantee terminates.
The guarantee will not be reinstated.
The Required Premium for the Guarantee Period is shown on the Policy Data Page.
If you make changes to the Policy after issue, the Required Premium for
subsequent months may change. We will send you notice of the new Required
Premium. The Required Premium per $1,000 factors for the Face Amount vary by
risk class, Issue Age, and sex. Additional premiums for substandard ratings and
rider benefits are included in the Required Premium.
After the Guarantee Period. A grace period starts if the Net Cash Value
on a Monthiversary will not cover the Monthly Deduction. A premium sufficient to
keep the Contract in force must be submitted during the grace period.
Premium Allocations and Crediting
In the Policy application, you specify the percentage of a Net Premium to be
allocated to the Investment Accounts and to the Fixed Account. The sum of your
allocations must equal 100%, with at least 1% of the Net Premium payment
allocated to each account selected by you. All Net Premium allocations must be
in whole percentages. AUL reserves the right to limit the number of Investment
Accounts to which premiums may be allocated. You can change the allocation
percentages at any time, subject to these rules, by sending Proper Notice to the
Home Office, or by telephone if written authorization is on file with us. The
change will apply to the premium payments received with or after receipt of your
notice.
The initial Net Premium generally is allocated to the Fixed Account and the
Investment Accounts in accordance with your allocation instructions on the later
of the day the "right to examine" period expires, or the date we receive the
premium at our Home Office. Subsequent Net Premiums are allocated as of the end
of the Valuation Period during which we receive the premium at our Home Office.
We generally allocate all Net Premiums received prior to the Issue Date to our
general account prior to the end of the "right to examine" period. We will
credit interest daily on Net Premiums so allocated. However, we reserve the
right to allocate Net Premiums to the Fixed Account and the Investment Accounts
of the Separate Account in accordance with your allocation instructions prior to
the expiration of the "right to examine" period. If you exercise your right to
examine the Policy and cancel it by returning it to us, we will refund to you
the greater of any premiums paid or the Account Value. At the end of the "right
to examine" period, we transfer the Net Premium and interest to the Fixed
Account and the Investment Accounts of the Separate Account based on the
percentages you have selected in the application. For purposes of determining
the end of the "right to examine" period, solely as it applies to this transfer,
we assume that receipt of this Policy occurs 5 days after the Issue Date.
Premium payments requiring satisfactory evidence of insurability will not be
credited to the Policy until underwriting has been completed and the premium
payment has been accepted. If the additional premium payment is rejected, AUL
will return the premium payment immediately, without any adjustment for
investment experience.
Transfer Privilege
You may transfer amounts between the Fixed Account and Investment Accounts or
among Investment Accounts at any time after the "right to examine" period.
There currently is no minimum transfer amount, although we reserve the right to
require a $100 minimum transfer. You must transfer the minimum amount, or, if
less, the entire amount in the account from which you are transferring each time
a transfer is made. If after the transfer the amount remaining in any account is
less than $25, we have the right to transfer the entire amount. Any applicable
transfer charge will be assessed. The charge will be deducted from the
account(s) from which the transfer is made on a prorata basis.
Transfers are made such that the Account Value on the date of transfer will not
be affected by the transfer, except for the deduction of any transfer charge.
Currently, all transfers are free. On a guaranteed basis, we reserve the right
to limit the number of transfers to 12 per year, or to restrict transfers from
being made on consecutive Valuation Dates.
If we determine that the transfers made by or on behalf of one or more Owners
are to the disadvantage of other Owners, we may restrict the rights of certain
Owners. We also reserve the right to limit the size of transfers and remaining
balances, to limit the number and frequency of transfers, and to discontinue
telephone transfers.
12
<PAGE>
The first 12 transfers during each Policy Year are free. Any unused free
transfers do not carry over to the next Policy Year. We reserve the right to
assess a $25 charge for the thirteenth and each subsequent transfer during a
Policy Year. For the purpose of assessing the charge, each request (or telephone
request described below) is considered to be one transfer, regardless of the
number of Investment Accounts or the Fixed Account affected by the transfer. The
charge will be deducted from the Investment Account(s) from which the transfers
are made.
Unless AUL restricts the right of an Owner to transfer funds as stated above,
there is no limit on the number of transfers that can be made between Investment
Accounts or to the Fixed Account. There is a limit on the amount transferred
from the Fixed Account each Policy Year. See "Transfers from Fixed Account" for
restrictions.
Telephone Transfers. Telephone transfers will be based upon
instructions given by telephone, provided the appropriate election has been made
at the time of application or proper authorization has been provided to us. We
reserve the right to suspend telephone transfer privileges at any time, for any
reason, if we deem such suspension to be in the best interests of Owners.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine, and if we follow those procedures, we will not be
liable for any losses due to unauthorized or fraudulent instructions. We may be
liable for such losses if we do not follow those reasonable procedures. The
procedures we will follow for telephone transfers include requiring some form of
personal identification prior to acting on instructions received by telephone,
providing written confirmation of the transaction, and making a tape recording
of the instructions given by telephone.
Dollar Cost Averaging Program
The Dollar Cost Averaging Program, if elected, enables you to transfer
systemically and automatically, on a monthly basis, specified dollar amounts
from the AUL American Money Market Investment Account to other Investment
Accounts. By allocating on a regularly scheduled basis, as opposed to allocating
the total amount at one particular time, you may be less susceptible to the
impact of market fluctuations. However, participation in the Dollar Cost
Averaging Program does not assure a Contract Owner of greater profits from the
purchases under the Program, nor will it prevent or necessarily alleviate losses
in a declining market.
You specify the fixed dollar amount to be transferred automatically from the AUL
American Money Market Investment Account. At the time that you elect the Dollar
Cost Averaging Program, the Account Value in the AUL American Money Market
account from which transfers will be made must be at least $2,000.
You may elect this Program at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing and returning the election form. Transfers made under the
Dollar Cost Averaging Program will commence on the Monthiversary on or next
following the election.
Once elected, transfers from the AUL American Money Market Investment Account
will be processed until the value of the Investment Account is completely
depleted, or you send us Proper Notice instructing us to cancel the transfers.
Currently, transfers made under the Dollar Cost Averaging Program will not be
subject to any transfer charge and will not count against the number of free
transfers permitted in a Policy Year. We reserve the right to impose a $25
transfer charge for each transfer effected under a Dollar Cost Averaging
Program. We also reserve the right to alter the terms or suspend or eliminate
the availability of the Dollar Cost Averaging Program at any time.
Portfolio Rebalancing Program
You may elect to have the accumulated balance of each Investment Account
redistributed to equal a specified percentage of the Variable Account. This will
be done on a quarterly or annual basis from the Monthiversary on which the
Portfolio Rebalancing Program commences. If elected, this plan automatically
adjusts your Portfolio mix to be consistent with the allocation most recently
requested. The redistribution will not count toward the 12 free transfers
permitted each Policy Year. If the Dollar Cost Averaging Program has been
elected, the Portfolio Rebalancing Program will not commence until the
Monthiversary following the termination of the Dollar Cost Averaging Program.
You may elect this plan at the time of application by completing the
authorization on the application or at any time after the Policy is issued by
properly completing the election form and returning it to us. Portfolio
rebalancing will terminate when you request any transfer or the day we receive
Proper Notice instructing us to cancel the Portfolio Rebalancing Program. We do
no currently charge for this program. We reserve the right to alter the terms or
suspend or eliminate the availability of portfolio rebalancing at any time.
FIXED ACCOUNT
Because of exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933, nor has the Fixed
Account been registered as an investment company under the 1940 Act.
Accordingly, neither the Fixed Account nor any interests therein are subject to
the provisions of these Acts and, as a result, the staff of the SEC has not
reviewed the disclosure in this Prospectus relating to the Fixed Account. The
disclosure regarding the Fixed Account, may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
You may allocate some or all of the Net Premiums and transfer some or all of the
Variable Account value to the Fixed Account, which is part of our general
account and pays interest at declared rates (subject to a minimum
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interest rate we guarantee to be 3%). Our general account supports our insurance
and annuity obligations.
The portion of the Account Value allocated to the Fixed Account will be credited
with rates of interest, as described below. Since the Fixed Account is part of
our general account, we benefit from investment gain and assume the risk of
investment loss on this amount. All assets in the general account are subject to
our general liabilities from business operations.
Minimum Guaranteed and Current Interest Rates
The Account Value in the Fixed Account earns interest at one or more interest
rates determined by AUL at its discretion and declared in advance ("Current
Rate"), which are guaranteed by AUL to be at least an annual effective rate of
3% ("Guaranteed Rate"). AUL will determine a Current Rate from time to time and,
generally, any Current Rate that exceeds the Guaranteed Rate will be effective
for the Policies for a period of at least one year. We reserve the right to
change the method of crediting from time to time, provided that such changes do
not have the effect of reducing the guaranteed rate of interest. AUL bears the
investment risk for Owner's Fixed Account values and for paying interest at the
Current Rate on amounts allocated to the Fixed Account.
Calculation of the Fixed Account Value
Fixed Account value at any time is equal to amounts allocated or transferred to
the Fixed Account, plus interest credited minus amounts deducted, transferred,
or surrendered from the Fixed Account.
Transfers from the Fixed Account
The amount transferred from the Fixed Account in any Policy Year may not exceed
20% of the amount in the Fixed Account at the beginning of the Policy Year, less
any Partial Surrenders made from the Fixed Account since that date, unless the
balance after the transfer is less than $25, in which case we reserve the right
to transfer the entire amount.
Payment Deferral
We reserve the right to defer payment of any surrender, Partial Surrender, or
transfer from the Fixed Account for up to six months from the date of receipt of
the Proper Notice for the partial or full surrender or transfer. In this case,
interest on Fixed Account assets will continue to accrue at the then-current
rates of interest.
CHARGES AND DEDUCTIONS
Premium Expense Charges
Premium Tax Charge. A 2.5% charge for state and local premium taxes and
related administrative expenses is deducted from each premium payment. The state
and local premium tax charge reimburses AUL for premium taxes and related
administrative expenses associated with the Policies. AUL expects to pay an
average state and local premium tax rate (including related administrative
expenses) of approximately 2.5% of premium payments for all states, although
such tax rates range from 0% to 4%. This charge may be more or less than the
amount actually assessed by the state in which a particular Owner lives.
Sales Charge. AUL deducts a sales charge from each premium payment. The
sales charge is 3.5% of each premium paid during the first 10 Policy Years, and
1.5% of each premium paid thereafter.
Monthly Deduction
AUL will deduct Monthly Deductions on the Contract Date and on each
Monthiversary. Monthly Deductions due on the Contract Date and any
Monthiversaries prior to the Issue Date are deducted on the Issue Date. Your
Contract Date is the date used to determine your Monthiversary. The Monthly
Deduction consists of (1) cost of insurance charge, (2) monthly administrative
charge, and (3) any charges for rider benefits, as described below. The Monthly
Deduction is deducted from the Variable Account (and each Investment Account)
and Fixed Account prorata on the basis of the portion of Account Value in each
account.
Cost of Insurance Charge. This charge compensates AUL for the expense
of providing insurance coverage. The charge depends on a number of variables and
therefore will vary between Policies and from Monthiversary to Monthiversary.
The Policy contains guaranteed cost of insurance rates that may not be
increased. The guaranteed rates are no greater than the 1980 Commissioners
Standard Ordinary Non-Smoker and Smoker Mortality Tables (the "1980 CSO Tables")
(and where unisex cost of insurance rates apply, the 1980 CSO-C Tables). The
guaranteed rates for substandard classes are based on multiples of or additives
to the 1980 CSO Tables. These rates are based on the Attained Age and
underwriting class of the Insured. They are also based on the sex of the
Insured, except that unisex rates are used where appropriate under applicable
law, including in the state of Montana, and in Policies purchased by employers
and employee organizations in connection with employment-related insurance or
benefit programs. The cost of insurance rate generally increases with the
Attained Age of the Insured. As of the date of this Prospectus, we charge
"current rates" that are generally lower (i.e., less expensive) than the
guaranteed rates, and we may also charge current rates in the future. The
current rates may also vary with the Attained Age, gender, where permissible,
duration of each Face Amount segment, policy size and underwriting class of the
Insured. For any Policy, the cost of insurance on a Monthiversary is calculated
by multiplying the current cost of insurance rate for the Insured by the Risk
Amount for that Monthiversary. The Risk Amount on a Monthiversary is the
difference between the Death Benefit divided by 1.00246627 and the Account
Value. The Account Value will first be considered part of the initial Face
Amount, then part of any additional Face Amounts in the order of the increases.
The cost of insurance charge for each Face Amount segment will be determined on
each Monthiversary. AUL currently places Insureds in the following classes,
based on underwriting: Standard Tobacco User, Standard Non-Tobacco User,
Preferred Tobacco User, Preferred Non-Tobacco User. An Insured may be placed in
a substandard risk class, which involves a higher mortality risk than the
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Standard Tobacco User or Standard Non-Tobacco User classes. Standard Non-Tobacco
User rates are available for Issue Ages 0-85. Preferred Non-Tobacco and
Preferred Tobacco User rates are available for Issue Ages 20-85. The guaranteed
maximum cost of insurance rate is set forth on the Policy Data Page of your
Policy.
AUL places the Insured in a risk class when the Policy is given underwriting
approval, based on AUL's underwriting of the application. When an increase in
Face Amount is requested, AUL conducts underwriting before approving the
increase (except as noted below), and a separate risk class may apply to the
increase. If the risk class for the increase has higher guaranteed cost of
insurance rates than the existing class, the higher guaranteed rates will apply
only to the increase in Face Amount, and the existing risk class will continue
to apply to the existing Face Amount. If the risk class for the increase has
lower guaranteed cost of insurance rates than the existing class, the lower
guaranteed rates will apply to both the increase and the existing Face Amount.
Monthly Administrative Charge. The monthly administrative charge is a
level monthly charge, currently $30 during the first Policy Year, and $5
thereafter, which applies in all years. It is guaranteed not to exceed $10 after
the first Policy Year. This charge reimburses AUL for expenses incurred in the
administration of the Policies and the Separate Account. Such expenses include,
but are not limited to: underwriting and issuing the Policy, confirmations,
annual reports and account statements, maintenance of Policy records,
maintenance of Separate Account records, administrative personnel costs, mailing
costs, data processing costs, legal fees, accounting fees, filing fees, the
costs of other services necessary for Owner servicing and all accounting,
valuation, regulatory and updating requirements.
Cost of Additional Benefits Provided by Riders. The cost of additional
benefits provided by riders is charged to the Account Value on the
Monthiversary.
Mortality and Expense Risk Charge
AUL deducts this monthly charge from the Investment Accounts prorata based on
your amounts in each account. The current charge is at an annual rate of 0.75%
of Variable Account value during the first 10 Policy Years, and 0.25%
thereafter, and is guaranteed not to increase for the duration of a Policy. AUL
may realize a profit from this charge.
The mortality risk assumed is that Insureds, as a group, may live for a shorter
period of time than estimated and, therefore, the cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. AUL also
assumes the mortality risk associated with guaranteeing the Death Benefit during
the Guarantee Period. The expense risk AUL assumes is that expenses incurred in
issuing and administering the Policies and the Separate Account will exceed the
amounts realized from the monthly administrative charges assessed against the
Policies.
Surrender Charge
During the first fifteen Policy Years, a surrender charge will be deducted from
the Account Value if the Policy is completely surrendered for cash. The total
surrender charge will not exceed the maximum surrender charge set forth in the
Policy. The surrender charge is equivalent to 100% of the base coverage target
premium for Policy Years 1 through 5, reducing thereafter by 10% annually
through Policy Year 15.
The surrender charge on the date of reinstatement of a Policy will be based on
the number of Policy Years from the original Contract Date. For purposes of
determining the surrender charge on any date after reinstatement, the period the
Policy was lapsed will be credited to the total Policy period.
The table below shows the surrender charge (which is a percentage of target
premium) deducted if the Policy is completely surrendered during the first
fifteen Policy Years.
Table of Surrender Charges
Policy Year Surrender Charge
1 100%
2 100%
3 100%
4 100%
5 100%
6 90%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15 0%
Taxes
AUL does not currently assess a charge for any taxes other than state premium
taxes incurred as a result of the establishment, maintenance, or operation of
the Investment Accounts of the Separate Account. We reserve the right, however,
to assess a charge for such taxes against the Investment Accounts if we
determine that such taxes will be incurred.
Special Uses
We may agree to reduce or waive the surrender charge or the Monthly Deduction,
or credit additional amounts under the Policies in situations where selling
and/or maintenance costs associated with the Policies are reduced, such as the
sale of several Policies to the same Owner(s), sales of large Policies, sales of
Policies in connection with a group or sponsored arrangement or mass
transactions over multiple Policies.
In addition, we may agree to reduce or waive some or all of these charges and/or
credit additional amounts under the Policies for those Policies sold to persons
who meet criteria established by us, who may include current and retired
officers, directors and employees of us and our affiliates. We may also agree to
waive minimum premium requirements for such persons.
We will only reduce or waive such charges or credit additional amounts on any
Policies where expenses associated with the sale of the Policy and/or costs
associated with administering and maintaining the Policy are reduced. We reserve
the right to terminate waiver/reduced charge and crediting programs at any time,
including those for previously issued Policies.
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Fund Expenses
Each Investment Account of the Separate Account purchases shares at the net
asset value of the corresponding Portfolio. The net asset value reflects the
investment advisory fee and other expenses that are deducted from the assets of
the Portfolio. The advisory fees and other expenses are not fixed or specified
under the terms of the Policy and are described in the Funds' prospectuses.
HOW YOUR ACCOUNT VALUES VARY
There is no minimum guaranteed Account Value, Cash Value or Net Cash Value.
These values will vary with the investment performance of the Investment
Accounts and/or the crediting of interest in the Fixed Account, and will depend
on the allocation of Account Value. If the Net Cash Value on a Monthiversary is
less than the amount of the Monthly Deduction to be deducted on that date and
the Guarantee Period is not then in effect, the Policy will be in default and a
grace period will begin. See "Premium Payments to Prevent Lapse."
Determining the Account Value
On the Contract Date, the Account Value is equal to the initial Net
Premium less the Monthly Deductions deducted as of the Contract Date. On each
Valuation Day thereafter, the Account Value is the aggregate of the Variable
Account value, the Fixed Account value, and the Loan Account value. Account
Value may be significantly affected on days when the New York Stock Exchange is
open for trading but we are closed for business, and you will not have access to
Cash Value on those days. The Account Value will vary to reflect the performance
of the Investment Accounts to which amounts have been allocated, interest
credited on amounts allocated to the Fixed Account, interest credited on amounts
in the Loan Account, charges, transfers, Partial Surrenders, loans and loan
repayments.
Variable Account Value. When you allocate an amount to an Investment
Account, either by Net Premium payment allocation or by transfer, your Policy is
credited with accumulation units in that Investment Account. The number of
accumulation units credited is determined by dividing the amount allocated to
the Investment Account by the Investment Account's accumulation unit value at
the end of the Valuation Period during which the allocation is effected. The
Variable Account value of the Policy equals the sum, for all Investment
Accounts, of the accumulation units credited to an Investment Account multiplied
by that Investment Account's accumulation unit value.
The number of Investment Account accumulation units credited to your Policy will
increase when Net Premium payments are allocated to the Investment Account and
when amounts are transferred to the Investment Account. The number of Investment
Account accumulation units credited to a Policy will decrease when the allocated
portion of the Monthly Deduction and mortality and expense charge are taken from
the Investment Account, a loan is made, an amount is transferred from the
Investment Account, or a Partial Surrender is taken from the Investment Account.
Accumulation Unit Values. An Investment Account's accumulation unit
value is determined on each Valuation Date and varies to reflect the investment
experience of the underlying Portfolio. It may increase, decrease, or remain the
same from Valuation Period to Valuation Period. The accumulation unit value for
the Money Market Investment Accounts were initially set at $1, and the
accumulation unit value for each of the other Investment Accounts was
arbitrarily set at $5 when each Investment Account was established. For each
Valuation Period after the date of establishment, the accumulation unit value is
determined by multiplying the value of an accumulation unit for an Investment
Account for the prior Valuation Period by the net investment factor for the
Investment Account for the current Valuation Period.
Net Investment Factor. The net investment factor is used to measure the
investment performance of an Investment Account from one Valuation Period to the
next. For any Investment Account, the net investment factor for a Valuation
Period is determined by dividing (a) by (b), where:
(a) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the current Valuation
Period; plus
2. the per share amount of any dividend or capital gain distribution
paid by the Portfolio during the Valuation Period; plus
3. the per share credit or charge with respect to taxes, if any,
paid or reserved for by AUL during the Valuation Period that are
determined by AUL to be attributable to the operation of the
Investment Account; and
(b) is equal to:
1. the net asset value per share of the Portfolio held in the
Investment Account determined at the end of the preceding
Valuation Period; plus
2. the per share credit or charge for any taxes reserved for the
immediately preceding Valuation Period.
Fixed Account Value. On any Valuation Date, the Fixed Account value of
a Policy is the total of all Net Premium payments allocated to the Fixed
Account, plus any amounts transferred to the Fixed Account, plus interest
credited on such Net Premium payments and amounts transferred, less the amount
of any transfers from the Fixed Account, less the amount of any Partial
Surrenders taken from the Fixed Account, and less the prorata portion of the
Monthly Deduction charged against the Fixed Account.
Loan Account Value. On any Valuation Date, if there have been any
Policy loans, the Loan Account value is equal to amounts transferred to the Loan
Account from the Investment Accounts and from the Fixed Account as collateral
for Policy loans and for due and unpaid loan interest, less amounts transferred
from the Loan Account to the Investment Accounts and the Fixed Account as
outstanding loans and loan interest are repaid, and plus interest credited to
the Loan Account.
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Cash Value and Net Cash Value
The Cash Value on a Valuation Date is the Account Value less any applicable
surrender charges. The Net Cash Value on a Valuation Date is the Cash Value
reduced by any outstanding loans and loan interest. Net Cash Value is used to
determine whether a grace period starts. See "Premium Payments to Prevent
Lapse." It is also the amount that is available upon full surrender of the
Policy. See "Surrendering the Policy for Net Cash Value."
DEATH BENEFIT AND CHANGES IN FACE AMOUNT
As long as the Policy remains in force, AUL will pay the Death Benefit Proceeds
upon receipt at the Home Office of satisfactory proof of the Insured's death.
AUL may require return of the Policy. The Death Benefit Proceeds may be paid in
a lump sum, generally within seven calendar days of receipt of satisfactory
proof (see "When Proceeds Are Paid"), or in any other way agreeable to you and
us. Before the Insured dies, you may choose how the proceeds are to be paid. If
you have not made a choice before the Insured dies, the beneficiary may choose
how the proceeds are paid. The Death Benefit Proceeds will be paid to the
beneficiary. See "Selecting and Changing the Beneficiary."
Amount of Death Benefit Proceeds
The Death Benefit Proceeds are equal to the sum of the Death Benefit in force as
of the end of the Valuation Period during which death occurs, plus any rider
benefits, minus any outstanding loan and loan interest on that date. If the date
of death occurs during a grace period, the Death Benefit will still be payable
to the beneficiary, although the amount will be equal to the Death Benefit
immediately prior to the start of the grace period, plus any benefits provided
by rider, and less any outstanding loan and loan interest and overdue Monthly
Deductions and mortality and expense risk charges as of the date of death. Under
certain circumstances, the amount of the Death Benefit may be further adjusted.
See "Limits on Rights to Contest the Policy" and "Changes in the Policy or
Benefits."
If part or all of the Death Benefit Proceeds is paid in one sum, AUL will pay
interest on this sum if required by applicable state law from the date of the
Insured's death to the date of payment.
Death Benefit Options
The Owner may choose one of two Death Benefit options. Under Option 1, the Death
Benefit is the greater of the Face Amount or the Applicable Percentage (as
described below) of Account Value on the date of the Insured's death. Under
Option 2, the Death Benefit is the greater of the Face Amount plus the Account
Value on the date of death, or the Applicable Percentage of the Account Value on
the date of the Insured's death.
If investment performance is favorable, the amount of the Death Benefit may
increase. However, under Option 1, the Death Benefit ordinarily will not change
for several years to reflect any favorable investment performance and may not
change at all. Under Option 2, the Death Benefit will vary directly with the
investment performance of the Account Value. To see how and when investment
performance may begin to affect the Death Benefit, see "Illustrations of Account
Values, Cash Values, Death Benefits and Accumulated Premium Payments."
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Applicable Percentages of Account Value
Attained Age Percentage Attained Age Percentage Attained Age Percentage Attained Age Percentage
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
95+ 100
</TABLE>
Initial Face Amount and Death Benefit Option
The initial Face Amount is set at the time the Policy is issued. You may change
the Face Amount from time to time, as discussed below. You select the Death
Benefit option when you apply for the Policy. You also may change the Death
Benefit option, as discussed below. We reserve the right, however, to decline
any change which might disqualify the Policy as life insurance under federal tax
law.
Changes in Death Benefit Option
Beginning one year after the Contract Date, as long as the Policy is not in the
grace period, you may change the Death Benefit option on your Policy subject to
the following rules. If you request a change from Death Benefit Option 2 to
Death Benefit Option 1, the Face Amount will be increased by the amount of the
Account Value on the date of change. The change will be effective on the
Monthiversary following our receipt of Proper Notice.
If you request a change from Death Benefit Option 1 to Death Benefit Option 2,
the Face Amount will be decreased by the amount of the Account Value on the date
of change. We may require satisfactory evidence of insurability. The change will
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<PAGE>
be effective on the Monthiversary following our approval of the change. We will
not permit a change which would decrease the Face Amount below $50,000.
Changes in Face Amount
Beginning one year after the Contract Date, as long as the Policy is not in the
grace period, you may request a change in the Face Amount. If a change in the
Face Amount would result in total premiums paid exceeding the premium
limitations prescribed under current tax law to qualify your Policy as a life
insurance contract, AUL will refund, after the next Monthiversary, the amount of
such excess above the premium limitations. Changes in Face Amount may cause the
Policy to be treated as a Modified Endowment for federal tax purposes.
AUL reserves the right to decline a requested decrease in the Face Amount if
compliance with the guideline premium limitations under current tax law would
result in immediate termination of the Policy, payments would have to be made
from the Cash Value for compliance with the guideline premium limitations, and
the amount of such payments would exceed the Net Cash Value under the Policy.
The Face Amount after any decrease must be at least $50,000. A decrease in Face
Amount will become effective on the Monthiversary that next follows receipt of
Proper Notice of a request.
Decreasing the Face Amount of the Policy may have the effect of decreasing
monthly cost of insurance charges. If you have made any increases to the Face
Amount, the decrease will first be applied to reduce those increases, starting
with the most recent increase. The decrease will not cause a decrease in either
the Required Premium for the Guarantee Period or the surrender charge.
Any increase in the Face Amount must be at least $5,000 (unless otherwise
provided by rider), and an application must be submitted. AUL reserves the right
to require satisfactory evidence of insurability. In addition, the Insured's
Attained Age must be less than the current maximum Issue Age for the Policies,
as determined by AUL from time to time. A change in planned premiums may be
advisable. See "Premiums." The increase in Face Amount will become effective on
the Monthiversary on or next following our approval of the increase.
For purposes of calculating cost of insurance charges, any Face Amount decrease
will be used to reduce any previous Face Amount increase then in effect,
starting with the latest increase and continuing in the reverse order in which
the increases were made. If any portion of the decrease is left after all Face
Amount increases have been reduced, it will be used to reduce the initial Face
Amount.
Selecting and Changing the Beneficiary
You select the beneficiary in your application. You may select more than one
beneficiary. You may later change the beneficiary in accordance with the terms
of the Policy. The primary beneficiary, or, if the primary beneficiary is not
living, the contingent beneficiary, is the person entitled to receive the Death
Benefit Proceeds under the Policy. If the Insured dies and there is no surviving
beneficiary, the Owner (or the Owner's estate if the Owner is the Insured) will
be the beneficiary. If a beneficiary is designated as irrevocable, then the
beneficiary's written consent must be obtained to change the beneficiary.
CASH BENEFITS
Policy Loans
Prior to the death of the Insured, you may borrow against your Policy by
submitting Proper Notice to the Home Office at any time after the end of the
"right to examine" period while the Policy is not in the grace period. The
Policy is assigned to us as the sole security for the loan. The minimum amount
of a new loan is $500. The maximum amount of a new loan is:
1. 90% of the Account Value; less
2. any loan interest due on the next Policy Anniversary; less
3. any applicable surrender charges; less
4. any existing loans and accrued loan interest.
Outstanding loans reduce the amount available for new loans. Policy loans will
be processed as of the date your written request is received and approved. Loan
proceeds generally will be sent to you within seven calendar days. See "When
Proceeds Are Paid."
Interest. AUL will charge interest on any outstanding loan at an annual
rate of 6.0%. Interest is due and payable on each Policy Anniversary while a
loan is outstanding. If interest is not paid when due, the amount of the
interest is added to the loan and becomes part of the loan.
Loan Collateral. When a Policy loan is made, an amount sufficient to
secure the loan is transferred out of the Investment Accounts and the Fixed
Account and into the Policy's Loan Account. Thus, a loan will have no immediate
effect on the Account Value, but the Net Cash Value will be reduced immediately
by the amount transferred to the Loan Account. The Owner can specify the
Investment Accounts from which collateral will be transferred. If no allocation
is specified, collateral will be transferred from each Investment Account and
from the Fixed Account in the same proportion that the Account Value in each
Investment Account and the Fixed Account bears to the total Account Value in
those accounts on the date that the loan is made. Due and unpaid interest will
be transferred each Policy Anniversary from each Investment Account and the
Fixed Account to the Loan Account in the same proportion that each Investment
Account value and the Fixed Account bears to the total unloaned Account Value.
The amount we transfer will be the amount by which the interest due exceeds the
interest which has been credited on the Loan Account.
The Loan Account will be credited with interest daily at an effective annual
rate of not less than 4.0%. Thus, the maximum net cost of a loan is 2.0% per
year (the net cost of a loan is the difference between the rate of interest
charged on indebtedness and the amount credited to the Loan Account).
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Beginning in the eleventh Policy Year, the amount in the Loan Account securing
the loan will be credited with interest at an effective annual rate in excess of
the minimum guaranteed rate (currently, 5.0%). Thus, the current net cost of the
loan is 1.0% per year. Any interest credited in excess of the minimum guaranteed
rate is not guaranteed.
Loan Repayment; Effect if Not Repaid. You may repay all or part of your
loan at any time while the Insured is living and the Policy is in force. Loan
repayments must be sent to the Home Office and will be credited as of the date
received. A loan repayment must be clearly marked as "loan repayment" or it will
be credited as a premium, unless the premium would cause the Policy to fail to
meet the federal tax definition of a life insurance contract in accordance with
the Internal Revenue Code. Loan repayments, unlike premium payments, are not
subject to premium expense charges. When a loan repayment is made, Account Value
in the Loan Account in an amount equivalent to the repayment is transferred from
the Loan Account to the Investment Accounts and the Fixed Account. Thus, a loan
repayment will have no immediate effect on the Account Value, but the Net Cash
Value will be increased immediately by the amount of the loan repayment. Loan
repayment amounts will be transferred to the Investment Accounts and the Fixed
Account according to the premium allocation instructions in effect at that time.
If the Death Benefit becomes payable while a loan is outstanding, any
outstanding loan and loan interest will be deducted in calculating the Death
Benefit Proceeds. See "Amount of Death Benefit Proceeds."
If the Monthly Deduction exceeds the Net Cash Value on any Monthiversary when
the Guarantee Period is not in force, the Policy will be in default. You will be
sent notice of the default. You will have a grace period within which you may
submit a sufficient payment to avoid termination of coverage under the Policy.
The notice will specify the amount that must be repaid to prevent termination.
See "Premium Payments to Prevent Lapse."
Effect of Policy Loan. A loan, whether or not repaid, will have a
permanent effect on the Death Benefit and Policy values because the investment
results of the Investment Accounts of the Separate Account and current interest
rates credited on Account Value in the Fixed Account will apply only to the
non-loaned portion of the Account Value. The longer the loan is outstanding, the
greater the effect is likely to be. Depending on the investment results of the
Investment Accounts while the loan is outstanding, the effect could be favorable
or unfavorable. Policy loans may increase the potential for lapse if investment
results of the Investment Accounts are less than anticipated. Also, loans could,
particularly if not repaid, make it more likely than otherwise for a Policy to
terminate. See "Tax Considerations" for a discussion of the tax treatment of
Policy loans, and the adverse tax consequences if a Policy lapses with loans
outstanding. In particular, if your Policy is a Modified Endowment, loans may be
currently taxable and subject to a 10% penalty tax.
Surrendering the Policy for Net Cash Value
You may surrender your Policy at any time for its Net Cash Value by submitting
Proper Notice to us. AUL may require return of the Policy. A surrender charge
may apply. See "Surrender Charge." A surrender request will be processed as of
the date your written request and all required documents are received. Payment
will generally be made within seven calendar days. See "When Proceeds are Paid."
The Net Cash Value may be taken in one lump sum or it may be applied to a
settlement option. See "Settlement Options." The Policy will terminate and cease
to be in force if it is surrendered for one lump sum or applied to a settlement
option. It cannot later be reinstated. Surrenders may have adverse tax
consequences. See "Tax Considerations."
Partial Surrenders
You may make Partial Surrenders under your Policy of at least $500 at any time
after the end of the "right to examine" period by submitting Proper Notice to
us. As of the date AUL receives Proper Notice for a Partial Surrender, the
Account Value and, therefore, the Cash Value will be reduced by the Partial
Surrender.
When you request a Partial Surrender, you can direct how the Partial Surrender
will be deducted from the Investment Accounts. If you provide no directions, the
Partial Surrender will be deducted from your Account Value in the Investment
Accounts and Fixed Account on a prorata basis. Partial Surrenders may have
adverse tax consequences. See "Tax Considerations."
AUL will reduce the Face Amount by an amount equal to the Partial Surrender. AUL
will reject a Partial Surrender request if the Partial Surrender would reduce
the Face Amount below $50,000, or if the Partial Surrender would cause the
Policy to fail to qualify as a life insurance contract under applicable tax
laws, as interpreted by AUL.
Partial Surrender requests will be processed as of the date your written request
is received, and generally will be paid within seven calendar days. See "When
Proceeds Are Paid."
Settlement Options
At the time of surrender or death, the Policy offers various options of
receiving proceeds payable under the Policy. These settlement options are
summarized below. All of these options are forms of fixed-benefit annuities
which do not vary with the investment performance of a separate account. Any
representative authorized to sell this Policy can further explain these options
upon request.
You may apply proceeds of $2,000 or more which are payable under this Policy to
any of the following options:
Option 1 - Income for a Fixed Period. Proceeds are payable in equal
monthly installments for a specified number of years, not to exceed 20.
Option 2 - Life Annuity. Proceeds are paid in equal monthly
installments for as long as the payee lives. A number of payments can be
guaranteed, such as 120, or the number of payments required to refund the
proceeds applied.
Option 3 - Survivorship Annuity. Proceeds are paid in monthly
installments for as long as either the first payee or surviving payee lives. A
number of payments equal to the initial payment can be guaranteed, such as 120.
A different monthly installment payable to the surviving payee can be
19
<PAGE>
specified. Any other method or frequency of payment we agree to may be used to
pay the proceeds of this Policy.
Policy proceeds payable in one sum will accumulate at interest from the date of
death or surrender to the payment date at the rate of interest then paid by us
or at the rate specified by statute, whichever is greater. Based on the
settlement option selected, we will determine the amount payable. The minimum
interest rate used in computing payments under all options will be 3% per year.
You may select or change an option by giving Proper Notice prior to the
settlement date. If no option is in effect on the settlement date, the payee may
select an option. If this Policy is assigned or if the payee is a corporation,
association, partnership, trustee or estate, a settlement option will be
available only with our consent.
If a payee dies while a settlement option is in effect, and there is no
surviving payee, we will pay a single sum to such payee's estate. The final
payment will be the commuted value of any remaining guaranteed payments.
Settlement option payments will be exempt from the claims of creditors to the
maximum extent permitted by law.
Minimum Amounts. AUL reserves the right to pay the total amount of the
Policy in one lump sum, if less than $2,000. If monthly payments are less than
$100, payments may be made less frequently at AUL's option.
The proceeds of this Policy may be paid in any other method or frequency of
payment acceptable to us.
Specialized Uses of the Policy
Because the Policy provides for an accumulation of Cash Value as well as a Death
Benefit, the Policy can be used for various individual and business financial
planning purposes. Purchasing the Policy in part for such purposes entails
certain risks. For example, if the investment performance of Investment Accounts
to which Variable Account value is allocated is poorer than expected or if
sufficient premiums are not paid, the Policy may lapse or may not accumulate
sufficient Variable Account value to fund the purpose for which the Policy was
purchased. Partial Surrenders and Policy loans may significantly affect current
and future Account Value, Net Cash Value, or Death Benefit Proceeds. Depending
upon Investment Account investment performance and the amount of a Policy loan,
the loan may cause a Policy to lapse. Because the Policy is designed to provide
benefits on a long-term basis, before purchasing a Policy for a specialized
purpose a purchaser should consider whether the long-term nature of the Policy
is consistent with the purpose for which it is being considered. Using a Policy
for a specialized purpose may have tax consequences. See "Tax Considerations."
Life Insurance Retirement Plans
Any Owners or applicants who wish to consider using the Policy as a funding
vehicle for (non-qualified) retirement purposes may obtain additional
information from us. An Owner could pay premiums under a Policy for a number of
years, and upon retirement, could utilize a Policy's loan and partial withdrawal
features to access Account Value as a source of retirement income for a period
of time. This use of a Policy does not alter an Owner's rights or our
obligations under a Policy; the Policy would remain a life insurance contract
that, so long as it remains in force, provides for a Death Benefit payable when
the Insured dies.
Illustrations are available upon request that portray how the Policy can be used
as a funding vehicle for (non-qualified) retirement plans, referred to herein as
"life insurance retirement plans," for individuals. Illustrations provided upon
request show the effect on Account Value, Cash Value, and the net Death Benefit
of premiums paid under a Policy and partial withdrawals and loans taken for
retirement income; or reflecting allocation of premiums to specified Investment
Accounts. This information will be portrayed at hypothetical rates of return
that are requested. Charts and graphs presenting the results of the
illustrations or a comparison of retirement strategies will also be furnished
upon request. Any graphic presentations and retirement strategy charts must be
accompanied by a corresponding illustration; illustrations must always include
or be accompanied by comparable information that is based on guaranteed cost of
insurance rates and that presents a hypothetical gross rate of return of 0%.
Retirement illustrations will not be furnished with a hypothetical gross rate of
return in excess of 12%.
The hypothetical rates of return in illustrations are illustrative only and
should not be interpreted as a representation of past or future investment
results. Policy values and benefits shown in the illustrations would be
different if the gross annual investment rates of return were different from the
hypothetical rates portrayed, if premiums were not paid when due, and whether
loan interest was paid when due. Withdrawals or loans may have an adverse effect
on Policy benefits.
Risks of Life Insurance Retirement Plans
Using your Policy as a funding vehicle for retirement income purposes presents
several risks, including the risk that if your Policy is insufficiently funded
in relation to the income stream expected from your Policy, your Policy can
lapse prematurely and result in significant income tax liability to you in the
year in which the lapse occurs. Other risks associated with borrowing from your
Policy also apply. Loans will be automatically repaid from the gross Death
Benefit at the death of the Insured, resulting in the estimated payment to the
beneficiary of the net Death Benefit, which will be less than the gross Death
Benefit and may be less than the Face Amount. Upon surrender, the loan will be
automatically repaid, resulting in the payment to you of the Net Cash Value.
Similarly, upon lapse, the loan will be automatically repaid, and the Policy
will terminate without value. Upon surrender, the loan will be automatically
repaid. The automatic repayment of the loan upon lapse or surrender will cause
the recognition of taxable income to the extent that Net Cash Value plus the
amount of the repaid loan exceeds your basis in the Policy. Thus, under certain
circumstances, surrender or lapse of your Policy could result in tax liability
to you. In addition, to reinstate a lapsed Policy, you would be required to make
certain payments. Thus, you should be careful to design a life insurance
retirement plan so that your Policy will not lapse prematurely under various
market scenarios as a result of withdrawals and loans taken from your Policy.
20
<PAGE>
To avoid lapse of your Policy, it is important to design a payment stream that
does not leave your Policy with insufficient Net Cash Value. Determinations as
to the amount to withdraw or borrow each year warrant careful consideration.
Careful consideration should also be given to any assumptions respecting the
hypothetical rate of return, to the duration of withdrawals and loans, and to
the amount of Account Value that should remain in your Policy upon its maturity.
Poor investment performance can contribute to the risk that your Policy may
lapse. In addition, the cost of insurance generally increases with the age of
the Insured, which can further erode existing Net Cash Value and contribute to
the risk of lapse.
Further, interest on a Policy loan is due to us for any Policy Year on the
Policy Anniversary. If this interest is not paid when due, it is added to the
amount of the outstanding loans and loan interest, and interest will begin
accruing thereon from that date. This can have a compounding effect, and to the
extent that the outstanding loan balance exceeds your basis in the Policy, the
amounts attributable to interest due on the loans can add to your federal (and
possibly state) income tax liability.
You should consult with your financial and tax advisers in designing a life
insurance retirement plan that is suitable for your particular needs. Further,
you should continue to monitor the Net Cash Value remaining in a Policy to
assure that the Policy is sufficiently funded to continue to support the desired
income stream and so that it will not lapse. In this regard, you should consult
your periodic statements to determine the amount of the remaining Net Cash
Value. Illustrations showing the effect of charges under the Policy upon
existing Account Value or the effect of future withdrawals or loans upon the
Policy's Account Value and Death Benefit are available from your representative.
Consideration should be given periodically to whether the Policy is sufficiently
funded so that it will not lapse prematurely.
Because of the potential risks associated with borrowing from a Policy, use of
the Policy in connection with a life insurance retirement plan may not be
suitable for all Owners. These risks should be carefully considered before
borrowing from the Policy to provide an income stream.
ILLUSTRATIONS OF ACCOUNT VALUES, CASH VALUES, DEATH BENEFITS
AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how certain
values under a Policy change with investment performance over an extended period
of time. The tables illustrate how Account Values, Cash Values and Death
Benefits under a Policy covering an Insured of a given age on the Policy Date
would vary over time if planned premium payments were paid annually and the
return on the assets in each of the Funds were an assumed uniform gross annual
rate of 0%, 6% and 12%. The values would be different from those shown if the
returns averaged 0%, 6% or 12% but fluctuated over and under those averages
throughout the years shown. The tables also show planned premiums accumulated at
5% interest compounded annually. The hypothetical investment rates of return are
illustrative only and should not be deemed a representation of past or future
investment rates of return. The tables may be deemed to be "forward looking
statements," and are based on certain assumptions. Actual performance under the
Policy may differ materially from performance described in the tables. Actual
rates of return for a particular Policy may be more or less than the
hypothetical investment rates of return and will depend on a number of factors,
including the investment allocations made by an Owner. These illustrations
assume that Net Premiums are allocated equally among the 16 Investment Accounts
available under the Policy, and that no amounts are allocated to the Fixed
Account. These illustrations also assume that no Policy loans have been made and
that the premium is paid at the beginning of each Policy Year. Values would be
different if the premiums are paid with a different frequency or in different
amounts.
The illustrations reflect the fact that the net investment return on the assets
held in the Investment Accounts is lower than the gross return of the selected
Portfolios. The tables assume an average annual expense ratio of approximately
0.76% of the average daily net assets of the Portfolios available under the
Policies. This average annual expense ratio is based on the expense ratios of
each of the Portfolios for the last fiscal year, adjusted, as appropriate, for
any material changes in expenses effective for the current fiscal year of a
Portfolio. For information on the Portfolios' expenses, see the prospectuses for
the Funds and Portfolios.
The illustrations also reflect the deduction of the premium expense charge, the
Monthly Deduction and the mortality and expense risk charge. AUL has the
contractual right to charge the guaranteed maximum charges. The current charges
and, alternatively, the guaranteed charges are reflected in separate
illustrations on each of the following pages. All the illustrations reflect the
fact that no tax charges other than the premium tax charge are currently made
against the Separate Account and assume no indebtedness or charges for rider
benefits.
The illustrations are based on AUL's sex distinct rates. Upon request, an Owner
will be furnished with a comparable illustration based upon the proposed
Insured's individual circumstances. Such illustrations may assume different
hypothetical rates of return than those illustrated in the following tables, and
also may reflect allocation of premiums to specified Investment Accounts. Such
illustrations will reflect the expenses of the Portfolios in which such
Investment Accounts invest. We may make a reasonable charge to provide such
illustrations.
21
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM ADJUSTABLE
VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 40 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 1
VARIABLE INVESTMENT $6,000 ANNUAL PREMIUM USING CURRENT CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 6,300 500,000 500,000 500,000 4,298 4,594 4,890 0 0 0
2 12,915 500,000 500,000 500,000 8,783 9,653 10,559 3,873 4,743 5,649
3 19,861 500,000 500,000 500,000 13,153 14,890 16,771 8,243 9,980 11,861
4 27,154 500,000 500,000 500,000 17,405 20,308 23,581 12,495 15,398 18,671
5 34,811 500,000 500,000 500,000 21,535 25,913 31,047 16,625 21,003 26,137
6 42,852 500,000 500,000 500,000 25,538 31,706 39,234 21,119 27,287 34,815
7 51,295 500,000 500,000 500,000 29,412 37,692 48,216 25,484 33,764 44,288
8 60,159 500,000 500,000 500,000 33,155 43,879 58,079 29,718 40,442 54,642
9 69,467 500,000 500,000 500,000 36,762 50,270 68,912 33,816 47,324 65,966
10 79,241 500,000 500,000 500,000 40,228 56,870 80,818 37,773 54,415 78,363
11 89,503 500,000 500,000 500,000 43,885 64,128 94,510 41,921 62,164 92,546
12 100,278 500,000 500,000 500,000 47,393 71,654 109,645 45,920 70,181 108,172
13 111,592 500,000 500,000 500,000 50,736 79,446 126,379 49,754 78,464 125,397
14 123,471 500,000 500,000 500,000 53,897 87,507 144,890 53,406 87,016 144,399
15 135,945 500,000 500,000 500,000 56,861 95,840 165,383 56,861 95,840 165,383
16 149,042 500,000 500,000 500,000 59,613 104,449 188,089 59,613 104,449 188,089
17 162,794 500,000 500,000 500,000 62,141 113,344 213,275 62,141 113,344 213,275
18 177,234 500,000 500,000 500,000 64,438 122,541 241,251 64,438 122,541 241,251
19 192,396 500,000 500,000 500,000 66,484 132,046 272,359 66,484 132,046 272,359
20 208,316 500,000 500,000 500,000 68,254 141,864 306,992 68,254 141,864 306,992
21 225,031 500,000 500,000 500,000 69,575 151,876 345,538 69,575 151,876 345,538
22 242,583 500,000 500,000 500,000 70,550 162,199 388,584 70,550 162,199 388,584
23 261,012 500,000 500,000 550,001 71,132 172,829 436,509 71,132 172,829 436,509
24 280,363 500,000 500,000 607,041 71,270 183,765 489,549 71,270 183,765 489,549
25 300,681 500,000 500,000 668,870 70,919 195,017 548,254 70,919 195,017 548,254
26 322,015 500,000 500,000 735,894 70,034 206,600 613,245 70,034 206,600 613,245
27 344,415 500,000 500,000 815,285 68,571 218,539 685,114 68,571 218,539 685,114
28 367,936 500,000 500,000 902,212 66,487 230,867 764,587 66,487 230,867 764,587
29 392,633 500,000 500,000 997,388 63,722 243,617 852,468 63,722 243,617 852,468
30 418,565 500,000 500,000 1,101,585 60,194 256,818 949,642 60,194 256,818 949,642
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, current cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $5.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
22
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C>
MALE ISSUE AGE: 40 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 1
VARIABLE INVESTMENT $6,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 6,300 500,000 500,000 500,000 4,034 4,321 4,609 0 0 0
2 12,915 500,000 500,000 500,000 8,170 9,004 9,873 3,260 4,094 4,963
3 19,861 500,000 500,000 500,000 12,164 13,815 15,606 7,254 8,905 10,696
4 27,154 500,000 500,000 500,000 16,010 18,753 21,849 11,100 13,843 16,939
5 34,811 500,000 500,000 500,000 19,701 23,816 28,651 14,791 18,906 23,741
6 42,852 500,000 500,000 500,000 23,228 28,998 36,060 18,809 24,579 31,641
7 51,295 500,000 500,000 500,000 26,584 34,299 44,138 22,656 30,371 40,210
8 60,159 500,000 500,000 500,000 29,764 39,718 52,951 26,327 36,281 49,514
9 69,467 500,000 500,000 500,000 32,757 45,250 62,572 29,811 42,304 59,626
10 79,241 500,000 500,000 500,000 35,555 50,890 73,082 33,100 48,435 70,627
11 89,503 500,000 500,000 500,000 38,455 57,041 85,125 36,491 55,077 83,161
12 100,278 500,000 500,000 500,000 41,127 63,324 98,361 39,654 61,851 96,888
13 111,592 500,000 500,000 500,000 43,545 69,720 112,912 42,563 68,738 111,930
14 123,471 500,000 500,000 500,000 45,675 76,209 128,916 45,184 75,718 128,425
15 135,945 500,000 500,000 500,000 47,489 82,773 146,539 47,489 82,773 146,539
16 149,042 500,000 500,000 500,000 48,955 89,393 165,970 48,955 89,393 165,970
17 162,794 500,000 500,000 500,000 50,045 96,054 187,430 50,045 96,054 187,430
18 177,234 500,000 500,000 500,000 50,739 102,748 211,187 50,739 102,748 211,187
19 192,396 500,000 500,000 500,000 50,992 109,451 237,535 50,992 109,451 237,535
20 208,316 500,000 500,000 500,000 50,752 116,128 266,815 50,752 116,128 266,815
21 225,031 500,000 500,000 500,000 49,959 122,743 299,427 49,959 122,743 299,427
22 242,583 500,000 500,000 500,000 48,547 129,256 335,847 48,547 129,256 335,847
23 261,012 500,000 500,000 500,000 46,415 135,599 376,632 46,415 135,599 376,632
24 280,363 500,000 500,000 523,743 43,456 141,704 422,374 43,456 141,704 422,374
25 300,681 500,000 500,000 577,129 39,561 147,505 473,056 39,561 147,505 473,056
26 322,015 500,000 500,000 634,866 34,618 152,935 529,055 34,618 152,935 529,055
27 344,415 500,000 500,000 703,068 28,509 157,929 590,814 28,509 157,929 590,814
28 367,936 500,000 500,000 777,524 21,106 162,419 658,919 21,106 162,419 658,919
29 392,633 500,000 500,000 858,798 12,242 166,312 734,015 12,242 166,312 734,015
30 418,565 500,000 500,000 947,501 1,691 169,480 816,811 1,691 169,480 816,811
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, guaranteed cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $10.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
23
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 40 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 2
VARIABLE INVESTMENT $6,000 ANNUAL PREMIUM USING CURRENT CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 6,300 504,289 504,584 504,880 4,289 4,584 4,880 0 0 0
2 12,915 508,756 509,623 510,526 8,756 9,623 10,526 3,846 4,713 5,616
3 19,861 513,098 514,826 516,699 13,098 14,826 16,699 8,188 9,916 11,789
4 27,154 517,311 520,196 523,447 17,311 20,196 23,447 12,401 15,286 18,537
5 34,811 521,390 525,733 530,825 21,390 25,733 30,825 16,480 20,823 25,915
6 42,852 525,330 531,437 538,888 25,330 31,437 38,888 20,911 27,018 34,469
7 51,295 529,126 537,308 547,703 29,126 37,308 47,703 25,198 33,380 43,775
8 60,159 532,775 543,349 557,343 32,775 43,349 57,343 29,338 39,912 53,906
9 69,467 536,272 549,560 567,886 36,272 49,560 67,886 33,326 46,614 64,940
10 79,241 539,611 555,938 579,416 39,611 55,938 79,416 37,156 53,483 76,961
11 89,503 543,116 562,920 592,617 43,116 62,920 92,617 41,152 60,956 90,653
12 100,278 546,447 570,108 607,122 46,447 70,108 107,122 44,974 68,635 105,649
13 111,592 549,585 577,490 623,052 49,585 77,490 123,052 48,603 76,508 122,070
14 123,471 552,508 585,053 640,540 52,508 85,053 140,540 52,017 84,562 140,049
15 135,945 555,201 592,787 659,736 55,201 92,787 159,736 55,201 92,787 159,736
16 149,042 557,642 600,676 680,805 57,642 100,676 180,805 57,642 100,676 180,805
17 162,794 559,817 608,710 703,935 59,817 108,710 203,935 59,817 108,710 203,935
18 177,234 561,716 616,885 729,340 61,716 116,885 229,340 61,716 116,885 229,340
19 192,396 563,316 625,180 757,243 63,316 125,180 257,243 63,316 125,180 257,243
20 208,316 564,587 633,569 787,883 64,587 133,569 287,883 64,587 133,569 287,883
21 225,031 565,326 641,842 821,344 65,326 141,842 321,344 65,326 141,842 321,344
22 242,583 565,658 650,118 858,061 65,658 150,118 358,061 65,658 150,118 358,061
23 261,012 565,526 658,334 898,332 65,526 158,334 398,332 65,526 158,334 398,332
24 280,363 564,877 666,428 942,484 64,877 166,428 442,484 64,877 166,428 442,484
25 300,681 563,662 674,337 990,888 63,662 174,337 490,888 63,662 174,337 490,888
26 322,015 561,838 682,003 1,043,961 61,838 182,003 543,961 61,838 182,003 543,961
27 344,415 559,363 689,365 1,102,168 59,363 189,365 602,168 59,363 189,365 602,168
28 367,936 556,203 696,364 1,166,029 56,203 196,364 666,029 56,203 196,364 666,029
29 392,633 552,308 702,926 1,236,110 52,308 202,926 736,110 52,308 202,926 736,110
30 418,565 547,606 708,947 1,313,010 47,606 208,947 813,010 47,606 208,947 813,010
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, current cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $5.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
24
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C>
MALE ISSUE AGE: 40 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 2
VARIABLE INVESTMENT $6,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 6,300 504,023 504,309 504,596 4,023 4,309 4,596 0 0 0
2 12,915 508,136 508,966 509,832 8,136 8,966 9,832 3,226 4,056 4,922
3 19,861 512,095 513,735 515,515 12,095 13,735 15,515 7,185 8,825 10,605
4 27,154 515,892 518,612 521,681 15,892 18,612 21,681 10,982 13,702 16,771
5 34,811 519,520 523,590 528,372 19,520 23,590 28,372 14,609 18,680 23,462
6 42,852 522,966 528,659 535,625 22,966 28,659 35,625 18,547 24,240 31,206
7 51,295 526,223 533,813 543,488 26,223 33,813 43,488 22,295 29,885 39,560
8 60,159 529,284 539,046 552,016 29,284 39,046 52,016 25,847 35,609 48,579
9 69,467 532,137 544,346 561,263 32,137 44,346 61,263 29,191 41,400 58,317
10 79,241 534,771 549,700 571,286 34,771 49,700 71,286 32,316 47,245 68,831
11 89,503 537,474 555,493 582,690 37,474 55,493 82,690 35,510 53,529 80,726
12 100,278 539,919 561,336 595,101 39,919 61,336 95,101 38,446 59,863 93,628
13 111,592 542,072 567,196 608,592 42,072 67,196 108,592 41,090 66,214 107,610
14 123,471 543,896 573,033 623,242 43,896 73,033 123,242 43,405 72,542 122,751
15 135,945 545,361 578,810 639,140 45,361 78,810 139,140 45,361 78,810 139,140
16 149,042 546,429 584,482 656,381 46,429 84,482 156,381 46,429 84,482 156,381
17 162,794 547,071 590,009 675,077 47,071 90,009 175,077 47,071 90,009 175,077
18 177,234 547,265 595,358 695,361 47,265 95,358 195,361 47,265 95,358 195,361
19 192,396 546,966 600,469 717,356 46,966 100,469 217,356 46,966 100,469 217,356
20 208,316 546,119 605,268 741,186 46,119 105,268 241,186 46,119 105,268 241,186
21 225,031 544,666 609,673 766,985 44,666 109,673 266,985 44,666 109,673 266,985
22 242,583 542,541 613,592 794,897 42,541 113,592 294,897 42,541 113,592 294,897
23 261,012 539,649 616,895 825,044 39,649 116,895 325,044 39,649 116,895 325,044
24 280,363 535,892 619,442 857,560 35,891 119,442 357,560 35,891 119,442 357,560
25 300,681 531,178 621,094 892,602 31,178 121,094 392,602 31,178 121,094 392,602
26 322,015 525,424 621,707 930,348 25,424 121,707 430,348 25,424 121,707 430,348
27 344,415 518,549 621,137 971,001 18,549 121,137 471,001 18,549 121,137 471,001
28 367,936 510,480 619,239 1,014,793 10,480 119,239 514,793 10,480 119,239 514,793
29 392,633 501,119 615,832 1,061,954 1,119 115,832 561,954 1,119 115,832 561,954
30 418,565 0 610,688 1,112,697 0 110,688 612,697 0 110,688 612,697
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, guaranteed cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $10.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
25
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 55 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 1
VARIABLE INVESTMENT $13,000 ANNUAL PREMIUM USING CURRENT CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 13,650 500,000 500,000 500,000 8,943 9,572 10,204 0 0 0
2 27,983 500,000 500,000 500,000 17,856 19,686 21,594 6,466 8,296 10,204
3 43,032 500,000 500,000 500,000 26,439 30,058 33,986 15,049 18,668 22,596
4 58,833 500,000 500,000 500,000 34,678 40,688 47,479 23,288 29,298 36,089
5 75,425 500,000 500,000 500,000 42,553 51,570 62,181 31,163 40,180 50,791
6 92,846 500,000 500,000 500,000 50,045 62,700 78,217 39,794 52,449 67,966
7 111,138 500,000 500,000 500,000 57,133 74,074 95,731 48,021 64,962 86,619
8 130,345 500,000 500,000 500,000 63,777 85,671 114,873 55,804 77,698 106,900
9 150,513 500,000 500,000 500,000 69,941 97,479 135,824 63,107 90,645 128,990
10 171,688 500,000 500,000 500,000 75,593 109,490 158,803 69,898 103,795 153,108
11 193,923 500,000 500,000 500,000 81,389 122,606 185,298 76,833 118,050 180,742
12 217,269 500,000 500,000 500,000 86,649 136,060 214,693 83,232 132,643 211,276
13 241,782 500,000 500,000 500,000 91,349 149,881 247,422 89,071 147,603 245,144
14 267,521 500,000 500,000 500,000 95,453 164,095 283,984 94,314 162,956 282,845
15 294,547 500,000 500,000 500,000 98,904 178,721 324,973 98,904 178,721 324,973
16 322,925 500,000 500,000 500,000 101,619 193,770 371,091 101,619 193,770 371,091
17 352,721 500,000 500,000 500,000 103,494 209,254 423,195 103,494 209,254 423,195
18 384,007 500,000 500,000 535,085 104,392 225,178 482,058 104,392 225,178 482,058
19 416,857 500,000 500,000 596,740 104,171 241,575 547,468 104,171 241,575 547,468
20 451,350 500,000 500,000 663,531 102,702 258,512 620,122 102,702 258,512 620,122
21 487,568 500,000 500,000 735,937 99,267 275,745 700,892 99,267 275,745 700,892
22 525,596 500,000 500,000 829,764 94,258 293,737 790,251 94,258 293,737 790,251
23 565,526 500,000 500,000 933,540 87,528 312,672 889,086 87,528 312,672 889,086
24 607,452 500,000 500,000 1,048,290 78,892 332,764 998,371 78,892 332,764 998,371
25 651,475 500,000 500,000 1,175,128 68,073 354,255 1,119,170 68,073 354,255 1,119,170
26 697,699 500,000 500,000 1,315,256 54,592 377,401 1,252,625 54,592 377,401 1,252,625
27 746,234 500,000 500,000 1,469,980 37,879 402,563 1,399,981 37,879 402,563 1,399,981
28 797,195 500,000 500,000 1,640,714 17,221 430,223 1,562,585 17,221 430,223 1,562,585
29 850,705 0 500,000 1,828,991 0 461,033 1,741,896 0 461,033 1,741,896
30 906,890 0 519,939 2,036,486 0 495,180 1,939,511 0 495,180 1,939,511
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, current cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $5.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
26
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 55 $500,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 1
VARIABLE INVESTMENT $13,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 13,650 500,000 500,000 500,000 7,699 8,290 8,882 0 0 0
2 27,983 500,000 500,000 500,000 15,186 16,856 18,602 3,796 5,466 7,212
3 43,032 500,000 500,000 500,000 22,209 25,457 28,994 10,819 14,067 17,604
4 58,833 500,000 500,000 500,000 28,739 34,064 40,106 17,349 22,674 28,716
5 75,425 500,000 500,000 500,000 34,734 42,638 51,988 23,344 31,248 40,598
6 92,846 500,000 500,000 500,000 40,150 51,136 64,700 29,899 40,885 54,449
7 111,138 500,000 500,000 500,000 44,939 59,514 78,311 35,827 50,402 69,199
8 130,345 500,000 500,000 500,000 49,020 67,695 92,879 41,047 59,722 84,906
9 150,513 500,000 500,000 500,000 52,313 75,602 108,483 45,479 68,768 101,649
10 171,688 500,000 500,000 500,000 54,739 83,162 125,232 49,044 77,467 119,537
11 193,923 500,000 500,000 500,000 56,792 91,060 144,302 52,236 86,504 139,746
12 217,269 500,000 500,000 500,000 57,835 98,564 165,090 54,418 95,147 161,673
13 241,782 500,000 500,000 500,000 57,784 105,611 187,878 55,506 103,333 185,600
14 267,521 500,000 500,000 500,000 56,524 112,115 213,003 55,385 110,976 211,864
15 294,547 500,000 500,000 500,000 53,891 117,951 240,863 53,891 117,951 240,863
16 322,925 500,000 500,000 500,000 49,659 122,944 271,942 49,659 122,944 271,942
17 352,721 500,000 500,000 500,000 43,534 126,867 306,848 43,534 126,867 306,848
18 384,007 500,000 500,000 500,000 35,129 129,420 346,365 35,129 129,420 346,365
19 416,857 500,000 500,000 500,000 24,004 130,266 391,543 24,004 130,266 391,543
20 451,350 500,000 500,000 500,000 9,683 129,042 443,786 9,683 129,042 443,786
21 487,568 0 500,000 529,724 0 125,356 504,499 0 125,356 504,499
22 525,596 0 500,000 600,483 0 118,741 571,889 0 118,741 571,889
23 565,526 0 500,000 678,560 0 108,628 646,248 0 108,628 646,248
24 607,452 0 500,000 764,667 0 94,277 728,255 0 94,277 728,255
25 651,475 0 500,000 859,570 0 74,644 818,638 0 74,644 818,638
26 697,699 0 500,000 964,088 0 48,267 918,179 0 48,267 918,179
27 746,234 0 500,000 1,079,091 0 13,111 1,027,706 0 13,111 1,027,706
28 797,195 0 0 1,205,497 0 0 1,148,092 0 0 1,148,092
29 850,705 0 0 1,344,283 0 0 1,280,270 0 0 1,280,270
30 906,890 0 0 1,496,501 0 0 1,425,239 0 0 1,425,239
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, guaranteed cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $10.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
27
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 55 $250,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 2
VARIABLE INVESTMENT $12,000 ANNUAL PREMIUM USING CURRENT CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 12,600 259,357 259,973 260,589 9,357 9,973 10,589 3,662 4,278 4,894
2 25,830 268,747 270,568 272,465 18,747 20,568 22,465 13,052 14,873 16,770
3 39,722 277,866 281,502 285,440 27,866 31,502 35,440 22,171 25,807 29,745
4 54,308 286,702 292,775 299,614 36,702 42,775 49,614 31,007 37,080 43,919
5 69,623 295,244 304,383 315,093 45,244 54,383 65,093 39,549 48,688 59,398
6 85,704 303,477 316,324 331,996 53,477 66,324 81,996 48,352 61,198 76,871
7 102,589 311,387 328,592 350,450 61,387 78,592 100,450 56,831 74,036 95,894
8 120,319 318,947 341,171 370,585 68,947 91,171 120,585 64,961 87,184 116,599
9 138,935 326,134 354,043 392,546 76,134 104,043 142,546 72,717 100,626 139,129
10 158,481 332,925 367,196 416,495 82,925 117,196 166,495 80,078 114,348 163,647
11 179,006 339,996 381,527 443,845 89,996 131,527 193,845 87,718 129,249 191,567
12 200,556 346,658 396,226 473,845 96,658 146,226 223,845 94,949 144,518 222,136
13 223,184 352,894 411,291 506,762 102,894 161,291 256,762 101,755 160,152 255,623
14 246,943 358,680 426,710 542,889 108,680 176,710 292,889 108,110 176,140 292,320
15 271,890 363,979 442,459 582,536 113,979 192,459 332,536 113,979 192,459 332,536
16 298,084 368,741 458,497 626,031 118,741 208,497 376,031 118,741 208,497 376,031
17 325,589 372,904 474,771 673,729 122,904 224,771 423,729 122,904 224,771 423,729
18 354,468 376,389 491,205 726,002 126,389 241,205 476,002 126,389 241,205 476,002
19 384,791 379,121 507,722 783,268 129,121 257,722 533,268 129,121 257,722 533,268
20 416,631 381,040 524,259 846,006 131,040 274,259 596,006 131,040 274,259 596,006
21 450,063 381,728 540,377 914,371 131,728 290,377 664,371 131,728 290,377 664,371
22 485,166 381,495 556,363 989,298 131,495 306,363 739,298 131,495 306,363 739,298
23 522,024 380,314 572,173 1,071,473 130,314 322,173 821,473 130,314 322,173 821,473
24 560,725 378,151 587,755 1,161,653 128,151 337,755 911,653 128,151 337,755 911,653
25 601,361 374,940 603,021 1,260,641 124,940 353,021 1,010,641 124,940 353,021 1,010,641
26 644,030 370,529 617,788 1,369,239 120,529 367,788 1,119,239 120,529 367,788 1,119,239
27 688,831 364,768 631,864 1,488,338 114,768 381,864 1,238,338 114,768 381,864 1,238,338
28 735,873 357,489 645,030 1,618,911 107,489 395,030 1,368,911 107,489 395,030 1,368,911
29 785,266 348,537 657,066 1,762,048 98,537 407,066 1,512,048 98,537 407,066 1,512,048
30 837,129 337,791 667,773 1,918,996 87,791 417,773 1,668,996 87,791 417,773 1,668,996
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, current cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $5.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
28
<PAGE>
AMERICAN UNITED LIFE INSURANCE COMPANY
VARIABLE UNIVERSAL LIFE INSURANCE
<TABLE>
<S> <C> <C> <C> <C>
MALE ISSUE AGE: 55 $250,000 FACE AMOUNT
PREFERRED, NON-TOBACCO USER DEATH BENEFIT OPTION 2
VARIABLE INVESTMENT $12,000 ANNUAL PREMIUM USING GUARANTEED CHARGES
DEATH BENEFIT ACCOUNT VALUE CASH VALUE
Assuming Hypothetical Assuming Hypothetical Assuming Hypothetical
PREMIUMS Gross Annual Gross Annual Gross Annual
ACCUM. Investment Return of Investment Return of Investment Return of
END AT 5% ________________________________ ________________________________ ________________________________
OF INTEREST
YEAR PER YEAR 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross 0% Gross 6% Gross 12% Gross
- ------------ --------------- ---------------------------------- ----------------------------------- --------------------------------
1 12,600 258,724 259,319 259,915 8,724 9,319 9,915 3,029 3,624 4,220
2 25,830 267,352 269,089 270,900 17,352 19,089 20,900 11,657 13,394 15,205
3 39,722 275,633 279,071 282,798 25,633 29,071 32,798 19,938 23,376 27,103
4 54,308 283,548 289,249 295,681 33,548 39,249 45,681 27,853 33,554 39,986
5 69,623 291,074 299,602 309,619 41,074 49,602 59,619 35,379 43,907 53,924
6 85,704 298,183 310,104 324,688 48,183 60,104 74,688 43,057 54,979 69,562
7 102,589 304,847 320,727 340,970 54,847 70,727 90,970 50,291 66,171 86,414
8 120,319 311,020 331,422 358,537 61,020 81,422 108,537 57,034 77,435 104,551
9 138,935 316,659 342,138 377,468 66,659 92,138 127,468 63,242 88,721 124,051
10 158,481 321,721 352,827 397,854 71,721 102,827 147,854 68,873 99,980 145,006
11 179,006 326,801 364,271 420,920 76,800 114,271 170,920 74,522 111,993 168,642
12 200,556 331,244 375,683 445,902 81,244 125,683 195,902 79,535 123,974 194,193
13 223,184 335,015 387,018 472,965 85,015 137,018 222,965 83,876 135,879 221,826
14 246,943 338,066 398,218 502,281 88,066 148,218 252,281 87,496 147,649 251,712
15 271,890 340,329 409,198 534,021 90,329 159,198 284,021 90,329 159,198 284,021
16 298,084 341,713 419,846 568,345 91,713 169,846 318,345 91,713 169,846 318,345
17 325,589 342,105 430,019 605,410 92,105 180,019 355,410 92,105 180,019 355,410
18 354,468 341,362 439,538 645,359 91,362 189,538 395,359 91,362 189,538 395,359
19 384,791 339,348 448,216 688,352 89,348 198,216 438,352 89,348 198,216 438,352
20 416,631 335,948 455,882 734,592 85,948 205,882 484,592 85,948 205,882 484,592
21 450,063 331,078 462,385 784,336 81,078 212,385 534,336 81,078 212,385 534,336
22 485,166 324,668 467,580 837,881 74,668 217,580 587,881 74,668 217,580 587,881
23 522,024 316,660 471,327 895,574 66,660 221,327 645,574 66,660 221,327 645,574
24 560,725 306,988 473,468 957,786 56,988 223,468 707,786 56,988 223,468 707,786
25 601,361 295,531 473,783 1,024,874 45,531 223,783 774,874 45,531 223,783 774,874
26 644,030 282,109 471,977 1,097,171 32,109 221,977 847,171 32,109 221,977 847,171
27 688,831 266,489 467,686 1,174,992 16,489 217,686 924,992 16,489 217,686 924,992
28 735,873 0 460,476 1,258,634 0 210,476 1,008,634 0 210,476 1,008,634
29 785,266 0 449,906 1,348,445 0 199,906 1,098,445 0 199,906 1,098,445
30 837,129 0 435,571 1,444,872 0 185,571 1,194,872 0 185,571 1,194,872
</TABLE>
(1) Assumes that no Policy loans have been made.
(2) Values reflect applicable premium expenses charges, guaranteed cost of
insurance rates, a monthly administrative charge of $30.00 per month in
year 1 and $10.00 per month thereafter, and a mortality and expense risk
charge of 0.75% of assets during the first ten Policy Years, and 0.25%
thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the Prospectus.
(4) Assumes that the planned periodic premium is paid at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
(5) The illustrated gross annual investment rates of return of 0%, 6%, and 12%
would correspond to approximate net annual rate of -1.46%, 4.50%, and
10.46% respectively, during the first ten Policy Years, and -0.97%, 5.02%,
and 11.00% respectively thereafter.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAT THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND PREVAILING RATES. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
RATES OF RETURN AVERAGED 0%, 6%, OR 12% OVER A PERIOD OF YEARS BUT ALSO
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY OR THE PORTFOLIOS THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
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<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
Limits on Rights to Contest the Policy
Incontestability. In the absence of fraud, after the Policy has been in
force during the Insured's lifetime for two years from the Contract Date, AUL
may not contest the Contract. Any increase in the Face Amount will not be
contested after the increase has been in force during the Insured's lifetime for
two years following the effective date of the increase. If you did not request
the Face Amount increase or if evidence of insurability was not required, we
will not contest the increase.
If a Policy lapses and it is reinstated, we can contest the reinstated Policy
during the first two years after the effective date of the reinstatement, but
only for statements made in the application for reinstatement.
Suicide Exclusion. If the Insured dies by suicide, while sane or
insane, within two years of the Contract Date or the effective date of any
reinstatement (or less if required by state law), the amount payable by AUL will
be equal to the premiums paid less any loan, loan interest, and any Partial
Surrender.
If the Insured dies by suicide, while sane or insane, within two years after the
effective date of any increase in the Face Amount (or less if required by state
law), the amount payable by AUL on such increase will be limited to the Monthly
Deduction associated with the increase.
Changes in the Policy or Benefits
Misstatement of Age or Sex. If it is determined the age or sex of the
Insured as stated in the Policy is not correct, the Death Benefit will be the
greater of: (1) the amount which would have been purchased at the Insured's
correct age and sex by the most recent cost of insurance charge assessed prior
to the date we receive proof of death; or (2) the Account Value as of the date
we receive proof of death, multiplied by the Minimum Insurance Percentage for
the correct age.
Other Changes. Upon notice, AUL may modify the Policy, but only if such
modification is necessary to: (1) make the Policy or the Separate Account comply
with any applicable law or regulation issued by a governmental agency to which
AUL is subject; (2) assure continued qualification of the Policy under the
Internal Revenue Code or other federal or state laws relating to variable life
contracts; (3) reflect a change in the operation of the Separate Account; or (4)
provide different Separate Account and/or Fixed Account accumulation options.
AUL reserves the right to modify the Policy as necessary to attempt to prevent
the Owner from being considered the owner of the assets of the Separate Account.
In the event of any such modification, AUL will issue an appropriate endorsement
to the Policy, if required. AUL will exercise these rights in accordance with
applicable law, including approval of Owners, if required.
Any change of the Policy must be approved by AUL's President, Vice President or
Secretary. No representative is authorized to change or waive any provision of
the Policy.
Change of Insured
While the Policy is in force, it may be exchanged for a new Policy on the life
of a substitute Insured. The exercise of this exchange is subject to
satisfactory evidence of insurability for the substitute Insured. The Contract
Date of the new Policy will generally be the same as the Contract Date of the
exchanged Policy. The Issue Date of the new Policy will be the date of the
exchange. The initial Cash Value of the new Policy will be the same as the Cash
Value of the exchanged Policy on the date of the exchange. Exercise of the
Change of Insured provision will result in a taxable exchange.
Exchange for Paid-Up Policy
You may exchange the Policy for a paid-up whole life policy by Proper Notice and
upon returning the Policy to the Home Office. The new policy will be for the
level face amount, not greater than the Policy's Face Amount, which can be
purchased by the Policy's Net Cash Value. The new policy will be purchased using
the continuous net single premium for the Insured's age upon the Insured's last
birthday at the time of the exchange. We will pay you any remaining Net Cash
Value that was not used to purchase the new policy.
At any time after this option is elected, the cash value of the new policy will
be its net single premium at the Insured's then attained age. All net single
premiums will be based on 3% interest and the guaranteed cost of insurance rates
of the Policy. No riders may be attached to the new policy.
When Proceeds Are Paid
AUL will ordinarily pay any Death Benefit Proceeds, loan proceeds, Partial
Surrender proceeds, or Full Surrender proceeds within seven calendar days after
receipt at the Home Office of all the documents required for such a payment.
Other than the Death Benefit, which is determined as of the date of death, the
amount will be determined as of the date of receipt of required documents.
However, AUL may delay making a payment or processing a transfer request if (1)
the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading is restricted by the SEC, or the SEC declares that an emergency
exists as a result of which the disposal or valuation of Separate Account assets
is not reasonably practicable; or (2) the SEC by order permits postponement of
payment to protect Owners.
Dividends
You will receive any dividends declared by us as long as the Policy is in force.
Dividend payments will be applied to increase the Account Value in the
Investment Accounts and Fixed Account on a prorata basis unless you request cash
payment. We do not anticipate declaring any dividends.
Reports to Policy Owners
At least once a year, you will be sent a report at your last known address
showing, as of the end of the current report period: Account Value, Cash Value,
Death Benefit, amount of interest credited to amounts in the Fixed Account,
change in value of amounts in the Separate Account, premiums paid, loans,
Partial Surrenders, expense charges, and cost of insurance charges since the
prior report. You will also be sent an annual and a semi-annual report for each
Fund or Portfolio underlying an Investment Account to which you have allocated
Account
30
<PAGE>
Value, including a list of the securities held in each Fund, as required by the
1940 Act. In addition, when you pay premiums (except for premiums deducted
automatically), or if you take out a loan, transfer amounts among the Investment
Accounts and Fixed Account or take surrenders, you will receive a written
confirmation of these transactions.
Assignment
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon AUL, it must be in writing and filed at the Home
Office. Once AUL has received a signed copy of the assignment, the Owner's
rights and the interest of any beneficiary (or any other person) will be subject
to the assignment. If there are any irrevocable beneficiaries, you must obtain
their written consent before assigning the Policy. AUL assumes no responsibility
for the validity or sufficiency of any assignment. An assignment is subject to
any loan on the Policy.
Reinstatement
The Policy may be reinstated within five years (or such longer period if
required by state law) after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Rider Benefits
The following rider benefits are available and may be added to your Policy. If
applicable, monthly charges for these riders will be deducted from your Account
Value as part of the Monthly Deduction. All of these riders may not be available
in all states.
Waiver of Monthly Deduction Disability (WMDD)
Issue Ages: 0-55
This rider waives the Monthly Deduction during a period of total disability.
WMDD cannot be attached to Policies with Face Amounts in excess of
$3,000,000 or rated higher than Table H.
Monthly Deductions are waived for total disability following a six month
waiting period. Monthly Deductions made during this waiting period are
re-credited to the Account Value upon the actual waiver of the Monthly
Deductions. If disability occurs before age 60, Monthly Deductions are
waived as long as total disability continues. If disability occurs between
ages 60-65, Monthly Deductions are waived as long as the Insured remains
totally disabled but not beyond age 65.
Guaranteed Insurance Option (GIO)
Issue ages: 0-39 (standard risks only)
This rider allows the Face Amount of the Policy to be increased by the
option amount or less, without evidence of insurability on the Insured.
These increases may occur on regular option dates or alternate option dates.
See the rider contract for the specific dates.
Children's Benefit Rider (CBR)
Issue Ages: 14 Days - 20 Years (Children's ages)
This rider provides level term insurance on each child of the Insured. At
issue, each child must be at least 14 days old and less than 20 years of
age, and the Insured must be less than 56 years old and not have a
substandard rating greater than table H. Once CBR is in force, children born
to the Insured are covered automatically after they are 14 days old.
Children are covered under CBR until they reach age 22, when they may
purchase, without evidence of insurability, a separate policy with up to
five times the expiring face amount of the rider's coverage.
Other Insured Rider (OIR)
Issue Ages: 0-85 (Other Insured's age)
The Other Insured Rider is level term life insurance on someone other than
the Insured. The minimum issue amount is $10,000; the maximum issue amount
is equal to three times the Face Amount. A maximum of two OIRs may be added
to the Policy. The OIR amount of coverage may be changed in the future, but
increases are subject to evidence of insurability.
Prior to the Other Insured's age 70, the OIR may be converted to a permanent
individual policy without evidence of insurability. The OIR may be converted
to permanent coverage on the Monthiversary following the date of the
Insured's death.
Same Insured Rider (SIR)
Issue Ages: 0-85
This rider provides level term life insurance on the Insured. The minimum
issue amount is $10,000; the maximum issue is equal to three times the Face
Amount of the Policy. Only one SIR may be added to the Policy. The SIR face
amount may be changed (increases are subject to evidence of insurability).
Prior to age 70 (55 for substandard risks), the Insured may convert the SIR
to permanent coverage without evidence of insurability.
Waiver of Premium Disability (WPD)
Issue Ages: 0-55
This rider pays a designated premium into the Account Value during a period
of total disability. The minimum designated premium is $100. WPD may not be
added to a policy unless WMDD is already added. If disability occurs before
age 60, the designated premium benefit is paid as long as total disability
continues. If disability occurs between ages 60-65, the designated premium
benefit is paid as long as the Insured remains totally disabled but not
beyond age 65.
Last Survivor Rider (LS)
Issue Ages: 20-85
This rider modifies the terms of the Policy to provide insurance on the
lives of two Insureds rather than one. When the Last Survivor Rider is
attached, the Death Benefit Proceeds are paid to the beneficiary upon the
death of the last surviving Insured. The cost of insurance charges reflect
the anticipated mortality of the two Insureds and the fact that the Death
Benefit is not paid until the death of the surviving Insured. For a Policy
containing the LS Rider to be reinstated, either both Insureds must be
alive on the date of the reinstatement, or the surviving Insured must be
alive and the lapse occurred after the death of the first
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<PAGE>
Insured. The Incontestability, Suicide, and Misstatement of Age or Sex
provisions of the Policy apply to either Insured.
LS Rider also provides a Policy Split Option, allowing the Policy on two
Insureds to be split into two separate Policies, one on the life of each
Insured. The LS Rider also includes an Estate Preservation Benefit which
increases the Face Amount of the Policy under certain conditions. The Estate
Preservation Benefit is only available to standard risks.
Automatic Increase Rider (AIR)
Issue Ages: 20-55 (standard risks only)
This rider increases the Insured's base coverage by 5% each year, without
evidence of insurability. The 5% increase is compounded annually and is
based on the base coverage Face Amount on Policy Anniversaries. No increases
are made during any period in which the Monthly Deduction is being waived.
Insured's initial base coverage must be at least $100,000.
AIR terminates on the earliest of the following dates: the date an
automatic increase is rejected, the date the Face Amount is decreased, the
date requested in writing by the Owner, the date of Policy termination, or
the anniversary date 20 years after issue of this rider. There is no charge
for AIR. New coverage generated by the rider results in an increase in the
target premium. All charges for any new coverage are based on the Insured's
nearest age at the time of increase.
Guaranteed Minimum Death Benefit Rider (GMDB)
This rider extends the Guarantee Period as listed on the Policy Data Page.
While the GMDB rider is in force, the Policy will remain in force and will
not begin the grace period if on each Monthiversary, the sum of the
premiums paid to date, less any Partial Surrenders, any outstanding loan
and loan interest, equals or exceeds the required premium for the
Guaranteed Minimum Death Benefit multiplied by the number of Policy months
since the Contract Date. The guarantee provided by this rider terminates if
this test is failed on any Monthiversary. The guarantee will not be
reinstated.
Accelerated Death Benefit Rider (ABR)
This rider allows for a prepayment of a portion of the Policy's Death
Benefit while the Insured is still alive, if the Insured has been diagnosed
as terminally ill, and has 12 months or less to live. The minimum amount
available is $5,000. The maximum benefit payable (in most states) is the
lesser of $500,000 or 50% of the Face Amount. ABR may be added to the Policy
at any time while it is still in force. There is no charge for ABR.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the Policy and does not purport to be complete or
to cover all situations. This discussion is not intended as tax advice. Counsel
or other competent tax advisers should be consulted for more complete
information. This discussion is based upon AUL's understanding of the present
federal tax laws as they currently are interpreted by the Internal Revenue
Service (the "IRS").
Tax Status of the Policy
In order to attain the tax benefits normally associated with life insurance, the
Policy must be classified for federal income tax purposes as a life insurance
contract. Section 7702 of the Internal Revenue Code sets forth a definition of a
life insurance contract for federal income tax purposes. The U.S. Treasury
Department (the "Treasury") is authorized to prescribe regulations implementing
Section 7702. While proposed regulations and other interim guidance has been
issued, final regulations have not been adopted. In short, guidance as to how
Section 7702 is to be applied is limited. If a Policy were determined not to be
a life insurance contract for purposes of Section 7702, such Policy would not
provide the tax advantages normally provided by a life insurance contract.
With respect to a Policy issued on a standard basis, AUL believes that such a
Policy should meet the Section 7702 definition of a life insurance contract.
With respect to a Policy that is issued on a substandard basis (i.e., a premium
class with extra rating involving higher than standard mortality risk) or one
involving joint insureds, there is less guidance, in particular as to how the
mortality and other expense requirements of Section 7702 are to be applied in
determining whether such a Policy meets the Section 7702 definition of a life
insurance contract. If the requirements of Section 7702 were deemed not to have
been met, the Policy would not provide the tax benefits normally associated with
life insurance and the tax status of all contracts invested in the Investment
Account to which premiums were allocated under the non-qualifying contract might
be affected.
If it is subsequently determined that a Policy does not satisfy Section 7702,
AUL may take whatever steps are appropriate and reasonable to attempt to cause
such a Policy to comply with Section 7702. For these reasons, AUL reserves the
right to modify the Policy as it deems necessary in its sole discretion to
attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Internal Revenue Code requires that the investments of
each of the Investment Accounts must be "adequately diversified" in accordance
with Treasury regulations in order for the Policy to qualify as a life insurance
contract under Section 7702 of the Internal Revenue Code. The Investment
Accounts, through the Portfolios, intend to comply with the diversification
requirements prescribed in Treas. Reg. Section 1.817-5, which affect how the
Portfolio's assets are to be invested. AUL believes that the Investment Accounts
will meet the diversification requirements, and AUL will monitor continued
compliance with this requirement.
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
investment accounts used to support their contracts. In those circumstances,
income and gains from the investment account assets would be includable
32
<PAGE>
in the variable contract owner's gross income. The IRS has stated in published
rulings that a variable contract owner will be considered the owner of
investment account assets if the contract owner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. The Treasury has also announced, in connection with the issuance of
regulations concerning diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
Owner), rather than the insurance company, to be treated as the owner of the
assets in the account." This announcement also stated that guidance would be
issued by way of regulations or rulings on the "extent to which contract holders
may direct their investments to particular investment accounts without being
treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that contract owners were not owners of investment account assets. For example,
an Owner has additional flexibility in allocating Net Premium payments and
Account Value. These differences could result in an Owner being treated as the
owner of a prorata portion of the assets of the Investment Accounts. In
addition, AUL does not know what standards will be set forth, if any, in the
regulations or rulings which the Treasury has stated it expects to issue. AUL
therefore reserves the right to modify the Policy as necessary to attempt to
prevent an Owner from being considered the Owner of a prorata share of the
assets of the Investment Accounts.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal income tax purposes.
Tax Treatment of Policy Benefits
In General. AUL believes that the proceeds and Account Value increases
of a Policy should be treated in a manner consistent with a fixed-benefit life
insurance contract for federal income tax purposes. Thus, the Death Benefit
under the Policy should be excludable from the gross income of the beneficiary
under Section 101(a)(1) of the Internal Revenue Code. However, if you elect a
settlement option for a Death Benefit other than in a lump sum, a portion of the
payment made to you may be taxable.
Depending on the circumstances, the exchange of a Policy, a change in the
Policy's Death Benefit option, a Policy loan, a Partial Surrender, a surrender,
a change in ownership, or an assignment of the Policy may have federal income
tax consequences. In addition, federal, state and local transfer, and other tax
consequences of ownership or receipt of Policy proceeds depends on the
circumstances of each Owner or beneficiary.
The Policy may also be used in various arrangements, including nonqualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The tax
consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which depends
in part on its tax consequences, you should consult a qualified tax adviser
regarding the tax attributes of the particular arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Account Value, including increments thereof, until there is a distribution. The
tax consequences of distributions from, and loans taken from or secured by, a
Policy depend on whether the Policy is classified as a Modified Endowment. Upon
a complete surrender or lapse of a Policy, whether or not a Modified Endowment,
the excess of the amount received plus the amount of any outstanding loans and
loan interest over the total investment in the Policy will generally be treated
as ordinary income subject to tax.
Modified Endowments. Section 7702A establishes a class of life
insurance Policies designated as "Modified Endowment Contracts." The rules
relating to whether a Policy will be treated as a Modified Endowment are
extremely complex and cannot be adequately described in the limited confines of
this summary. In general, a Policy will be a Modified Endowment if the
accumulated premiums paid at any time during the first seven Policy Years exceed
the sum of the net level premiums which would have been paid on or before such
time if the Policy provided for paid-up future benefits after the payment of
seven level annual premiums. A Policy may also become a Modified Endowment after
a material change. The determination of whether a Policy will be a Modified
Endowment after a material change generally depends upon the relationship of the
Death Benefit and Account Value at the time of such change and the additional
premiums paid in the seven years following the material change.
Due to the Policy's flexibility, classification as a Modified Endowment will
depend on the individual circumstances of each Policy. In view of the foregoing,
a current or prospective Owner should consult with a tax adviser to determine
whether a Policy transaction will cause the Policy to be treated as a Modified
Endowment. However, at the time a premium is credited which in AUL's view would
cause the Policy to become a Modified Endowment, AUL will attempt to notify the
Owner that unless a refund of the excess premium (with any appropriate interest)
is requested by the Owner, the Policy will become a Modified Endowment. However,
we do not undertake to provide such notice. The Owner will have 30 days after
receiving such notification to request the refund.
Policies classified as Modified Endowments will be subject to the following:
First, all distributions, including distributions upon surrender and Partial
Surrender, from such a Policy are treated as ordinary income subject to tax up
to the amount equal to the excess (if any) of the Account Value immediately
before the distribution over the investment in the Policy (described below) at
such time. Second, loans taken from or secured by such a Policy, are treated as
distributions from the Policy and taxed accordingly. Past due loan interest that
is added to the loan amount will be treated as a loan. Third, a 10 percent
additional income tax is imposed on the portion of any distribution from, or
loan taken from or secured by, such a Policy that is included in income except
where the distribution or loan is made on or after the Owner attains age 59 1/2,
is attributable to the Owner's becoming disabled, or is part of a series of
substantially equal periodic payments for the life (or life expectancy) of the
Owner or the joint lives (or joint life expectancies) of the Owner and the
Owner's beneficiary.
33
<PAGE>
If a Policy becomes a Modified Endowment after it is issued, distributions made
during the Policy Year in which it becomes a Modified Endowment, distributions
in any subsequent Policy Year and distributions within two years before the
Policy becomes a Modified Endowment will be subject to the tax treatment
described above. This means that a distribution from a Policy that is not a
Modified Endowment could later become taxable as a distribution from a Modified
Endowment.
All Modified Endowments that are issued by AUL (or its affiliates) to the same
Owner during any calendar year are treated as one Modified Endowment for
purposes of determining the amount includable in an Owner's gross income under
Section 72(e) of the Internal Revenue Code.
Distributions from a Policy that is not a Modified Endowment are generally
treated as first recovering the investment in the Policy (described below) and
then, only after the return of all such investment in the Policy, as
distributing taxable income. An exception to this general rule occurs in the
case of a decrease in the Policy's Death Benefit or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in a cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such a
cash distribution will be taxed in whole or in part as ordinary income (to the
extent of any gain in the Policy) under rules prescribed in Section 7702.
Loans from, or secured by, a Policy that is not a Modified Endowment are not
treated as distributions. Instead, such loans are treated as indebtedness of the
Owner.
Finally, neither distributions (including distributions upon surrender) nor
loans from, or secured by, a Policy that is not a Modified Endowment are subject
to the 10 percent additional income tax.
Policy Loan Interest. Generally, consumer interest paid on any loan
under a Policy which is owned by an individual is not deductible for federal or
state income tax purposes. The deduction of other forms of interest paid on
Policy loans may also be subject to other restrictions under the Internal
Revenue Code. A qualified tax adviser should be consulted before deducting any
Policy loan interest.
Investment in the Policy. Investment in the Policy means: (i) the
aggregate amount of any premiums or other consideration paid for a Policy, minus
(ii) the aggregate amount received under the Policy which is excluded from gross
income of the Owner (except that the amount of any loan from, or secured by, a
Policy that is a Modified Endowment, to the extent such amount is excluded from
gross income, will be disregarded), plus (iii) the amount of any loan from, or
secured by, a Policy that is a Modified Endowment to the extent that such amount
is included in the gross income of the Owner.
Estate and Generation Skipping Taxes
When the Insured dies, the Death Benefits will generally be includable in the
Owner's estate for purposes of federal estate tax if the Insured owned the
Policy. If the Owner was not the Insured, the fair market value of the Policy
would be included in the Owner's estate upon the Owner's death. Nothing would be
includable in the Insured's estate if he or she neither retained incidents of
ownership at death nor had given up ownership within three years before death.
Federal estate tax is integrated with federal gift tax under a unified rate
schedule. An unlimited marital deduction may be available for federal estate and
gift tax purposes. The unlimited marital deduction permits the deferral of taxes
until the death of the surviving spouse.
If the Owner (whether or not he or she is the Insured) transfers ownership of
the Policy to someone two or more generations younger, the transfer may be
subject to the generation-skipping transfer tax with the taxable amount being
the value of the Policy. The generation-skipping transfer tax provisions
generally apply to transfers which would be subject to the gift and estate tax
rules. Because these rules are complex, the Owner should consult with a
qualified tax adviser for specific information if ownership is passing to
younger generations.
Life Insurance Purchased for Use in Split Dollar Arrangements
On January 26, 1996, the IRS released a technical advice memorandum ("TAM") on
the taxability of life insurance policies used in certain split dollar
arrangements. A TAM, issued by the National Office of the IRS, provides advice
as to the internal revenue laws, regulations, and related statutes with respect
to a specific set of facts and a specific taxpayer. In the TAM, among other
things, the IRS concluded that an employee was subject to current taxation on
the excess of the cash surrender value of the policy over the premiums to be
returned to the employer. Purchasers of life insurance policies to be used in
split dollar arrangements are strongly advised to consult with a qualified tax
adviser to determine the tax treatment resulting from such an arrangement.
Taxation Under Section 403(b) Plans
Purchase Payments. Under Section 403(b) of the Code, payments made by certain
employers (i.e., tax-exempt organizations meeting the requirements of Section
501(c)(3) of the Code, or public educational institutions) to purchase Policies
for their employees are excludible from the gross income of employees to the
extent that such aggregate purchase payments do not exceed certain limitations
prescribed by the Code. This is the case whether the purchase payments are a
result of voluntary salary reduction amounts or employer contributions. Salary
reduction payments, however, subject to FICA (social security) taxes.
Taxation of Distributions. Distributions from a Section 403(b) Policy are taxed
as ordinary income to the recipient. Taxable distributions received before the
employee attains Age 59 1/2 generally are subject to 10% penalty tax in addition
to regular income tax. Certain distributions are excepted from this penalty tax
including distributions following the employee's death, disability, separation
from service after age 55, separation from service at any age if the
distribution is in the form of an annuity for the life (or life expectancy) of
the employee (or the employee and Beneficiary) and distributions not in excess
of deductible medical expenses. In addition, no distributions of voluntary
salary reduction amounts made for years after December 31, 1988 (plus earnings
thereon and earnings on Policy Values as of December 31, 1988) will be permitted
prior to one of the following events: attainment of age 59 1/2 by the employee
or the employee's separation from service, death, disability or hardship.
(Hardship distributions
34
<PAGE>
will be limited to the lesser of the amount of the hardship or the amount of
salary reduction contributions, exclusive of earnings thereon.)
Required Distributions. At retirement or on April 1 of the calendar year
following the calendar year in which the employee attains the age 70 1/2, the
Policy must be surrendered or one of the settlement options (other than the
interest option) must be put into effect. Otherwise, the Surrender Value becomes
reportable taxable income.
If the insured dies after the commencement of payments under a settlement
option, other than an interest option, any remaining portion of such interest
will be distributed at least as rapidly as under the method of distribution
being used on the date of such death. If the insured dies before commencement of
payments under a settlement option, or after payments commenced under the
interest option, the entire interest in the Policy will be distributed (1)
within 5 years after such death, or (2) as annuity payments which will begin
within one year of such death and which will be made over the life of the
designated beneficiary (who must be a natural person under this option) or over
a period not extending beyond the life expectancy of that beneficiary. However,
if the beneficiary is the insured's surviving spouse, the surviving spouse may
elect an option with payments extending more than five years after the insured's
death (but not to exceed the beneficiary's life or life expectancy) at any time
until the later of (1) the end of the calendar year following the year of the
insured's death, or (2) the end of the calendar year in which the insured would
have attained the age of 70 1/2.
Non-Individual Ownership of Contracts
If the Owner of a Policy is an entity rather than an individual, the tax
treatment may differ from that described above. Accordingly, prospective Owners
that are entities should consult a qualified tax advisor.
Possible Charge for AUL's Taxes
At the present time, AUL makes no charge for any federal, state or local taxes
(other than the charge for state and local premium taxes) that it incurs that
may be attributable to the Investment Accounts or to the Policies. However, AUL
reserves the right to make additional charges for any such tax or other economic
burden resulting from the application of the tax laws that it determines to be
properly attributable to the Investment Accounts or to the Policies.
OTHER INFORMATION ABOUT THE POLICIES AND AUL
Policy Termination
The Policy will terminate, and insurance coverage will cease, as of: (1) the end
of the Valuation Period during which we receive Proper Notice to surrender the
Policy; (2) the expiration of a grace period; or (3) the death of the Insured.
See "Surrendering the Policy for Net Cash Value," "Premium Payments to Prevent
Lapse," and "Death Benefit and Changes in Face Amount."
Resolving Material Conflicts
The Funds presently serve as the investment medium for the Separate Account and,
therefore, indirectly for the Policies. In addition, the Funds have advised us
that they are available to registered separate accounts of insurance companies,
other than AUL, offering variable annuity and variable life insurance policies.
We do not currently foresee any disadvantages to you resulting from the Funds
selling shares as an investment medium for products other than the Policies.
However, there is a theoretical possibility that a material conflict of interest
may arise between Owners whose Cash Values are allocated to the Separate Account
and the owners of variable life insurance policies and variable annuity
contracts issued by other companies whose values are allocated to one or more
other separate accounts investing in any one of the Funds. Shares of some of the
Funds may also be sold to certain qualified pension and retirement plans
qualifying under Section 401 of the Internal Revenue Code. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
or owners of other contracts (including contracts issued by other companies),
and such retirement plans or participants in such retirement plans. In the event
of a material conflict, we will take any necessary steps, including removing the
Separate Account from that Fund, to resolve the matter. The Board of
Directors/Trustees of each Fund will monitor events in order to identify any
material conflicts that may arise and determine what action, if any, should be
taken in response to those events or conflicts.
Addition, Deletion or Substitution of Investments
We reserve the right, subject to applicable law, to make additions to, deletions
from, or substitutions for the shares that are held in the Separate Account or
that the Separate Account may purchase. If the shares of a Portfolio are no
longer available for investment or if, in our judgment, further investment in
any Portfolio should become inappropriate in view of the purposes of the
Separate Account, we may redeem the shares, if any, of that Portfolio and
substitute shares of another registered open-end management investment company.
We will not substitute any shares attributable to a Policy's interest in an
Investment Account of the Separate Account without notice to you and prior
approval of the SEC and state insurance authorities, to the extent required by
the 1940 Act or other applicable law.
We also reserve the right to establish additional Investment Accounts of the
Separate Account, each of which would invest in shares corresponding to a
Portfolio of a Fund or in shares of another investment company having a
specified investment objective. Any new Investment Accounts may be made
available to existing Owners on a basis to be determined by AUL. Subject to
applicable law and any required SEC approval, we may, in our sole discretion,
eliminate one or more Investment Accounts if marketing needs, tax considerations
or investment conditions warrant.
If any of these substitutions or changes are made, we may, by appropriate
endorsement, change the Policy to reflect the substitution or change.
If we deem it to be in the best interests of persons having voting rights under
the Policies (subject to any approvals that
35
<PAGE>
may be required under applicable law), the Separate Account may be operated as a
management investment company under the 1940 Act, it may be de-registered under
that Act if registration is no longer required, or it may be combined with other
AUL separate accounts.
Voting Rights
AUL is the legal owner of the shares of the Portfolios held by the Investment
Accounts of the Separate Account. In accordance with its view of present
applicable law, AUL will exercise voting rights attributable to the shares of
each Portfolio held in the Investment Accounts at any regular and special
meetings of the shareholders of the Funds or Portfolios on matters requiring
shareholder voting under the 1940 Act. AUL will exercise these voting rights
based on instructions received from persons having the voting interest in
corresponding Investment Accounts of the Separate Account and consistent with
any requirements imposed on AUL under contracts with any of the Funds, or under
applicable law. However, if the 1940 Act or any regulations thereunder should be
amended, or if the present interpretation thereof should change, and as a result
AUL determines that it is permitted to vote the shares of the Portfolios in its
own right, it may elect to do so.
The person having the voting interest under a Policy is the Owner. AUL or the
pertinent Fund shall send to each Owner a Fund's proxy materials and forms of
instruction by means of which instructions may be given to AUL on how to
exercise voting rights attributable to the Portfolio's shares.
Unless otherwise required by applicable law or under a contract with any of the
Funds, with respect to each of the Portfolios, the number of Portfolio shares as
to which voting instructions may be given to AUL is determined by dividing the
value of all of the Accumulation Units of the corresponding Investment Account
attributable to a Policy on a particular date by the net asset value per share
of that Portfolio as of the same date. Fractional votes will be counted. The
number of votes as to which voting instructions may be given will be determined
as of the date coincident with the date established by a Fund for determining
shareholders eligible to vote at the meeting of the Fund or Portfolio. If
required by the SEC or under a contract with any of the Funds, AUL reserves the
right to determine in a different fashion the voting rights attributable to the
shares of the Portfolio. Voting instructions may be cast in person or by proxy.
Voting rights attributable to the Policies for which no timely voting
instructions are received will be voted by AUL in the same proportion as the
voting instructions which are received in a timely manner for all Policies
participating in that Investment Account. AUL will vote shares of any Investment
Account, if any, that it owns beneficially in its own discretion, except that if
a Fund offers its shares to any insurance company separate account that funds
variable annuity contracts or if otherwise required by applicable law or
contract, AUL will vote its own shares in the same proportion as the voting
instructions that are received in timely manner for Policies participating in
the Investment Account.
Neither the Separate Account nor AUL is under any duty to inquire as to the
instructions received or the authority of Owners or others to instruct the
voting of shares of any of the Portfolios.
If required by state insurance officials, AUL may disregard Owner voting
instructions if such instructions would require shares to be voted so as to
cause a change in sub-classification or investment objectives of one or more of
the Portfolios, or to approve or disapprove an investment advisory agreement. In
addition, AUL may under certain circumstances disregard voting instructions that
would require changes in the investment advisory contract or investment adviser
of one or more of the Portfolios, provided that AUL reasonably disapproves of
such changes in accordance with applicable federal regulations. If AUL ever
disregards voting instructions, Owners will be advised of that action and of the
reasons for such action in the next semiannual report. Finally, AUL reserves the
right to modify the manner in which the weight to be given to pass-through
voting instructions is calculated when such a change is necessary to comply with
current federal regulations or the current interpretation thereof.
Sale of the Policies
The Policies will be offered to the public on a continuous basis, and we do not
anticipate discontinuing the offering of the Policies. However, we reserve the
right to discontinue the offering. Applications for Policies are solicited by
representatives who are licensed by applicable state insurance authorities to
sell our variable life contracts and who are also registered representatives of
AUL. AUL is registered with the SEC under the Securities Exchange Act of 1934 as
a broker-dealer and is a member of the National Association of Securities
Dealers, Inc.
AUL acts as the "principal underwriter," as defined in the 1940 Act, of the
Policies for the Separate Account. We are not obligated to sell any specific
number of Policies.
Registered representatives may be paid commissions on Policies they sell.
Representatives generally will be paid 50% of planned premiums paid in the first
year for premiums up to target premium. For planned premiums paid in excess of
target premium, registered representatives will also receive 3% of that excess.
Additional commissions may be paid in certain circumstances. Other allowances
and overrides also may be paid.
36
<PAGE>
AUL Directors and Executive Officers
The following table sets forth the name and principal occupations during the
past five years of each of AUL's directors and executive officers. Unless
otherwise indicated, the address of each of the following individuals is One
American Square, P.O. Box 368, Indianapolis, Indiana 46206-0368, and the
indicated position is with AUL.
<TABLE>
<S> <C>
Name
Jerry D. Semler Principal Occupation During Past Five Years
President and Chief Operating Officer, 1980-1989;
President & Chief Exec. Officer, 1989-8/91; Chairman of
the Board, Pres. & CEO, 9/91-present; Mental Health
Board, State of Indiana, 10/87-10/91; Dir. Jenn
Foundation Board, 5/92-present; IWC Resources Corp., 4/96-present
John H. Barbre Sr. Vice Pres., Individual Div., 5/80-present
William R. Brown General Counsel & Secretary, 1/85-present; Dir., Health &
Hospital Corp. of Marion County Board, 1/84-1/92; Member,
Metro Development Com. of Indpls., 1/92-10/93; Dir.,
NOLHGA Board, 1/95-present
Charles D. Lineback Sr. Vice Pres., Reinsurance Div., 12/87-present
James W. Murphy Sr. Vice Pres., Corporate Finance, 8/69-present
Jerry L. Plummer Sr. Vice Pres., Human Resources, 1/93-present; V.P.
Human Res., 1/81-1/93
R. Stephen Radcliffe Executive Vice Pres., 8/94-present; Sr. V.P., Chief
Actuary, 5/83-8/94; Director, 2/91-present
G. David Sapp Sr. Vice Pres., Investments, 1/92-present; V.P.,
Securities, 8/75-1/92
William L. Tindall Sr. Vice Pres., Pension Div., 8/97 - present; Sr. Vice
Pres., Massachusetts Mutual Life Insurance Co.,
1993-1997; Vice President Pension Marketing,
Massachusetts Mutual Life Insurance Co., 1987-1993.
Gerald T. Walker Sr. Vice Pres., Group Life & Health Div., 10/89-present
Catherine B. Husman V.P. and Chief Actuary, 7/97-present; V.P. and Corporate
Actuary, 1/84-7/97
Scott A. Kincaid Sr. V.P. & Chief Information Officer, 3/98-present; V.P. & Chief
Information Officer 1/95-3/98; V.P. Data Center, 9/91-1/95
Steven C. Beering, M.D. Director, 2/90-present; Director, NIPSCO Industries, Inc.
575 McCormick Rd. 2/86-present; Director, Arvin Industries, Inc.,
West Lafayette, IN 47906 11/83-present; Director, Eli Lilly, 4/83-present;
President, Purdue University, 2/83-present; Director,
Guidant Corp., 12/94-8/95; Dir., State Life Ins. Co.,
11/94-present
Arthur L. Bryant Director, 11/94-present; President, The State Life
11817 Sand Dollar Ct. Insurance Company, 9/83-present; Chairman of Board, The
Indianapolis, IN 46256 State Life Ins., 2/85-11/94
James M. Cornelius Director, 2/96-present; V.P. & CEO, Eli Lilly & Co.,
1055 Park Place 1/83-1995; Chairman, Guidant Corp., 10/95-present; Dir.
Zoinsville, IN 46077 State Life Ins. Co., 11/94-present, Dir., National Bank
of Indpls., 11/93-present; Dir. Lilly Industries, Inc.,
4/96-present
James A. Dora Director, 2/89-present; Chairman/CEO and Owner, General
5121 Green Braes, E. Dr. Hotels Corp., 1/90-present; President and Owner, General
Indianapolis, IN 46234 Hotels Corp., 1967-1989; Dir., Indiana National Bank,
4/83-10/93; Dir., NBD Bank, N.A. (formerly Indiana
National Bank), 10/93-present; Dir., State Life,
11/94-present
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<PAGE>
Otto N. Frenzel Director, 2/71-present (Chairman of Audit Comm.);
11330 Templin Rd. Chairman, Executive Comm., National City Bank Indiana,
Zionsville, IN 46077 1/96-present; Chrmn. National City Bank Indiana,
10/92-1/96; Dir., National City Corp., 10/92-present;
Chairman, Merchants National Corp., 4/79-1/93; Vice
Chrmn, Merchants National Bank & Trust Co. of Indpls.,
4/86-10/92; Director, Indpls. Water Co., 4/63-present;
Dir., Indian Gas Co., Inc. 1/67-present; Dir. Indpls.
Power & Lights Corp. 4/77-present; Dir. Baldwin & Lyons,
Inc., 5/79-present; Dir. IPALCO Enterprises, Inc.,
9/83-present; Dir., IWC Resources Corp., 3/86-present;
Dir. Indiana Energy, Inc., 10/85-present; Dir., State
Life Ins. Co., 11/94-present
David W. Goodrich Director, 2/95-present; Exec. Vice Pres., F.C. Tucker
6060 Sunset Ln. Co., 1/86-present; Chrmn., Methodist Hosp. of Indiana
Indianapolis, IN 46228 1/93-6/96; Director, The State Life Ins. Co.,
7/90-present; Director, Irwin Financial Corp.,
1/88-present; Director, Citizens Gas & Coke Utility,
9/94-present; Vice Chairman, Clarian Health Partners,
6/96-present
William P. Johnson Director, 7/78-present; Chairman of the Board & CEO,
19448 Rio Verde Dr. Goshen Rubber Co., 7/91-present, Pres. & Treas., Goshen
Goshen, IN 46526 Rubber Co., 9/76-7/91; Pres. & Dir., GNC Corp.,
9/76-7/91; Pres. & Dir., GSH Corp., 7/91-present; Pres. &
Dir. GRN Corp., 9/76-7/91; Chrmn., GRN Corp.,
7/91-present; Pres. & Dir., Goshen Rubber of Canada,
Ltd., 9/76-7/91; Chrmn., Goshen Rubber of Canada, Ltd.,
7/91-present; Dir., Society Bank Ind. (formerly Trustcorp
Inc.) Co. Bend, IN, 2/88-12/95; Member of Advisory Comm.,
Society Bank Ind. Goshen, IN, 2/88-12/95; Dir., Coachman
Industries, 1978-present; Chrmn. & CEO, Syracuse Rubber
Co., 1981-present; Chrmn. & CEO, Bond-Flex Rubber Co.,
4/86-present; Dir., Peetro Go, Inc., 4/86-5/96; Dir.,
Flair Inc., 3/86-present; Dir., Lightfoot Enterprises,
4/86-present; Chrmn., Palmer Plastics, 10/87-present;
Chrmn., Dayton Polymrics, 10/89-present; Chrmn. GR
Plastics, 10/89-present; Chrmn. & CEO, ETI Inc.,
9/92-present; Chrmn. & CEO, GKI Inc., 7/91-present;
Chrmn. & CEO, Prolon, Inc., 10/92-present; Chrmn. & CEO,
Yeasel, Inc., 1/90-present; Chrmn. & CEO, Bower Mfg.,
7/91-present; Dir., State Life Ins. Co., 11/94-present
James T. Morris Director, 2/87-present; Chairman & CEO, Indianapolis
8191 N. Pennsylvania Water Co., 1/92-present; Pres., Indianapolis Water Co.,
Indianapolis, IN 46240 1/89-1/92; Pres., Chrmn. & CEO, IWC Resources Corp.,
1/89-present; Director, MSA Realty Corp., 11/84-9/94;
Dir., National City Bank Corp., 7/89-present; Advisor,
Logo 7, Inc., 9/90-12/91; Dir., Paul Harris,
12/96-present; Dir., State Life Ins. Co., 11/94-present
Thomas E. Reilly, Jr. Director, 2/90-present; Chairman, Reilly Industries,
8877 Pickwick Dr. Inc., 1/90-present; President, Reilly Indus., 1963-1/90;
Indianapolis, IN 46260 Director, Lilly Indus. Inc., 4/81-present; Director, INB
National Bank, 4/84-10/93; Dir. NBD Indiana, subsid. of
NBD Bancorp, 4/84-1994; Dir., NBD Bancorp, 3/94-2/95;
Dir., First Chicago NBD Corp., 2/95-present; Dir.,
Herif Jones Corp., 10/95-present; Dir., State Life Ins. Co.,
11/94-present
William R. Riggs Director, 2/92-present; Attorney (Partner), Ice Miller
7614 Silver Pine Ct. Donadio & Ryan, 6/63-present; Dir., State Life Ins. Co.,
Indianapolis, IN 46250 11/94-present
John C. Scully Director, 11/97-present; President and CEO, LIMRA International
2636 Ocean Dr., # 505 (6/92-11/97); Director, State Life Ins. Co.
Vero Beach, Florida
Yvonne H. Shaheen Director, 8/93-present; Utility Pres., & CEO, Bright
11808 Rolling Springs Dr. Sheet Metal, 2/87-1/95; Pres., & CEO, Long Elec. Co.,
Indianapolis, IN 46032 2/87-present; Dir., Corporate Community Council,
1/93-1/95; Director, Community Hospital Foundation,
1/92-2/96; Dir., Junior Achievement, 4/90-present; Dir.,
National Elec., Contractors Assoc., 1/91-present; Dir.,
Boy Scouts of America, 10/91-present, Director, State
Life Ins. Co., 11/94-present
Frank D. Walker Director, 11/94-present; Chairman of the Board & CEO,
3613 Bay Rd. N. Dr. Walker Information, Inc., 6/60-present; Managing Partner,
Indianapolis, IN 46240 W.R. Properties, 6/84-present; Dir., Citizens Gas & Coke
Utility, 10/87-present; Dir., NBD Bank N.A. Indiana,
4/88-present; Advisor, Wild Birds Unlimited, Inc.,
8/95-present
</TABLE>
38
<PAGE>
State Regulation
AUL is subject to regulation by the Department of Insurance of the State of
Indiana, which periodically examines the financial condition and operations of
AUL. AUL is also subject to the insurance laws and regulations of all
jurisdictions where it does business. The Policy described in this Prospectus
has been filed with and, where required, approved by, insurance officials in
those jurisdictions where it is sold.
AUL is required to submit annual statements of operations, including financial
statements, to the insurance departments of the various jurisdictions where it
does business to determine solvency and compliance with applicable insurance
laws and regulations.
Additional Information
A registration statement under the Securities Act of 1933 has been filed with
the SEC relating to the offering described in this Prospectus. This Prospectus
does not include all the information set forth in the registration statement.
The omitted information may be obtained at the SEC's principal office in
Washington, D.C. by paying the SEC's prescribed fees.
Independent Auditors
The consolidated balance sheets for AUL at December 31, 1997 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year ended December 31, 1997 appearing herein have been audited by Coopers &
Lybrand LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included herein in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Actuarial matters included in this prospectus have been examined by Stephen J.
Pearson, FSA, MAAA, Assistant Vice President and Individual Product Actuary of
AUL.
Litigation
The Separate Account is not a party to any litigation. Its depositor, AUL, as an
insurance company, ordinarily is involved in litigation. AUL is of the opinion
that at present, such litigation is not material to the Owners of the Policies.
Legal Matters
Dechert Price & Rhoads of Washington, D.C. has provided advice on certain
matters relating to the federal securities laws. Matters of Indiana law
pertaining to the Policies, including AUL's right to issue the Policies and its
qualification to do so under applicable laws and regulations issued thereunder,
have been passed upon by Richard A. Wacker, Associate General Counsel of AUL.
Year 2000 Issues and Readiness
In recent years, the Year 2000 problem has received extensive publicity. The
problem arises because most computer systems and programs were written with
dates expressed as a 2 digit code. Unless steps are taken, on January 1, 2000,
many systems may read the year "2000" as "1900" and date-related computations
either would not be processed or would be processed incorrectly. This could have
a material and adverse effect on financial institutions such as banks and
insurance companies like AUL. To prevent this, AUL began assessing the potential
impact in early 1996 and adopted a detailed written work plan in June, 1997 to
deal with Year 2000 issues.
Due to the complexity of this issue and the ever-increasing interrelationships
of computer systems in the United States, it would be extremely difficult for
any company to state that it has or will achieve complete Year 2000 compliance
or to guarantee that its systems will not be affected in any way on January 1,
2000. However, AUL currently believes that all critical computer systems and
software (those systems or software, which would cause great disruption to the
Company if they were inoperable for any length of time or if they were to
generate erroneous data) will, before January 1, 2000, be Year 2000 compliant.
Although AUL has no reason to believe that these steps will not be sufficient to
avoid any material adverse impact from Year 2000 issues and is addressing its
Year 2000 issues by using both internal staff and external consultants, by
replacing hardware, operating systems, and application software, and by
remediating current application software, there can be no assurance that the
Company's efforts will be sufficient to avoid any adverse impact. This project
is currently expected to require more than 285,000 hours of labor at a cost of
approximately $17,000,000, which will be expensed against current operating
funds.
As a part of its plan, the Company has surveyed its primary service providers to
be sure that such providers have taken steps to address the Year 2000 issues.
AUL will continue to periodically monitor the status of all service providers'
Year 2000 efforts.
Financial Statements
AUL's financial statements as of December 31, 1997, are included in this
Prospectus. The financial statements of AUL should be distinguished from
financial statements of the Separate Account and should be considered only as
bearing upon AUL's ability to meet its obligations under the Policies. They
should not be considered as bearing on the investment performance of the assets
held in the Separate Account. Because the Separate Account has not commenced
operations before the date of this Prospectus, no financial statements of the
Separate Account are included in this Prospectus.
39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
American United Life Insurance Company
Indianapolis, Indiana
We have audited the accompanying combined balance sheet of American United Life
Insurance Company(R) and affiliates as of December 31, 1997 and 1996, and the
related combined statements of operations, policyholders' surplus and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of American United Life
Insurance Company(R) and affiliates as of December 31, 1997 and 1996, and the
results of their operations their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
February 27, 1998
40
<PAGE>
COMBINED BALANCE SHEET
December 31, 1997 and 1996 1997(in millions)1996
-------------------------------------------------------------------------
Assets
Investments:
Fixed Maturities:
Available for sale at fair value ........... $ 1,653.8 $ 1,593.4
Held to maturity at amortized cost ......... 2,902.2 3,013.6
Equity securities at fair value ............. 18.6 15.2
Mortgage loans .............................. 1,120.4 1,114.6
Real estate ................................. 52.1 52.3
Policy loans ................................ 143.1 143.5
Short term and other invested assets ........ 102.0 43.8
Cash and cash equivalents ................... 41.2 20.2
-------------------------------------------------------------------------
Total investments ........................... 6,033.4 5,996.6
Accrued investment income ................... 79.3 82.1
Reinsurance receivables ..................... 244.3 209.5
Deferred acquisition costs .................. 421.2 348.2
Property and equipment ...................... 55.5 54.0
Insurance premiums in course of collection .. 72.9 47.5
Other assets ................................ 17.2 35.7
Assets held in separate accounts ............ 1,674.0 1,078.7
-------------------------------------------------------------------------
Total assets ................................ $ 8,597.8 $ 7,852.3
-------------------------------------------------------------------------
Liabilities and policyholders' surplus
Liabilities
Policy reserves ............................ $ 5,642.9 $ 5,688.6
Other policyholder funds ................... 175.2 176.2
Pending policyholder claims ................ 164.3 137.6
Surplus notes .............................. 75.0 75.0
Other liabilities and accrued expenses ..... 201.8 123.4
Liabilities related to separate accounts ... 1,674.0 1,078.7
-------------------------------------------------------------------------
Total liabilities ........................... 7,933.2 7,279.5
-------------------------------------------------------------------------
Unrealized appreciation of securities,
net of deferred income tax ................. 36.5 19.0
Policyholders' surplus ...................... 628.1 553.8
-------------------------------------------------------------------------
Total policyholders' surplus ................ 664.6 572.8
-------------------------------------------------------------------------
Total liabilities and policyholders' surplus $ 8,597.8 $ 7,852.3
-------------------------------------------------------------------------
41
<PAGE>
COMBINED STATEMENT
OF POLICYHOLDERS' SURPLUS
Policyholders' surplus at beginning of year .... $ 572.8 $ 548.9
Net income ..................................... 74.3 52.1
Change in unrealized appreciation (depreciation)
of securities, net ............................. 17.5 (28.2)
- ----------------------------------------------------------------------------
Policyholders' surplus at end of year .......... $ 664.6 $ 572.8
- ----------------------------------------------------------------------------
COMBINED STATEMENT OF OPERATIONS
December 31, 1997 and 1996 1997(in millions)1996
- ---------------------------------------------------------------------------
Revenues:
Insurance premiums and other
considerations ............................... $ 413.9 $ 401.1
Policy and contract charges ................... 69.3 50.4
Net investment income ......................... 464.9 471.8
Realized investment gains ..................... 13.7 6.6
Other income .................................. 5.9 1.2
- ----------------------------------------------------------------------------
Total revenues ................................. 967.7 931.1
- ----------------------------------------------------------------------------
Benefits and expenses:
Policy benefits ............................... $ 386.2 $ 381.9
Interest expense on annuities and
financial products ........................... 257.3 261.6
Underwriting, acquisition and
insurance expenses ........................... 126.6 111.2
Amortization of deferred acquisition costs .... 53.2 49.8
Dividends to policyholders .................... 25.0 26.3
Interest expense on surplus notes ............. 5.8 5.1
Other operating expenses ...................... 9.5 8.7
- ----------------------------------------------------------------------------
Total benefits and expenses ................... 863.6 844.6
- ----------------------------------------------------------------------------
Income before income tax expense .............. 104.1 86.5
Income tax expense ............................ 29.8 34.4
- ----------------------------------------------------------------------------
Net income .................................... $ 74.3 $ 52.1
- ----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
COMBINED STATEMENT OF CASH FLOWS
December 31, 1997 and 1996 1997(in millions)1996
- ---------------------------------------------------------------------------
Cash flows from operating activities:
- ---------------------------------------------------------------------------
Net Income ..................................... $ 74.3 $ 52.1
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred acquisition costs ..... 53.2 49.8
Depreciation ................................... 10.1 9.2
Deferred taxes ................................. 7.3 1.8
Realized investment gains ...................... (13.7) (6.6)
Policy acquisition costs capitalized ........... (90.8) (69.3)
Interest credited to deposit liabilities ....... 252.1 254.7
Fees charged to deposit liabilities ............ (32.9) (19.8)
Amortization and accrual of investment income .. (8.2) (6.2)
Increase in insurance liabilities .............. 140.2 93.9
Increase in noninvested assets ................. (66.3) (44.4)
Increase in other liabilities .................. 35.1 19.6
Net cash provided by operating activities ...... 360.4 334.8
Cash flows from investing activities:
Purchases:
Fixed maturities, Held to Maturity ............. (120.8) (194.4)
Fixed maturities, Available for Sale ........... (348.3) (477.7)
Equity securities .............................. (9.4) (24.7)
Mortgage loans ................................. (155.4) (169.1)
Real estate .................................... (1.9) (3.9)
Short term and other invested assets ........... (43.3) (2.6)
Proceeds from sales, calls or maturities:
Fixed maturities, Held to Maturity ............. 241.2 158.8
Fixed maturities, Available for Sale ........... 335.1 466.4
Equity securities .............................. 7.2 28.7
Mortgage loans ................................. 149.7 175.0
Real estate .................................... 4.3 3.1
Short term and other invested assets ........... 1.6 27.6
Net cash provided (used) by investing activities 60.0 (12.8)
Cash flows from financing activities:
Proceeds from issuance of surplus notes ........ 0 75.0
Deposits to insurance liabilities .............. 713.6 595.2
Withdrawals from insurance liabilities ......... (1,112.5) (984.6)
Change in policyholder dividend liability ...... (.9) 3.6
Decrease (increase) in policy loans ............ .4 (1.9)
Net cash used by financing activities .......... (399.4) (312.7)
Net increase in cash and cash equivalents ...... 21.0 9.3
Cash and cash equivalents beginning of year .... 20.2 10.9
Cash and cash equivalents end of year .......... $ 41.2 $ 20.2
The accompanying notes are an integral part of financial statements.
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
American United Life Insurance Company (AUL) is an Indiana domiciled mutual life
insurance company with headquarters in Indianapolis. AUL is licensed to do
business in 48 states and the District of Columbia and is an authorized
reinsurer in all states. AUL offers individual life and annuity products through
its career agent distribution system. AUL's qualified group retirement plans,
tax deferred annuities and other non-medical group products are marketed through
independent agents and brokers, as well as career agents who are supported by 29
regional sales offices located throughout the country. Life and pooled
reinsurance is marketed directly to other insurance companies. In 1997, AUL
International began operations to develop reinsurance partners in Central and
South America. The combined Company financial statements include the accounts of
AUL and its affiliate, The State Life Insurance Company (State Life).
Significant intercompany transactions have been excluded.
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP). AUL and State Life file
separate financial statements with insurance regulatory authorities which are
prepared on the basis of statutory accounting practices which are significantly
different from financial statements prepared in accordance with GAAP. These
differences are described in detail in Note 9 - Statutory Information.
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Investments
Fixed maturity securities which may be sold to meet liquidity and other needs of
the Company are categorized as available for sale and are stated at fair value.
Fixed maturity securities which the Company has the positive intent and ability
to hold to maturity are categorized as held-to-maturity and are stated at
amortized cost. Equity securities are stated at fair value. Mortgage loans on
real estate are carried at amortized cost less an impairment allowance for
estimated uncollectible amounts. Real estate is reported at cost less allowances
for depreciation. Depreciation is provided (straight line) over the estimated
useful lives of the related assets. Investment real estate is net of accumulated
depreciation of $31.7 million and $28.8 million at December 31, 1997 and 1996,
respectively. Depreciation expense for investment real estate amounted to $2.5
million and $2.4 million for 1997 and 1996, respectively. Policy loans are
carried at their unpaid balance. Other invested assets are reported at cost plus
the Company's equity in undistributed net equity since acquisition. Short term
investments include investments with maturities of one-year or less and are
carried at cost which approximates market. Short term certificates of deposit
and savings certificates are considered to be cash equivalents. The carrying
amount for cash and cash equivalents approximates market.
Realized gains and losses on sale or maturity of investments are based upon
specific identification of the investments sold and do not include amounts
allocable to separate accounts. At the time a decline in value of an investment
is determined to be other than temporary, a provision for loss is recorded which
is included in realized investment gains and losses. Unrealized gains and
losses, resulting from carrying available-for-sale securities at fair value, are
reported in policyholders' surplus, net of deferred taxes.
Deferred Policy Acquisition Costs
Those costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable. Such costs include commissions, certain costs of
policy underwriting and issue and certain variable agency expenses. These costs
are amortized with interest as follows:
For participating whole life insurance products, over the lesser of 30
years or the lifetime of the policy in relation to the present value of
estimated gross margins from expenses, investments and mortality,
discounted using the expected investment yield.
For universal life-type policies and investment contracts, over the lesser
of the lifetime of the policy or 30 years for life policies or 20 years for
other policies in relation to the present value of estimated gross profits
from surrender charges and investment, mortality and expense margins,
discounted using the interest rate credited to the policy.
For term life insurance products and life reinsurance policies, over the
lesser of the benefit period or 30 years for term life or 20 years for life
reinsurance policies in relation to the ratio of anticipated annual premium
revenue to the anticipated total premium revenue, using the same
assumptions used in calculating policy benefits.
For miscellaneous group life and individual and group health policies,
straight line over the expected life of the policy.
For credit insurance policies, the deferred acquisition cost balance is
primarily equal to the unearned premium reserve multiplied by the ratio of
deferrable commissions to premiums written.
44
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Recoverability of the unamortized balance of deferred policy acquisition costs
is evaluated regularly. For universal life-type contracts, investment contracts
and participating whole life policies, the accumulated amortization is adjusted
(increased or decreased) whenever there is a material change in the estimated
gross profits or gross margins expected over the life of a block of business in
order to maintain a constant relationship between cumulative amortization and
the present value of gross profits or gross margins. For most other contracts,
the unamortized asset balance is reduced by a charge to income only when the
present value of future cash flows, net of the policy liabilities, is not
sufficient to cover such asset balance.
Assets Held in Separate Accounts
Separate accounts are funds on which investment income and gains or losses
accrue directly to certain policies, primarily variable annuity contracts and
equity-based pension and profit sharing plans. The assets of these accounts are
legally segregated, and are valued at fair value. The related liabilities are
recorded at amounts equal to the underlying assets; the fair value of these
liabilities is equal to their carrying amount.
Property and Equipment
Property and equipment includes real estate owned and occupied by the Company.
Property and equipment is carried at cost, net of accumulated depreciation of
$41.6 million and $37.2 million as of December 31, 1997 and 1996, respectively.
The Company provides for depreciation of property and equipment using the
straight-line method over its estimated useful life. Depreciation expense for
1997 and 1996 was $7.6 million and $6.8 million, respectively.
Premium Revenue and Benefits to Policyholders
The premiums and benefits for whole life and term insurance products and certain
annuities with life contingencies (immediate annuities) are fixed and
guaranteed. Such premiums are recognized as premium revenue when due. Group
insurance premiums are recognized as premium revenue over the time period to
which the premiums relate. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the life of the
contracts. This association is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of deferred policy
acquisition costs.
Universal life policies and investment contracts are policies with terms that
are not fixed and guaranteed. The terms that may be changed could include one or
more of the amounts assessed the policyholder, premiums paid by the policyholder
or interest accrued to policyholder balances. The amounts collected from
policyholders for these policies are considered deposits, and only the
deductions during the period for cost of insurance, policy administration and
surrenders are included in revenue. Policy benefits and claims that are charged
to expense include interest credited to contracts and benefit claims incurred in
the period in excess of related policy account balances.
Reserves for Future Policy and Contract Benefits
Liabilities for future policy benefits for participating whole life policies are
calculated using the net level premium method and assumptions as to interest and
mortality. The interest rate is the dividend fund interest rate and the
mortality rates are those guaranteed in the calculation of cash surrender values
described in the contract. Liabilities for future policy benefits for term life
insurance and life reinsurance policies are calculated using the net level
premium method and assumptions as to investment yields, mortality and
withdrawals. The assumptions are based on projections of past experience and
include provisions for possible unfavorable deviation. These assumptions are
made at the time the contract is issued. Liabilities for future policy benefits
on universal life and investment contracts consist principally of policy account
values plus certain deferred policy fees which are amortized using the same
assumptions and factors used to amortize the deferred policy acquisition costs.
If the future benefits on investment contracts are guaranteed (immediate
annuities with benefits paid for a period certain) the liability for future
benefits is the present value of such guaranteed benefits. Claim liabilities
include provisions for reported claims and estimates based on historical
experience, for claims incurred but not reported.
Income Taxes
The provision for income taxes includes amounts currency payable and deferred
income taxes resulting from the temporary differences in the assets and
liabilities determined on a tax and financial reporting basis.
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
2. Investments:
The book value and fair value of investments in fixed maturity securities by
type of investment were as follows:
<TABLE>
<CAPTION>
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
<S> <C> <C> <C> <C>
Obligations of U.S. government states,
political subdivisions end foreign governments $ 47.8 $ 4.0 $0.0 $ 51.8
Corporate securities ......................... 1,064.1 55.5 1.8 1,117.8
Mortgage-backed securities ................... 456.8 27.6 0.2 484.2
- ----------------------------------------------------------------------------------------------------------------
$ 1,568.7 $ 87.1 $2.0 $ 1,653.8
- ----------------------------------------------------------------------------------------------------------------
Held to maturity
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 124.2 $ 6.2 $0.3 $ 130.1
Corporate securities ......................... 1,854.4 123.4 3.6 1,9742
Mortgage-backed securities ................... 923.6 55.5 0.2 978.9
- ----------------------------------------------------------------------------------------------------------------
$ 2,902.2 $185.1 $4.1 $ 3,083.2
- ----------------------------------------------------------------------------------------------------------------
December 31, 1997
- ----------------------------------------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
Available for sale: (in millions)
<S> <C> <C> <C> <C>
Obligations of U.S. government, states,
political subdivisions end foreign governments $ 85.2 $ 1.9 $1.3 $ 85.8
Corporate securities ......................... 1,000.0 33.9 7.0 1,026.9
Mortgage-backed securities ................... 463.0 19.1 1.4 480.7
- ----------------------------------------------------------------------------------------------------------------
$ 1,548.2 $ 54.9 $9.7 $ 1,593.4
- ----------------------------------------------------------------------------------------------------------------
Held to maturity:
Obligations of U.S. government, states,
political subdivisions and foreign governments $ 132.0 $ 5.5 $ 1.1 $ 136.4
Corporate securities ......................... 1,891.1 100.1 14.0 1,977.2
Mortgage-backed securities ................... 990.5 44.9 4.4 1,031.0
- ----------------------------------------------------------------------------------------------------------------
$ 3,013.6 $ 150.5 $19.5 $ 3,144.6
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The amortized cost and fair value of fixed maturity securities at December
31,1997, by contractual average maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Available for Sale Held to Maturity Total
Amortized Fair Amortized Fair Amortized Fair
(in millions) Cost Value Cost Value Cost Value
- -----------------------------------------------------------------------------------------------------------
Due in one year or less .............. $ 127.0 $ 127.2 $ 60.8 $ 61.5 $ 187.8 $ 188.7
Due after one year through five years 311.6 318.4 768.5 798.0 1,080.1 1,116.4
Due after five years through ten years 368.9 388.5 738.9 794.7 1,107.8 1,183.2
Due after ten years .................. 304.4 335.5 410.4 450.1 714.8 785.6
- -----------------------------------------------------------------------------------------------------------
1,111.9 1,169.6 1,978.6 2,104.3 3,090.5 3,273.9
Mortgage-backed securities ........... 456.8 484.2 923.6 978.9 1,380.4 1,463.1
- -----------------------------------------------------------------------------------------------------------
$ 1,568.7 $ 1,653.8 $ 2,902.2 $ 3,083.2 $ 4,470.9 $ 4,737.0
- -----------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Net investment income consisted of the following:
for years ended December 31 1997(in millions)1996
- ----------------------------------------------------------------------------
Fixed maturity securities $359.4 $364.0
Equity securities 2.5 2.0
Mortgage loans 100.9 104.4
Real estate 11.5 10.8
Policy loans 8.8 9.0
Other 7.3 6.1
- ----------------------------------------------------------------------------
Gross investment income 490.4 496.3
Investment expenses 25.5 24.5
- ----------------------------------------------------------------------------
Net investment income $464.9 $471.8
- ----------------------------------------------------------------------------
Net realized investment gains and (losses) include write downs and changes in
the reserve for losses on mortgage loans and foreclosed real estate of $(1.3)
million and $.5 million for 1997 and 1996, respectively. Proceeds from the
sales, maturities or calls of investments in fixed maturities during 1997 and
1996 were approximately $576.3 million and $625.2 million, respectively. Gross
gains of $11.6 million and $12.0 million, and gross losses of $1.3 million and
$6.9 million were realized in 1997 and 1996, respectively. The changes in
unrealized appreciation (depreciation) of fixed maturities amounted to
approximately $39.9 million and $(64.3) million in 1997 and 1996, respectively.
At December 31, 1997, the unrealized appreciation on equity securities of
approximately $2.3 million is comprised of $3.8 million in unrealized gains and
$1.5 million of unrealized losses and has been reflected directly in
policyholders' surplus. The change in the unrealized appreciation (depreciation)
of equity securities amounted to approximately $.9 million and $(1.1)million in
1997 and 1996, respectively.
The Company maintains a diversified mortgage loan portfolio and exercises
internal limits on concentrations of loans by geographic area, industry, use and
individual mortgagor. At December 31, 1997, the largest geographic concentration
of commercial mortgage loans was in California, Indiana, and Florida where
approximately 33% of the portfolio was invested. A total of 40% of the mortgage
loans have been issued on retail properties, primarily backed by long term
leases or guarantees from strong credits.
The Company has outstanding mortgage loan commitments at December 31, 1997, of
approximately $117.2 million. As of December 31, 1997, the carrying value of
investments that produced no income for the previous twelve month period was
$1.8 million.
3. Insurance Liabilities: At December 31, 1997 and 1996, insurance liabilities
consisted of the following:
<TABLE>
<CAPTION>
(in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
Withdrawal Mortality or morbidity Interest rate
assumption assumption assumption 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Future policy benefits:
Participating whole life contracts ........... Company Company 2.5% to 6.0% $ 594.5 $ 554.9
experience experience
Universal life-type contracts ................ n/a n/a n/a 376.4 352.0
Other individual life contracts .............. Company Company 6.8% to 10.0% 216.4 183.6
experience experience
Accident and health .......................... n/a n/a n/a 51.0 43.7
Annuity products ............................. n/a n/a n/a 4,213.6 4,397.1
Group life and health ........................ n/a n/a n/a 191.0 157.3
Other policyholder funds ..................... n/a n/a n/a 175.2 176.2
Pending policyholder claims .................. n/a n/a n/a 164.3 137.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total insurance liabilities $ 5,982.4 $6,002.4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Participating life insurance policies under generally accepted accounting
principles represent approximately 9% and 11 % of the total individual life
insurance in force at December 31, 1997 and 1996, respectively. Participating
policies represented approximately 39% and 40% of life premium income for 1997
and 1996, respectively. The amount of dividends to be paid is determined
annually by the Board of Directors.
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
4. Employees' and Agents' Benefit Plans:
The Company has a noncontributory defined benefit pension plan covering
substantially all employees. Company contributions to the employee plan are made
annually in an amount between the minimum ERISA required contribution and the
maximum tax-deductible contribution. Contributions made to the Plan were $2.6
million in 1997 and $2.4 million in 1996. The net periodic pension cost was
$(.5) million and $.6 million for the years ended December 31, 1997 and 1996,
respectively. This includes service cost of $2.2 million and $3.5 million,
interest cost of $1.6 million and $1.4 million, and return on plan assets of
$4.3 million, and $4.3 million for the years ended December 31, 1997 and 1996,
respectively.
The following benefit information for the employees' defined benefit plan was
determined by independent actuaries as of January 1, 1997 and 1996,
respectively, the most recent actuarial valuation dates:
1997 (in millions) 1996
Actuarial present value of accumulated benefits
for the employees' defined benefit plan:
Vested $20.5 $20.1
Nonvested 2.0 .2
- --------------------------------------------------------------------------------
Total accumulated benefits $22.5 $20.3
- --------------------------------------------------------------------------------
Related net assets available for plan benefits $34.0 $28.8
- --------------------------------------------------------------------------------
The Company has a defined contribution plan and a 401(k) plan covering employees
who have completed one full calendar year of service. Annual contributions are
made by the Company in amounts based upon the Company's financial results.
Company contributions to the plan during 1997 and 1996 were $1.4 million and
$1.7 million, respectively.
The Company has a defined contribution pension plan and a 401(k) plan covering
substantially all of the agents, except general agents. Contributions of 3% of
defined commissions (plus 3% for commissions over the Social Security wage base)
are made to the pension plan. An additional contribution of 3% of defined
commissions are made to a 401(k) plan. Company contributions expensed for these
plans for 1997 and 1996 were $268,000 and $612,000, respectively.
The funds for all plans are held by the Company under deposit administration and
group annuity contracts.
The Company also provides certain health care and life insurance benefits (post
retirement benefits) for retired employees and certain agents (retirees).
Employees and agents with at least 10 years of plan participation may become
eligible for such benefits if they reach retirement age while working for the
Company.
The net periodic post retirement benefit cost was $1,035,000 and $956,000 for
the year ended December 31, 1997 and 1996, respectively. This includes service
cost of $336,000 and $255,000, interest cost of $697,000 and $645,000,
amortization of unrecognized loss of $2,000 and $56,000 for the years ended
December 31, 1997 and 1996, respectively.
Accrued post retirement benefits as of December 31: 1997(in millions)1996
- --------------------------------------------------------------------------------
Accumulated post retirement benefit obligation (APBO):
Retirees and their dependents $5.2 $ 4.6
Active employees fully eligible to retire and
receive benefits 3.1 2.6
Active employees not fully eligible 2.6 2.7
Unrecognized loss (1.6) (1.0)
- --------------------------------------------------------------------------------
Total APBO $9.3 $ 8.9
- --------------------------------------------------------------------------------
The assumed discount rate used in determining the accumulated post retirement
benefit was 7.00% and the assumed health care cost trend rate was 10% graded to
5% until 2004. Compensation rates were assumed to increase 6% at each year end.
The health coverage for retirees 65 and over is capped in the year 2000. The
health care cost trend rate assumption has an effect on the amounts reported. An
increase in the assumed health care cost trend rates by one percentage point
would increase the accumulated post retirement benefit obligation as of December
31, 1997, by $885,000 and increase the accumulated post retirement benefit cost
for 1997 by $126,000.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
5. Federal Income Taxes:
A reconciliation of the income tax attributable to continuing operations
computed at U.S. federal statutory tax rates to the income tax expense included
in the statement of operations follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
Income tax computed at statutory tax rate $36.3 $30.3
Tax exempt income (1.5) (1.6)
Mutual company differential earnings amount 6.1 7.5
Prior year differential earnings amount (3.7) (5.6)
Other (7.4) 3.8
- --------------------------------------------------------------------------------
Federal income tax $29.8 $34.4
- --------------------------------------------------------------------------------
The components of the provision for income taxes on earnings included current
tax provisions of $22.5 million and $32.6 million for the years ended December
31, 1997 and 1996, respectively, and deferred tax expense of $7.3 million and
$1.8 million for the years ended December 31, 1997 and 1996, respectively.
Deferred income tax assets (liabilities)
as of December 31: 1997 1996
- --------------------------------------------------------------------------------
(in millions)
Deferred policy acquisition costs $(137.0) $(110.9)
Investments (12.0) (8.1)
Insurance liabilities 154.7 139.0
Unrealized appreciation of securities (21.9) (11.2)
Other (4.7) (4.9)
- --------------------------------------------------------------------------------
Deferred income tax assets (liabilities) $ (20.9) $ 3.9
- --------------------------------------------------------------------------------
Federal income taxes paid were $28.6 million and $39.0 million for 1997 and
1996, respectively.
6. Reinsurance:
The Company is a party to various reinsurance contracts under which it receives
premiums as a reinsurer and reimburses the ceding companies for portions of the
claims incurred. At December 31,1997 and 1996, life Reinsurance assumed was
approximately 71% and 67%, respectively, of life insurance in force.
The Company cedes that portion of the total risk on an individual life in excess
of $1,500,000. For accident and health and disability policies, the Company has
established various limits of coverage it will retain on any one policy owner
and cedes the remainder of such coverage.
Certain statistical data with respect to reinsurance follows:
for years ended December 31 1997 1996
- --------------------------------------------------------------------------------
(in millions)
Direct statutory premiums $369.4 $353.1
Reinsurance assumed 253.9 214.8
Reinsurance ceded 132.3 109.8
- --------------------------------------------------------------------------------
Net premiums 491.0 458.1
- --------------------------------------------------------------------------------
Reinsurance recoveries $103.4 $ 73.5
- --------------------------------------------------------------------------------
The Company accounts for all reinsurance agreements as transfers of risk. If
companies to which reinsurance has been ceded are unable to meet obligations
under the reinsurance agreements, the Company would remain liable. Six
reinsurers account for approximately 57% of the Company's December 31, 1997,
ceded reserves for life and accident and health insurance. The remainder of such
ceded reserves is spread among numerous reinsurers.
7. Surplus Notes and Lines of Credit:
On February 16, 1996, the Company issued $75 million of Surplus Notes, due March
30, 2026. Interest is payable semi-annually on March 30, and September 30 at a
7.75% annual rate. Any payment of interest on or principal of the Notes may be
made only with the prior approval of the Commissioner of the Indiana Department
of Insurance. The Surplus Notes may not be redeemed at the option of AUL or any
holder of the Surplus Notes. Interest paid during 1997 was $5.8 million. The
Company has available a $125 million committed credit facility. No amounts have
been drawn as of December 31, 1997.
8. Commitments and Contingencies:
Various lawsuits have arisen in the ordinary course of the Company's business.
In each of the matters, the Company believes the ultimate resolution of such
litigation will not result in any material adverse impact to operations or
financial condition of the Company.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Pursuant to an Investment Agreement with Indianapolis Life Insurance Company and
the Indianapolis Life Group of Companies (IL Group), the Company has agreed to
purchase from IL Group $27 million of common stock. As of December 31,1997, $8.9
million of this stock was purchased, with an additional $18.1 million committed
to be purchased upon the approval of the Insurance Departments of various
states. Upon purchase of the full commitment, the Company will own 25% of IL
Group's issued and outstanding stock.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
9. Statutory Information:
AUL and State Life prepare statutory financial statements in accordance with
accounting Principles and practices prescribed or permitted by the Indiana
Department of Insurance. Prescribed statutory accounting practices (SAP)
currently include state laws, regulations and general administrative rules
applicable to all insurance enterprises domiciled in a particular state, as well
as practices described in National Association of Insurance Commissioners'
(NAIC) publications.
A reconciliation of SAP surplus to GAAP surplus at December 31 follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
SAP surplus $464.2 $407.9
Deferred policy acquisition costs 447.4 362.7
Adjustments to policy reserves (303.1) (278.3)
Asset valuation and interest maintenance reserves 86.1 106.4
Unrealized gain on invested assets, net 36.5 19.0
Surplus notes (75.0) (75 0)
Deferred income taxes 1.0 16.8
Other, net 7.5 13.3
- --------------------------------------------------------------------------------
GAAP surplus $664.6 $572.8
- --------------------------------------------------------------------------------
A reconciliation of SAP net income to GAAP net income for the years ended
December 31 follows:
for years ended December 31 1997 (in millions) 1996
- --------------------------------------------------------------------------------
SAP income $41.8 $ 51.4
Deferred policy acquisition costs 37.6 19.5
Adjustments to policy reserves (9.2) (15.0)
Deferred income taxes (7.3) (1.8)
Other, net 11.4 (2.0)
- --------------------------------------------------------------------------------
GAAP net income $74.3 $52.1
- --------------------------------------------------------------------------------
Life insurance companies are required to maintain certain amounts of assets on
deposit with state regulatory authorities. Such assets had an aggregate carrying
value of $4.5 million at December 31,1997.
10. Fair Value of Financial Instruments:
The disclosure of fair value information about certain financial instruments is
based primarily on quoted market prices. The fair values of short-term
investments and accrued investment income approximate the carrying amounts
reported in the balance sheets. Fair values for fixed maturity and equity
securities, and surplus notes are based on quoted market prices where available.
For fixed maturity securities not actively traded, fair values are estimated
using values obtained from independent pricing services, or in the case of
private placements, are estimated by discounting expected future cash flows
using a current market rate applicable to the yield, credit quality and maturity
of the investments. The fair value of the aggregate mortgage loan portfolio was
estimated by discounting the future cash flows using current rates at which
similar loans would be made to borrowers with similar credit ratings for similar
maturities.
The estimated fair values of the liabilities for policyholder funds approximate
the statement values because interest rates credited to account balances
approximate current rates paid on similar funds and are not generally guaranteed
beyond one year. Fair values for other insurance reserves are not required to be
disclosed. However, the estimated fair values for all insurance liabilities are
taken into consideration in the Company's overall management of interest rate
risk, which minimizes exposure to changing interest rates through the matching
of investment maturities with amounts due under insurance contracts. The fair
values of certain financial instruments along with their corresponding carrying
values at December 31,1997 and 1996 follow.
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
1997 (in millions) 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
- --------------------------------------------------------------------------------
Fixed maturity securities:
Available for sale $1,653.8 $1,653.8 $1,593 4 $1,593.4
Held to Maturity 2,902.2 3,083.2 3,013.6 3,144.6
Equity securities 18.6 18.6 15.2 15.2
Mortgage loans 1,120.4 1,201.0 1,114.6 1,186.3
Policy loans 143.1 143.1 143.5 143.5
Surplus notes 75.0 79.5 75.0 73.0
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
No dealer, salesman or any other person is authorized by the AUL
American Individual Variable Life Unit Trust or by AUL to give any
information or to make any representation other than as contained in
this Prospectus in connection with the offering described herein.
There has been filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as amended,
with respect to the offering herein described. For further information
with respect to the AUL American Individual Variable Life Unit Trust,
AUL and its variable products, reference is made thereto and the
exhibits filed therewith or incorporated therein, which include all
contracts or documents referred to herein.
================================================================================
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE
Sold By
AMERICAN UNITED
LIFE INSURANCE COMPANY(R)
One American Square
Indianapolis, Indiana 46282
PROSPECTUS
Dated: May 1, 1998
================================================================================
51
<PAGE>
PART II
Undertaking to File Reports
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any regulation of
the Commission heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
Rule 484 Undertaking
Article IX, Section 1 of the by-laws of American United Life Insurance
Company(R) ("AUL") provides as follows:
The corporation shall indemnify any director or officer or former
director or officer of the corporation against expenses actually and
reasonably incurred by him (and for which he is not covered by
insurance) in connection with the defense of any action, suit or
proceeding (unless such action, suit or proceeding is settled) in which
he is made a party by reason of being or having been such director or
officer, except in relation to matters as to which he shall be adjudged
in such action, suit or proceeding, to be liable for negligence or
misconduct in the performance of his duties. The corporation may also
reimburse any director or officer or former director or officer of the
corporation for the reasonable costs of settlement of any such action,
suit or proceeding, if it shall be found by a majority of the directors
not involved in the matter in controversy (whether or not a quorum)
that it was to the interest of the corporation that such settlement be
made and that such director or officer was not guilty of negligence or
misconduct. Such rights of indemnification and reimbursement shall not
be exclusive of any other rights to which such director or officer may
be entitled under any By-law, agreement, vote of members or otherwise.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Depositor pursuant to the foregoing provisions, or otherwise, the Depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Depositor of expenses incurred
or paid by a director, officer or controlling person of the Depositor in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Section 26(e)(2) Representation
AUL, the sponsoring insurance company of the AUL American Individual
Variable Life Unit Trust, hereby represents that the fees and charges deducted
under the Policies are reasonable in relation to the services rendered, the
expenses expected to be incurred and the risks assumed by AUL.
Rule 6e-3(T) Representation
This filing is made pursuant to Rule 6e-3(T) and Rule 6c-3 under the
Investment Company Act of 1940.
<PAGE>
Contents of Registration Statement
This Post-Effective Amendment to the Registration Statement on Form S-6
comprises the following papers and documents:
The facing sheet.
Reconciliation and tie.
The Prospectus (including illustrations).
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26(e)(2).
The Rule 6e-3(T) representation.
The signatures.
Written consent of the following persons (included
in the exhibits shown below):
Independent Public Accountants
Dechert Price & Rhoads
Actuary
The following exhibits:
1. (1) Resolution of the Board of Directors of the Depositor
dated July 10, 1997 concerning AUL American
Individual Variable Life Unit Trust(1)
(2) Inapplicable
(3) (a) Inapplicable
(b) Inapplicable
(c) Schedule of Sales Commissions(2)
(4) Inapplicable
(5) (a) Form of Modified Single Premium Variable Life
Insurance Policy(1)
(b) Form of Last Survivor Rider(1)
(c) Form of Waiver of Monthly Deduction Disability(1)
(d) Form of Guaranteed Insurance Option(1)
2
<PAGE>
(e) Form of Children's Benefit Rider(1)
(f) Form of Other Insured/Same Insured Rider(1)
(g) Form of Waiver of Premium Disability(1)
(h) Form of Automatic Increase Rider(1)
(i) Form of Guaranteed Minimum Death Benefit Rider(1)
(j) Form of Accelerated Death Benefit Rider(1)
(k) Form of Joint First-to-Die Level Term Insurance
Rider(1)
(6) (a) Certification of Articles of Merger between
American Central Life Insurance Company
and United Mutual Life Insurance Company (2)
(b) Articles of Merger between
American Central Life Insurance Company
and United Mutual Life Insurance Company (2)
(b) By-laws of American United Life Insurance
Company(R) (2)
(7) Inapplicable
(8) (a) Form of Participation Agreement between American
United Life Insurance Company(R) and Alger
American Fund (2)
(b) Form of Participation Agreement between American
United Life Insurance Company(R) and American
Century Variable Portfolios, Inc. (2)
(c) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund (2)
(d) Form of Participation Agreement between American
United Life Insurance Company(R) and Fidelity
Variable Insurance Products Fund II (2)
(e) Form of Participation Agreement between American
United Life Insurance Company(R) and T. Rowe
Price Equity Series, Inc. (2)
(9) Inapplicable
(10) Form of Application for Flexible Premium
Adjustable Variable Life Insurance Policy(1)
3
<PAGE>
2. Opinion and consent of legal officer of American United Life
Insurance Company(R) as to legality of Policies being
registered(1)
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Consent of Independent Accountants(2)
7. Consent of Dechert Price & Rhoads(1)
8. Opinion of Actuary(1)
9. Memorandum Describing Issuance, Transfer, and Redemption
Procedures(1)
10. Powers of Attorney(2)
- ---------------
(1) Filed with the Registrant's initial registration statement on Form
S-6 (File No. 333-32531) on July 31, 1997.
(2) Filed with the Registrant's Post-Effective Amendment No. 1 to the
Registration Statement on Form S-6 (File No. 333-32531) on
April 30, 1998.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Post-Effective Amendment to the Registration Statement pursuant to Rule 485(b)
of the Securities Act of 1933 and has duly caused this Post-Effective Amendment
to the Registration Statement (Form S-6) to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis and the
State of Indiana on the 30th day of April, 1998.
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
(Registrant)
By: American United Life Insurance Company
By: __________________________________________
Name: Jerry D. Semler*
Title: Chairman of the Board, President,
and Chief Executive Officer
* By: /s/ Richard A. Wacker
__________________________________________
Richard A. Wacker as attorney-in-fact
Date: April 30, 1998
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment no. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
_______________________________ Director April 30, 1998
Steven C. Beering M.D.*
_______________________________ Director April 30, 1998
Arthur L. Bryant*
_______________________________ Director April 30, 1998
James M. Cornelius*
_______________________________ Director April 30, 1998
James E. Dora*
_______________________________ Director April 30, 1998
Otto N. Frenzel III*
_______________________________ Director April 30, 1998
David W. Goodrich*
_______________________________ Director April 30, 1998
William P. Johnson*
_______________________________ Director April 30, 1998
James T. Morris*
<PAGE>
Signature Title Date
- --------- ----- ----
______________________________ Principal Financial April 30, 1998
James W. Murphy* and Accounting Officer
______________________________ Director April 30, 1998
R. Stephen Radcliffe*
______________________________ Director April 30, 1998
Thomas E. Reilly Jr*
______________________________ Director April 30, 1998
William R. Riggs*
______________________________ Director April 30, 1998
John C. Scully*
______________________________ Director April 30, 1998
Yvonne H. Shaheen*
______________________________ Director April 30, 1998
Frank D. Walker*
________/s/ Richard A. Wacker______________
*By: Richard A. Wacker as Attorney-in-fact
Date: April 30, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS FILED WITH
FORM S-6
For Registration Under the Securities Act of 1933
of Securities of Unit Investment Trust
Registered on Form N-8B-2
AUL AMERICAN INDIVIDUAL VARIABLE LIFE UNIT TRUST
OF AMERICAN UNITED LIFE INSURANCE COMPANY(R)
<TABLE>
<S> <C>
Exhibit Exhibit
Number in Form Numbering
N-4, Item 24(b) Value Name of Exhibit
- ---------------- --------- ---------------
1.3.c EX-99.1.3.c Schedule of Sales Commissions
1.6.a EX-99.1.6.a Certification of Articles of Merger between
American Central Life Insurance Company
and United Mutual Life Insurance Company
1.6.b EX-99.1.6.b Articles of Merger between
American Central Life Insurance Company
and United Mutual Life Insurance Company
1.6.c EX-99.1.6.c By-laws of American United Life Insurance Company(R)
1.8.a EX-99.1.8.a Form of Participation Agreement with Alger
American Fund
1.8.b EX-99.1.8.b Form of Participation Agreement with American
Century Variable Portfolios, Inc.
1.8.c EX-99.1.8.c Form of Participation Agreement with Fidelity
Variable Insurance Products Fund
1.8.d EX-99.1.8.d Form of Participation Agreement with Fidelity
Variable Insurance Products Fund II
1.8.e EX-99.1.8.e Form of Participation Agreement with T. Rowe
Price Equity Series, Inc.
6 EX-99.6 Consent of Independent Accountants
10 EX-99.10 Powers of Attorney
</TABLE>
- --------------------------------------------------------------------------------
EXHIBIT 1.3.c
Schedule of Sales Commissions
- --------------------------------------------------------------------------------
Variable Universal Life Compensation Schedule
Periodic Premium Contract
Career Agent Compensation
First year commission: 50% of target premiums 3% commission on
premiums in excess of target
Renewal commission: 3% years 2-10
1.5% years 11 and after
Trail Commission: .75% asset based trail in year 5; .15% asset
based trail annually thereafter
Riders:
First year commission: 40% of coi's
Renewal commission: 5% of coi's years 2-10
2% of coi's year 11 and after
General Agent Overrides:
First year: 25% of Net Earned Commission
Subsequent years: 1.5% of premium paid years 2-10
1% of premiums paid years 11 and after
Trail override: 20% of writing agent's trail beginning in
year 5
- --------------------------------------------------------------------------------
EXHIBIT 1.6.a
Certification of the Indiana Secretary of State
as to the Filing of the Articles of Merger between
American Central Life Insurance Company
and United Mutual Life Insurance Company
- --------------------------------------------------------------------------------
STATE OF INDIANA
OFFICE OF THE SECRETARY OF STATE
August G. Mueller, Secretary of State
To Whom These Presents Come, Greeting:
WHEREAS, there have been presented to me at this office Articles of Merger in
forty-eight copies whereby AMERICAN CENTRAL LIFE INSURANCE COMPANY,
non-surviving corporation, is merged into the UNITED MUTUAL LIFE INSURANCE
COMPANY, surviving corporation, showing no capital stock, hereinafter designated
as the AMERICAN UNITED LIFE INSURANCE COMPANY.
Said Articles of Merger having been prepared and signed in accordance with "An
Act Concerning Insurance and Declaring an Emergency", approved March 8, 1935.
WHEREAS, upon due examination, I find that they conform to law:
NOW, THEREFORE, I hereby certify that I have this day endorsed my approval upon
the forty-eight copies of Articles so presented, and, having received the fees
required by law, in the sum of $6.50, have filed one copy of the Articles in
this office and returned forty-seven copies bearing the endorsement of my
approval to the surviving corporation. I further certify that said American
Central Life Insurance Company is duly merged into said United Mutual Life
Insurance Company and that the name of the latter is duly changed to AMERICAN
UNITED LIFE INSURANCE COMPANY, and that Section 125 of said Act, approved March
8, 1935, provides that all property, assets and rights of every nature and
wherever situated owned by the non-surviving corporation are transferred and
vested in the surviving corporation.
In Witness Whereof, I have hereunto set my hand and affixed the seal of the
State of Indiana at the City of Indianapolis, this 31st day of December, 1936
[SEAL]
at the hour of 5:00 o'clock P.M.
/s/ August G. Mueller
---------------------
Secretary of State
By: /s/ Joseph O. Hoffman
-------------------------
Deputy
- --------------------------------------------------------------------------------
EXHIBIT 1.6.b
Articles of Merger
between American Central Life Insurance Company
and United Mutual Life Insurance Company
- --------------------------------------------------------------------------------
ARTICLES OF MERGER
OF
AMERICAN CENTRAL LIFE
INSURANCE COMPANY
INDIANAPOLIS, INDIANA
AND
UNITED MUTUAL LIFE
INSURANCE COMPANY
INDIANAPOLIS, INDIANA
<PAGE>
(This page was left blank intentionally)
<PAGE>
ARTICLES OF MERGER
IT IS HEREBY CERTIFIED by the American Central Life Insurance Company and the
United Mutual Life Insurance Company that the following Joint Agreement of
Merger between said corporations has been duly adopted and executed by them,
viz:
THIS JOINT AGREEMENT OF MERGER, made and entered into this 17th day of December,
A. D., 1936, at Indianapolis, Indiana, by and between the AMERICAN CENTRAL LIFE
INSURANCE COMPANY, a corporation duly organized, established, and existing under
and by virtue of the laws of the State of Indiana, as a capital stock life
insurance company (hereinafter designated as the "American Central"), and the
UNITED MUTUAL LIFE INSURANCE COMPANY, a corporation duly organized, established,
and existing under and by virtue of the laws of the State of Indiana, as a
mutual life insurance company (hereinafter designated as the "United Mutual"),
each with its principal office and place of business at Indianapolis, Indiana,
WITNESSETH THAT,
WHEREAS, The laws of the State of Indiana by Acts 1935, Chapter 162,
authorize and empower domestic insurance corporations to enter into joint
agreements of merger and provide the method and procedure for the approval,
adoption, and execution of such agreements and the approval of articles of
merger,
NOW THEREFORE, In consideration of the mutual promises, covenants, and
agreements herein contained and to effectuate a merger of the American Central
and the United Mutual pursuant to the approval and authorization of their
respective boards of directors, the stockholders of the American Central and the
members of the United Mutual and subject to the approval of the necessary
officials and departments of the State of Indiana, all as provided by law, IT IS
HEREBY MUTUALLY AGREED by and between the parties hereto as follows:
1. Merger Agreement and Name of Surviving Corporation:
The American Central Life Insurance Company shall merge into the United
Mutual Life Insurance Company, (which, with its name changed to "AMERICAN UNITED
LIFE INSURANCE COMPANY," shall be and is hereinafter designated as the
"Surviving Corporation"), under the present certificate of authority of the
United Mutual, except for such modification and changes as are specifically set
forth in this Joint Merger Agreement and restatement of its Articles of
Incorporation.
3
<PAGE>
2. Surrender of American Central Stock and Issuance of Participation
Certificates:
Immediately upon the issuance of the Certificate of Merger by the Secretary
of State, stock certificates evidencing ownership of at least eighty-five per
centum (85%) in amount of the capital stock of the American Central shall be
surrendered by Herbert M. Woollen and Harry R. Wilson, as Trustees for American
Central stockholders and owners of Participation Certificates, free and clear of
any pledge, lien or claim of any nature whatsoever to the Surviving Corporation
for cancellation; provided that surrender of a substantial part of the remaining
shares shall be completed within four (4) months from the effective date of said
merger; and provided that coincident with any such surrender and cancellation
and in exchange for said stock certificates and in consideration therefor, there
shall be issued by the Surviving Corporation to said Trustees for delivery to
each owner, in lieu of his certificates of stock in the American Central,
Participation Certificates, in the form hereinafter set forth, entitling him to
such fractional part of the amounts herein called "Conversion Proceeds" less
deductions herein set out as the number of his surrendered shares of stock bears
to 2,740, the total outstanding shares of stock in the American Central. In the
event any shares of American Central stock shall be acquired in accordance with
the provisions of Chapter III, Article V, Section 123 of the Indiana Insurance
Law, or by purchase, Participation Certificates shall be issued for such stock
so acquired or purchased and shall share in the regular distribution of
Conversion Proceeds. Such Participation Certificates shall be held by the
Surviving Corporation as Trustee for the remaining Participation Certificate
owners and the share thereof in the Conversion Proceeds shall be equitably
distributed by the said Trustee among the remaining Participation Certificate
owners. The Surviving Corporation may purchase Participation Certificates for
its own account. The Participation Certificates shall be registered on the books
of the Surviving Corporation and shall be transferable. They shall give the
owners and holders thereof no other or greater rights than stated in such
Certificates and this Agreement, and shall create no liability against the
Surviving Corporation except for Conversion Proceeds, as hereinafter defined,
when, if, and as determined in the manner herein provided.
3. Segregation of American Central Assets and Liabilities American Central
Fund
There shall be created, by proper segregation, designations, and entries
upon the books of the Surviving Corporation, a complete separation, listing, and
accounting of all assets, liabilities, and business of the American Central,
(except those assets taken over by the Surviving Corporation by agreement,) as
the same exist
4
<PAGE>
and are shown by the books and records in the accounting for the American
Central at the close of business on December 31, 1936, which, with all
accretions thereto and depletions therefrom, shall constitute and be known as
the "American Central Fund" and shall continue until all Participation
Certificates are retired as hereinafter provided.
4. Conversion Proceeds Determined Annually and Distributed:
The Conversion Proceeds above mentioned shall be determined in the
following manner: As of December 31, 1936, and annually thereafter until and
including December 31, 1956, a complete annual accounting of the business of the
American Central Fund shall be prepared in the form required for annual
statements to the Indiana Insurance Department.
A. In these statements there shall be credited to the American Central Fund
the following:
a. In the first accounting as of December 31, 1936, all assets received
from the American Central at book values. Subsequent accountings shall
start with the ledger assets at the date of the preceding accounting.
b. All income of any sort derived from business and assets of the
American Central Fund.
c. All profits on sales and maturities of ledger assets and gross
increase by adjustment in book value of ledger assets of the American
Central Fund.
d. Interest, rents and other income, including profits on sales or
maturities and increases by adjustments on that portion, if any, of
the general assets of the Surviving Corporation which is derived from
the business and assets of the American Central Fund, at the net rate
realized by the Surviving Corporation on all of its assets acquired
after this Merger, excluding those transferred from the American
Central and the United Mutual.
B. In said annual statements, there shall be charged as disbursements:
a. All disbursements specifically chargeable to the business and assets
of the American Central Fund. The expenses which cannot be
specifically allocated to the business of the American Central or the
Surviving Corporation, shall be pro-rated between the respective
businesses and assets on the basis hereinafter set forth, it being
expressly understood that no part of the acquisition expense of the
Surviving Corporation shall be charged to the American Central Fund.
5
<PAGE>
b. All investment expenses and investment losses on account of assets of
the American Central Fund.
c. All payments made or credited to owners of Participation Certificates
and dissenting stockholders.
C. In preparing the statements of assets and liabilities, the following
principles shall be followed:
a. All assets received from the American Central with accretions and
substitutions less depletions, shall be included.
b. An amount equal to the value of the undivided part of the general
assets of the Surviving Corporation derived from income from the
business and assets of the American Central Fund shall be included.
c. All policy assets and liabilities and all other non-ledger assets and
liabilities shall be included as required by the Insurance Department
Annual Statement Blank unless otherwise specified herein. Disability
reserves shall be based upon the tables heretofore used by the
American Central.
From the statements prepared as provided herein, the gain or loss of the
Surviving Corporation on account of the business of the American Central shall
be determined. The amount thereof shall constitute the Conversion Proceeds. Any
such loss in excess of gains from other sources and of the existing Fluctuation
Fund as hereinafter provided shall be a first charge against the Conversion
Proceeds of the succeeding year or years until equalized. The determination of
Conversion Proceeds, as herein provided, shall be made annually as of December
31st, and after deducting the amounts provided in Sections 5, 6 and 7 hereof,
the remainder of said Conversion Proceeds shall within ninety (90) days
thereafter be distributed in cash annually for a period ending December 31,
1956, to the registered owners of the Participation Certificates. The Trustees
shall have access at all times to the books and records of the Surviving
Corporation for the purpose of determining the correctness of the accounting, or
for any other purposes. Any expense of any examinations or audits at the request
of the Trustees shall be paid by the Surviving Corporation and charged against
the American Central Fund.
5. Equalization of American Central Surplus as of December 31, 1935:
It is agreed that the capital and surplus of the American Central as of
December 31, 1935, and the surplus of the United Mutual constitute the surplus
of the Surviving Corporation. If necessary to equalize the surplus of the
American Central at the effective date hereof to the amount thereof as of
December 31,
6
<PAGE>
1935, there shall be deducted from the Conversion Proceeds each year beginning
with the accounting for the year 1937 an amount not in excess of ten per centum
(10%) of the Conversion Proceeds created by the operations of that year, which
amounts so deducted shall remain in the American Central Fund.
6. Provision for Fluctuations and Losses" Final Accounting December 31, 1956 -
Appraisal:
In order to provide for fluctuations in the value of investments and other
losses, there shall be deducted an amount equal to twenty per centum (20%) of
the remainder of the Conversion Proceeds after the deduction provided in Section
5 hereof has been made, beginning with the accounting for the year 1939, which
amounts so deducted shall remain in the American Central Fund and be carried as
a liability to be known as the "Fluctuation Fund," against which losses in
excess of gains from other sources may be charged, until December 31,1956,
provided that the maximum of said Fund shall not at any accounting exceed ten
per centum (10%) of the book value of the assets of the American Central Fund,
and provided further that the American Central Committee, as hereinafter
created, shall annually determine the extent to which the further maintenance of
this Fund is reasonably necessary. In the accounting as of December 31, 1956,
the reasonable, fair, normal, average market value of all assets in the American
Central Fund shall be determined by agreement between the American Central
Committee and the Surviving Corporation; or, in the event they are unable so to
agree, by disinterested parties employed by the American Central Committee with
the approval of the Surviving Corporation. In that accounting, the values so
fixed shall be used in determining the Conversion Proceeds payable to the
Participation Certificate owners, and the remainder of the Fluctuation Fund, if
any, shall be distributed as a part of the final accounting and payment. Any
part of the Fluctuation Fund which shall be distributed in accordance with this
agreement shall not be subject to the deduction provided for in Section 7 of
this agreement. Immediately thereupon the Participation Certificates shall be
surrendered for cancellation.
7. Allocation of Conversion Proceeds to Surviving Corporation:
In the accounting for each of the years 1937 and 1938 there shall be
deducted and credited to the surplus of the Surviving Corporation an amount
equal to ten per centum (10%) of the Conversion Proceeds as determined from the
operations during said year. For each of the years 1939 and thereafter such
deduction and credit shall be fifteen per centum (15%).
7
<PAGE>
8. Effective Date of Merger:
The "effective date" of the merger shall be the date of the issuance of the
Certificate of Merger by the Secretary of State, as provided by Chap. III, Art.
V, Sec. 118 of the Indiana Insurance Law.
9. Surviving Corporation Vested with Property and Responsible for Liabilities:
When such merger has been effected, as provided by Chap. III, Art. V, Sec.
125 of the Indiana Insurance Law, the Surviving Corporation shall thereupon and
thereafter possess and be vested with all the rights, privileges, immunities,
powers, and franchises of a public, as well as of a private nature of each of
the corporations, parties hereto; and all property, real, personal, and mixed,
and all debts due on whatever account and all choses in action and all and every
other interest, of or belonging to or due to each of them shall be deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and the title to any real estate, or any interest therein, under the laws
of this State vested in either of the corporations, parties hereto, shall not
revert or be in any way impaired by reason of the merger, and the Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of each of the corporations, parties hereto, in the same manner
and to the same extent as if the Surviving Corporation had itself incurred the
same or contracted therefor. The American Central, its directors, officers and
agents shall make all conveyances, assignments, and do or refrain from all other
acts and deeds deemed necessary, expedient or proper to effectuate the merger,
and to vest in the Surviving Corporation all of the American Central's right,
title and interest in and to said property, and to carry out the full intents
and purposes of the merger, and the Surviving Corporation shall have all rights
of action, legal and equitable possessed by each of the corporations, parties
hereto.
10. Taxes Paid by Owners of Participation Certificates:
The Participation Certificate owners shall pay all state and federal taxes
which may be imposed against said owners upon the portion of the Conversion
Proceeds paid to them; provided that should any state or federal law require
that the said taxes be paid by the Surviving Corporation prior to payment to the
Participation Certificate owners, the Surviving Corporation shall pay the same
and withhold and deduct in the annual accounting the proper prorated amounts
thereof from the amounts payable to the various Participation Certificate
owners.
11. Disbursements and Income - Allocation and Pro-Rata Division:
Whenever, in this Joint Agreement of Merger, reference is made to a
pro-rata division of profits or losses on the undivided
8
<PAGE>
assets of the Surviving Corporation or income from those assets or disbursements
on their account or a division of the general income, expenses or disbursements
of the Surviving Corporation, the following principles shall govern:
A. The items which are derived from the undivided assets, if any, shall be
divided in proportion to the contributions on the one part of the American
Central and on the other part of the United Mutual and the Surviving Corporation
to such undivided assets of the Surviving Corporation.
B-1. The following disbursements of the Surviving Corporation as listed in
the annual statement are considered as specifically chargeable to the American
Central Fund and as such shall be charged as disbursements to that Fund, as
provided for in Section 4, Paragraph B(a) of this Agreement of Merger:
a. All payments of any kind to or for any policyholder, or his or her
beneficiary, on contracts of life insurance or on annuities written or
assumed by the American Central.
b. Amounts paid for claims on supplementary contracts issued or assumed
by the American Central.
c. Expenses of investigation and settlement of American Central policy
and contract claims, including legal expenses.
d. Renewal commissions and first year commissions to agents on life
insurance policies and annuity contracts written by them for the
American Central.
e. All taxes, licenses, and fees laid by any State or the Federal
Government and all other taxes on assets belonging to the American
Central Fund or paid to protect same, and taxes on annuity
considerations or insurance premiums on contracts or policies written
or assumed by the American Central.
f. All bills and accounts and similar obligations incurred by the
American Central prior to date of this merger.
g. Bank exchange on American Central items.
h. American Central agents' balances charged off.
i. Gross loss on sale or maturity of ledger assets of the American
Central Fund.
j. Gross decrease by adjustment in book value of ledger assets of the
American Central Fund.
k. Any other general disbursements clearly allocable to the business and
assets of the American Central Fund.
B-2. The following listed disbursements of the Surviving Corporation are to
be divided between the American Central Fund and the Surviving Corporation in
proportion to the amount of insurance
9
<PAGE>
remaining in force as of December 31st of the preceding year, originally written
or assumed on the one part by the American Central and on the other part by the
United Mutual and the Surviving Corporation:
a. The rent of the two home office buildings, (941 North Meridian Street
and 30 West Fall Creek Parkway). It is understood and agreed that the
building at 941 North Meridian Street will be disposed of by sale or
lease as soon as possible, and at that time the rent on this building
will be dropped from the disbursements.
b. Bureau and association dues and assessments, with the exception of
those of the National Fraternal Congress, M. I. B., Life Insurance
Sales Research Bureau, Association of Life Agency Officers and any
other association of which neither the American Central nor the United
Mutual is now a member, or in which membership would be clearly for
the benefit of the Surviving Corporation. Such excepted membership
costs shall be charged to the Surviving Corporation.
c. Books, newspapers and periodicals not clearly allocable.
d. Postage, express, telegraph, and telephone not clearly allocable.
e. General Office maintenance and expenses not clearly allocable.
f. Legislative expense not clearly allocable.
B-3. The following listed disbursements of the Surviving Corporation are to
be divided in proportion to the actual time devoted, use made, and expense
incurred in carrying out the business of the American Central Fund and the
Surviving Corporation respectively:
a. Salaries and all other compensation of officers, directors, trustees,
and home office employees.
b. Home office travel.
c. Legal expenses not incurred in connection with settlement of policy or
annuity claims.
d. Furniture and fixtures.
e. Printing and stationery.
f. Insurance except on real estate.
g. Investment expense.
h. Miscellaneous expense.
B-4. The division of any general disbursements of the Surviving
Corporation, other than those enumerated in this Section or which are not
clearly allocable to the business and assets of the American Central Fund or of
the Surviving Corporation, shall be made by the
10
<PAGE>
American Central Committee, hereinafter mentioned, in accordance with a survey
of the items of expense.
B-6. Payments to inactive employees, retired prior to the effective date of
or as a result of this merger shall be charged to the American Central Fund if
paid to former employees of the American Central or charged entirely to the
Surviving Corporation if paid to former employees of the United Mutual.
12. American Central Committee:
The by-laws of the Surviving Corporation shall create a Committee to be
known as the "American Central Committee," which shall consist of four (4)
members of the Board of Directors of the Surviving Corporation of whom two (2)
shall be named by the Trustees for the Participation Certificate owners and two
(2) shall be named by the Board of Directors of the Surviving Corporation; the
duties of such Committee shall be:
a. To operate, manage, control, direct, lease, sell, convert, and collect the
assets of the American Central Fund and to reinvest the proceeds thereof
available for reinvestment in such securities as will comply with the
Indiana Insurance Law.
b. To formulate and apply a just and accurate rule or formula for the
distribution of the income and disbursements and the profits and losses of
the American Central Fund where situations and conditions arise not covered
by the terms of this Agreement.
c. To supervise, manage, and control the insurance and reinsurance business of
the American Central Fund as the same exists at the date of the merger and
as the same continues thereafter until the expiration of the term provided
in this Agreement, provided that with respect to the agency field force of
the American Central, it is understood that in the acquisition of new
business the same shall be under the complete supervision, management and
control of the Surviving Corporation, except:
That such agency field force may have the privilege of writing new business
for the Surviving Corporation under the contracts with the American Central
in force on the effective date of the merger and that none of the members
of such agency field force shall be subject to dismissal, nor shall their
contracts be terminated by the Surviving Corporation, unless for willful
violation of the terms of the contract of employment or the rules and
regulations of the Surviving Corporation, or if it be found upon experience
that the acquisition
11
<PAGE>
cost of new business through them is unduly excessive and that proper
measures in accordance with the spirit of their contracts to reduce such
cost to a proper figure are not effective, unless with the approval of the
American Central Committee.
d. Each Committee Member shall have power to designate a suitable person to
act as substitute, provided, however, that not more than two (2)
substitutes shall be permitted at any one time; no action of the Committee
shall be valid unless it is by the unanimous act of all members or
substitutes therefor.
e. The Committee shall choose from its members its own Chairman and Secretary
who shall serve without compensation and neither of whom shall lose his
vote in Committee matters; upon request of the Committee the Secretary of
the Surviving Corporation may, however, act as secretary; Committee
meetings shall be held at the Home Office as frequently as practicable on
call of any two members; full and complete minutes of all Committee
meetings shall be kept, preserved, and reported to the Board of Directors
at each regular meeting thereof; full and complete records and books of
account reflecting truly and accurately all business transactions and the
state and condition of the American Central Fund shall be kept and
maintained and the minutes of the Committee and such books and records
shall be kept in the office of the Secretary of the Surviving Corporation
and shall be open at all times to inspection by the executive officers and
directors of the Surviving Corporation.
f. The Committee shall have no power or authority to waive, alter, change or
amend the provisions, terms and requirements of this Agreement, but all of
the provisions, terms, and requirements hereof shall be binding upon and
controlling over such Committee in all of its actions. If the Committee
cannot agree unanimously with respect to any matter in this Paragraph
hereafter enumerated no further action shall be taken with respect thereto
until the same shall, upon the request of any member thereof, be referred
to and acted upon by the Board of Directors or by the Executive Committee,
which shall promptly review the subject so to it referred and determine the
proper action to be taken with respect thereto, of which action immediate
notice shall be given to the Committee. If such failure to agree shall
occur within fifteen (15) days prior to a regular Board meeting, such
matter shall be referred to the Board; if at any other
12
<PAGE>
time, then such matter shall be referred to the Executive Committee; if
referred to the Executive Committee, the chief executive officer, if he so
desires, may have a period of fifteen (15) days within which to call a
special meeting of the Board to consider such matter. The matters which may
be thus referred to the Board are:
(1) Those matters defined in Paragraph (a) of this Section.
(2) Those matters defined in Paragraph (b) of this Section, so far as they
do not violate the terms of this Agreement.
(3) The administration and handling of the reinsurance in force on the
effective date of the merger and contracts and treaties therefor.
(4) Dealings and relations with the agency field force of the American
Central under contracts in force at the effective date of the merger.
g. Any such by-laws relating to the foregoing subject matter shall be
irrevocable while any Participation Certificates are outstanding.
13. Participation Certificates Form:
The Participation Certificates to be issued to stockholders of the American
Central shall be in the form following:
PARTICIPATION CERTIFICATE
No. _______________ ____Units
AMERICAN UNITED LIFE INSURANCE COMPANY
Indianapolis, Indiana
This certifies that _____________________________________ is the owner of
________________________________ Beneficial Units entitling him to participate
in any and all distributions from certain assets and proceeds therefrom,
designated as the American Central Fund in Articles of Merger executed by
American Central Life Insurance Company and United Mutual Life Insurance
Company, both of Indianapolis, Indiana, by which said corporations were merged
into American United Life Insurance Company, the issuer hereof. Said Articles of
Merger were filed in the office of the
Secretary of State of Indiana on the ____________ day of __________________,
1936, and were recorded in the office of the Recorder of Marion County,
Indiana, in Miscellaneous Record ____________________, page _______ By the
provisions of said Articles of Merger, all holders of shares of capital stock in
American Central Life Insurance Company are entitled to surrender for
cancellation the certificates evidencing said shares and to receive in lieu
thereof a Certificate or Certificates in the form hereof for such the American
Central Fund and the Surviving Corporation in proportion to the amount of
insurance
13
<PAGE>
outstanding 2,740 shares of said stock and the rights of the holder of this
certificate participate shall be in the proportion that the number of units
represented by this certificate bears to the total number (not in excess of
2,740) of shares for which certificates shall be issued.
For the sole protection and the enforcement of the rights of holders of
certificates, of which this Certificate is a part, there has been executed by
American United Life Insurance Company and by Herbert M. Woollen and Harry R.
Wilson, formerly President and Vice President, respectively, of American Central
Life Insurance Company, a written Trust Indenture dated the ____________ day of
_______________________, 1936. The aforesaid Articles of Merger and said Trust
Indenture are made parts of this Participation Certificate, and any holder
hereof is bound by all the terms and conditions of said documents and by the
provisions of the Indiana Insurance Law.
On the effective day of the said Articles of Merger, American United Life
Insurance Company became vested with all of the property and assets of American
Central Life Insurance Company and assumed liability to perform all of its
obligations. As a part of that merger said American United Life Insurance
Company agreed to issue said Participation Certificates in consideration of and
proportionately to the extent of the surrender to it of the shares of capital
stock above described.
The American Central Fund consists of all the assets and liabilities and
business delivered by American Central Life Insurance Company to American United
Life Insurance Company pursuant to said merger as shown by the books and records
of said former company at the close of business on December 31, 1936, with all
subsequent accretions thereto and depletions therefrom until and including the
year 1956.
Before March 31st of each year beginning with 1938 until all Participation
Certificates are retired there shall be determined the gain or loss, which
amount so determined shall constitute what is described in the Articles of
Merger as the Conversion Proceeds.
If necessary to equalize the surplus of the American Central Life Insurance
Company to the amount thereof as of December 31, 1935, an amount not in excess
of ten per centum (10%) of the Conversion Proceeds created by operations of each
respective preceding year shall, in 1938 and each year thereafter, be retained
in the American Central Fund.
Beginning with the accounting for December 31, 1939, and in each year thereafter
until December 31, 1956, there shall be deducted twenty per centum (20%) of the
amount remaining in the Conversion Proceeds after said deduction, which amount
so deducted shall remain in the American Central Fund and shall be known as the
"Fluctuation Fund," which shall serve to provide for fluctuations in the value
of investments and other losses and against which losses in excess of gains from
other sources may be charged, provided that the maximum amount in this
Fluctuation Fund shall at no time exceed ten per centum (10%) of the book value
of the assets in the American Central Fund. Such deductions for the Fluctuation
Fund shall continue so long only as may be reasonably necessary.
In each of the years 1938 and 1939, there shall be deducted and credited to the
surplus of American United Life Insurance Company ten per centum (10%) of the
Conversion Proceeds for distribution in that year; in the year 1940 and in each
year thereafter such deduction shall be fifteen per centum (15%).
The remainder of the Conversion Proceeds after the foregoing deductions and any
expense incurred in accordance with the Trust Agreement shall be distributed
annually at the times and in the manner provided in the Articles of Merger
pro-rata to holders of Participation Certificates.
14
<PAGE>
On or before March 31st, 1957, by methods provided in the Articles of Merger,
there shall be determined the net amount, if any, to be distributed from the
American Central Fund as at the close of business on December 31, 1956, and the
same shall then be distributed pro-rata to Participation Certificate holders,
whereupon all further rights and claims of the owner of this certificate against
any property or assets of American United Life Insurance Company shall cease and
this Certificate and all other certificates shall be deemed fully satisfied and
shall be surrendered for cancellation.
The owner hereof shall have no claim against any of the property or assets of
American United Life Insurance Company except as is described in this
Certificate and in the Articles of Merger, nor is any liability created hereby
except as, and when funds are available as provided in said Articles of Merger
for distribution to the owners of Participation Certificates.
For a more complete description of the American Central Fund, methods of
creating such Fund, principles of debiting and crediting the same in the
determination of the Conversion Proceeds, and of the participation rights of the
holders of these Certificates, there should be examined the aforesaid Articles
of Merger and the Trust Indenture.
All distributions hereunder may be delivered to the person or persons registered
as the owner or owners hereof by valid remittance transmitted by United States
mail addressed to the owner or owners all as is shown by the registration books
of the Company. Or, before making any remittance, the Company may in its
discretion demand production and exhibit of this certificate and, on final
distribution, the surrender hereof.
IN WITNESS WHEREOF, American United Life Insurance Company by its authorized
officers, has hereunto affixed its signature attested by its corporate seal this
____________ day of ____________, 1936.
AMERICAN UNITED LIFE INSURANCE COMPANY
By___________________________
President
ATTEST:
_____________________________
Secretary
(Corporate Seal)
14. American Central Policyholders:
The policyholders of the American Central on the effective date of the merger
shall not participate in the profits of the Surviving Corporation or otherwise,
but their respective policies shall continue to remain non-participating,
provided that any policy issued by the American Central on the participating
basis shall continue to participate in the manner and to the extent provided in
the policy. The rights and obligations between the American Central
policyholders and the Surviving Corporation shall continue unchanged from those
existing between the American Central and said policy. holders prior to the
merger, without change, diminution, or enlargement.
15
<PAGE>
15. Restatement of Articles of Incorporation:
In order to give effect to the merger described herein, it is deemed necessary
and advisable to restate certain of the Articles of Incorporation of the
Surviving Corporation: Such Articles as are so restated and the restatements
thereof are as follows:
ARTICLE I
Sec. 1. NAME AND SEAL: The name of the Corporation shall be American United
Life Insurance Company.
The seal shall be a circular disk around the edge of which shall appear the
words, "American United Life Insurance Company," and in the center of which
shall appear the words "Seal" and "A Mutual Corporation."
ARTICLE II
Sec. 1. TERM OF CORPORATE EXISTENCE: The existence of the Surviving
Corporation shall be perpetual.
ARTICLE III
Sec. 1. MEMBERSHIP - CLASSES OF MEMBERS AND POLICYHOLDERS: The members and
policyholders of the American United Life Insurance Company shall consist of
voting members and non-voting policyholders.
a. VOTING MEMBERS: The voting members shall consist of the present members
of the United Mutual Life Insurance Company and those becoming members of the
American United Life Insurance Company subsequent to the effective date of the
merger.
b. NON-VOTING POLICYHOLDERS: The non-voting policyholders shall consist of
all policyholders of the American Central Life Insurance Company on the
effective date of the merger.
ARTICLE: IV
Sec. 1. BOARD OF DIRECTORS - NUMBER: The number of directors of the
American United Life Insurance Company shall be sixteen (16) and until the first
annual meeting and their successors are elected and qualified and vacancies
filled they shall consist of the following present directors of the United
Mutual Life Insurance Company and the following present directors of the
American Central Life Insurance Company, namely:
Go. A. Bangs Alva M. Lumpkin
Earl B. Barnes William R. O'Neal
Harry C. Byers Gwynn F. Patterson
Russell T. Byers James E. Watson
John W. Craig Harry R. Wilson
Leslie E. Crouch Richard S. Witte
Edward A. Horton Herbert M. Woollen
16
<PAGE>
IN WITNESS WHEREOF, Said parties, respectively, in accordance with resolutions
of their respective Board of Directors, have caused these presents to be signed
in their names by their presidents and have affixed hereto their corporate seals
attested by their secretaries at the City of Indianapolis, Indiana, the day and
year first above written.
AMERICAN LIFE INSURANCE COMPANY
By /s/ Herbert M. Woollen
--------------------------------
President
ATTEST:
/s/ H. W. Buttolph
- --------------------
Secretary
(CORPORATE SEAL)
UNITED MUTUAL LIFE INSURANCE COMPANY
By /s/ Geo. A. Bangs
-------------------------------------
President
ATTEST:
/s/ W.A. Jenkins
- ----------------------
Secretary
(CORPORATE SEAL)
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17 th day of December, 1936, before me appeared Geo. A. Bangs and W. A.
Jenkins, to me personally known, who, being by me duly sworn, did say that they
are the President and the Secretary, respectively, of the United Mutual Life
Insurance Company and that the seal affixed to said instrument is the corporate
seal of said corporation, and that said instrument was signed and sealed in
behalf of said corporation by authority of its Board of Directors, and said Go.
A. Bangs and W. A. Jenkins acknowledged said instrument to be the free act and
deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Alma H. Irwin
- ----------------------------
Notary Public
My commission expires Jan. 15, 1939
- ---------------------------------------
17
<PAGE>
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17th day of December,1936, before me appeared Herbert M. Woollen and H.
W. Buttolph, to me personally known, who, being by me duly sworn, did say that
they are the President and the Secretary, respectively, of the American Central
Life Insurance Company and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Herbert M. Woollen and H. W. Buttolph acknowledged said instrument to be
the free act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Helen L. Clark
- -------------------------
Notary Public
My commission expires: Feb. 23 1938
- -----------------------------------------
IT IS FURTHER CERTIFIED that the signatures appended to the foregoing Joint
Agreement of Merger are the respective signatures of the corporations, parties
thereto, and that the manner of adoption of said Joint Agreement of Merger and
the vote by which adopted by each of said corporations is as follows:
(1) That at a duly called regular meeting of the Board of Directors of the
United Mutual Life Insurance Company, held at its home office on the 15th day of
August, 1936, at which a quorum was present, said Board did unanimously adopt a
resolution approving the Joint Agreement of Merger above set forth; that said
resolution directed that said agreement be submitted to a vote of all of the
members of said corporation entitled to vote in respect thereof at a special
meeting of said members, which was by said resolution called to be held at the
home office of said corporation at 941 N. Meridian Street, Indianapolis,
Indiana, on the 6th day of October, 1936, at the hour of 10:00 o'clock A. M.,
and did further direct that notice of said special meeting be given by the
secretary of the corporation to all members of record in the manner provided by
law; that in compliance with said resolution said secretary did, on the 5th day
of September, 1936, mail a printed notice of the place, day, hour and purposes
of said special meeting to each mem-
18
<PAGE>
ber entitled to vote, at his address as it appeared upon the records of the
corporation; that said special members' meeting was duly held at the place, day
and hour in said notice stated and that there were present and entitled to vote
13 members in person and 27,289 members represented by proxy; that said members
so present in person and represented by proxy constituted a quorum for the
transaction of business under the by-laws of the corporation; that a resolution
approving said Joint Agreement of Merger was duly adopted by said members, and
that the affirmative vote by which said resolution was so adopted was 27,302
votes in favor of and none against its adoption, whereupon said Joint Agreement
of Merger was duly adopted by the corporation; that on the 7th day of October,
1936, and within five days after the adoption of the said Joint Agreement of
Merger as above stated, the secretary of the corporation did mail a printed
notice of the adoption of said Joint Agreement of Merger to each member of
record of the corporation who was not present in person or represented by proxy
at said special meeting of members, and the corporation did on the 8th day of
October, 1936, file with the Indiana Insurance Department an affidavit, signed
by the President and the Secretary, that such notice was given; that no member
or members have, in the manner provided by law or otherwise, objected to the
adoption of said Joint Agreement of Merger or filed a petition with the Indiana
Insurance Department for a hearing thereon; that at a duly called adjourned
regular meeting of the Board of Directors held at the corporation's home office
on the 11th day of December, 1936, at which a quorum was present, said Board did
again consider and by a unanimous vote adopted a resolution reapproving said
Joint Agreement of Merger in all things and authorizing its execution by the
proper officers of the corporation as provided by law; that said adjourned
regular meeting of the Board of Directors was held as soon as practicable after
the expiration of a period of thirty days after the adoption of said Joint
Agreement of Merger by the American Central Life Insurance Company, which
corporation was the last, in point of time, to adopt it.
(2) That at a duly called special meeting of the Board of Directors of the
American Central Life Insurance Company held at its home office on the 31st day
of August, 1936, at which a quorum was present, said Board did unanimously adopt
a resolution approving the above set forth Joint Agreement of Merger; that said
resolution directed that said agreement be submitted to a vote of all of the
shareholders of said corporation entitled to vote in respect thereof at a
special meeting of said shareholders, which was by said resolution called to be
held at the home office of said corporation at 30 West Fall Creek Parkway,
Indianapolis, Indiana, on the 10th day of November, 1936, at the hour of 10:00
o'clock A. M., and did
19
<PAGE>
further direct that notice of said special meeting be given by the secretary of
the corporation to all shareholders of record in the manner provided by law;
that in compliance with said resolution said secretary did, on the 7th day of
October, 1936, deliver or mail a written notice of the place, day, hour and
purposes of said special meeting to each shareholder entitled to vote, at his
address as it appeared upon the records of the corporation; that the said
special meeting was duly held at the place, day and hour in said notice stated
and that there were present in person or represented by proxy 2,619 1/2 shares
of the total 2,740 outstanding shares of capital stock; that said shareholders
so present in person and by proxy constituted a quorum for the transaction of
business under the by-laws of the corporation and more than two-thirds of all
its outstanding capital stock; that a resolution approving said Joint Agreement
of Merger was duly adopted by said shareholders, and that the affirmative vote
by which said resolution was so adopted was 2,619 1/2 votes in favor of and none
against its adoption, whereupon said Joint Agreement of Merger was duly adopted
by the corporation; that on the 10th day of November, 1936, and being within
five days after the adoption of said Joint Agreement of Merger as above stated,
the secretary of the corporation did mail a written notice of the adoption of
said Joint Agreement of Merger to each shareholder of record of the corporation
who was not present in person or represented by proxy at said special meeting of
shareholders, and the corporation did on the 11th day of November, 1936, file
with the Indiana Insurance Department an affidavit, signed by the President and
the Secretary, that such notice was given; that no shareholder has, in the
manner provided by law or otherwise, objected to the adoption of said Joint
Agreement of Merger or demanded payment of the value of his share or shares of
stock; that at a duly called special meeting of the Board of Directors held at
the corporation's home office on the 11th day of December, 1936, at which a
quorum was present, said Board did again consider and by a unanimous vote
adopted a resolution reapproving said Joint Agreement of Merger in all things
and authorizing its execution by the proper officers of the corporation as
provided by law; that said special meeting of the Board of Directors was held as
soon as practicable after the expiration of a period of thirty day after the
adoption of said Joint Agreement of Merger by the shareholders of and by said
corporation.
(3) That pursuant to authorization by their respective Boards of Directors
as hereinbefore stated, said corporations did on the 17 th day of December,
1936, duly execute said Joint Agreement of Merger.
20
<PAGE>
IN WITNESS WHEREOF, said corporations, respectively, have caused these
presents to be signed in such multiple copies as shall be required in their
names by their presidents and have affixed hereto their corporate seals attested
by their secretaries at the city of Indianapolis, Indiana, this 17th day of
December, 1936.
AMERICAN CENTRAL LIFE INSURANCE COMPANY
By /s/ Herbert M. Woollen
---------------------------------------
President
ATTEST:
/s/ H. W. Buttolph
- ---------------------------
Secretary
(CORPORATE SEAL)
UNITED MUTUAL LIFE INSURANCE COMPANY
By /s/ Geo. A. Bangs
----------------------------------------
President
ATTEST:
/s/ W.A. Jenkins
- ---------------------------
Secretary
(CORPORATE SEAL)
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17 th day of December, 1936, before me appeared Herbert M. Woollen and
H. W. Buttolph, to me personally known, who, being by me duly sworn, did say
that they are the President and the Secretary, respectively, of the American
Central Life Insurance Company and that the seal affixed to said instrument is
the corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Herbert M. Woollen and H. W. Buttolph acknowledged said instrument to be
the free act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Helen L. Clark
- -----------------------------
Notary Public
My commission expires: Feb. 26, 1938
- --------------------------------------
21
<PAGE>
STATE OF INDIANA }
}ss:
COUNTY OF MARION }
On this 17th day of December, 1936, before me appeared Geo. A. Bangs and W.
A. Jenkins, to me personally known, who, being by me duly sworn, did say that
they are the President and the Secretary, respectively, of the United Mutual
Life Insurance Company and that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
said Go A. Bangs and W. A. Jenkins acknowledged said instrument to be the free
act and deed of said corporation.
Witness my hand and official seal this 17 th day of December, 1936.
/s/ Alma H. Irwin
- -----------------------
Notary Public
My commission expires: January 15, 1939
- -----------------------------------------
22
- --------------------------------------------------------------------------------
EXHIBIT 1.6.c
Code of By-Laws of American United Life Insurance Company
- --------------------------------------------------------------------------------
CODE OF BY-LAWS
OF
AMERICAN UNITED LIFE INSURANCE COMPANY (R)
ARTICLE I
CORPORATE SEAL AND PRINCIPAL OFFICE
Section 1. Corporate Seal. The corporate seal shall be circular in form
with the words "American United Life Insurance Company (R) " around the top of
its periphery and the words "Seal" and "A Mutual Corporation" through its
center.
Section 2. Principal Office. The principal office and place of business
shall be at One American Square, City of Indianapolis, County of Marion and
State of Indiana.
ARTICLE II
MEMBERSHIP
Section 1. Classes of Members. As provided in the articles of
incorporation, the members of the corporation shall be divided into two classes:
(a) voting members, and (b) non-voting policyholders. The members of each class
shall have such rights, privileges, duties and liabilities, with respect to the
regulation and management of the affairs of the corporation, as are provided in
these By-laws or in the articles of incorporation.
Section 2. Voting Members. The voting members of the corporation shall
consist of those policyholders
(a) who hold insurance certificates issued by the Insurance Department of the
Supreme Lodge Knights of Pythias and
(b) who hold policies issued or assumed by the former American Life Insurance
Company of Detroit, Michigan, and by the former Mutual Savings Life
Insurance Company of St. Louis, Missouri, which were assumed by this
corporation, and
(c) who hold policies of insurance or annuity contracts issued by the
corporation under its present name or under the name United Mutual Life
Insurance Company.
Each voting member continues to be a member of the corporation so long as any
policy or annuity contract, which entitles him to voting membership, remains in
full force and effect.
Section 3. Non-Voting Policyholders. The non-voting policyholders of the
corporation shall consist of those persons (a) who were policyholders in the
American Central Life Insurance Company when that corporation was merged into
this corporation, or (b) who prior to that merger were policyholders in the
American Central Life Insurance Company and subsequently were reinstated as
policyholders. Nothing contained in this Section 3, however, shall disqualify a
policyholder who qualifies as a voting member according to the provisions of
Section 2 of Article II.
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ARTICLE III
MEETINGS OF MEMBERS
Section 1. Annual Meeting. The regular annual meeting of the members of
this corporation shall be held at its principal place of business on the third
Thursday in February of each year at ten a.m. Elections for directors shall be
held at the annual meeting.
Section 2. Special Meetings. Special meetings of the members of the
corporation may be called by the chief executive officer of the corporation, by
the board of directors or by not less than twenty-five percent of the voting
members.
Section 3. Notice of Meetings. Thirty day written notice stating the place,
day and hour of any meetings of members shall be delivered or mailed by the
secretary of the corporation or by the officer or persons calling the meeting to
each member entitled to vote at such meeting at such address as appears upon the
records of the corporation. In the case of special meetings or when otherwise
required by law, the purpose or purposes for which the meeting is called shall
also be stated. With respect to annual meetings of members, notice need not be
given to any member in whose policy of insurance or annuity contract there is a
statement of the time and place of the meeting.
If less than a quorum of voting members attend in person or by proxy, a
majority of the voting members who are present in person or by proxy may
adjourn, without notice other than by announcement at the meeting, until the
number of members required to form a quorum shall attend. No annual meeting of
members may be adjourned to a date later than five months after the close of the
fiscal year of the corporation. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
original meeting.
Section 4. Waiver of Notice. Notice of any meeting of members may be waived
in writing by any member if the waiver sets forth in reasonable detail the time
and place of the meeting and its purpose. Attendance at any meeting in person or
by proxy shall constitute a waiver of notice of such meeting.
Section 5. Voting Rights. Except as hereinafter provided, each voting
member of the corporation shall have the right to cast one vote on each matter
submitted to a vote of the members, regardless of the number of policies or
amount of insurance standing in his name with the corporation.
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Section 6. Voting by Proxy. A member entitled to vote at a meeting of
members may vote either in person or by proxy executed in writing by the member
or the member's duly authorized attorney-in- fact. No proxy shall be voted at
any meeting of members unless the proxy is filed with the secretary of the
meeting at or before the meeting.
Section 7. Quorum. To constitute a quorum at any meeting of members, there
must be at least ten percent of the voting members represented in person or by
proxy. A majority vote of any such quorum shall be necessary for the transaction
of any business at the meeting unless a greater vote is required by law or the
articles of incorporation.
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Duties and Qualifications. The business and affairs of the
corporation shall be managed by a board of directors. Each director shall be a
voting member of the corporation, and the policy of insurance or annuity
contract entitling each director to membership in the corporation shall be free
of liens to secure any debt to the corporation. Each director shall be a citizen
of the U.S. or the Dominion of Canada, and at least one director shall be a
resident of the State of Indiana. No person shall be eligible for election as a
director who has reached, or will reach, his seventieth birthday in the year of
election, and is retired from his business or profession.
Section 2. Number and Terms of Office. The board of directors shall consist
of sixteen members who are elected by the voting members at annual meetings to
serve for terms of three years, and until their successors are elected and
qualified. The board of directors shall be divided into three classes, two of
which consist of five directors and one of which consists of six directors. I he
teens of office of all directors in a particular class shall be identical;
however, the terms of office of each class of directors shall be staggered so
that in every three year period a different class shall be elected at each
succeeding annual meeting of members.
Section 3. Limitation as to Employee or Retired Employee Directors. No more
than five fulltime employees of the corporation or retired employees of the
corporation receiving a pension or other retirement benefits from the
corporation shall be eligible to serve at one time as directors.
Section 4. Vacancies. Any vacancy in the board of directors caused by
death, resignation or disqualification shall be filled by a majority vote of the
remaining members of the board of directors for the unexpired term of the
director whose place is filled. Any vacancy on the board of directors occasioned
by an
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increase in the number of directors shall be filled by a majority vote of the
existing directors for a term ending with the next annual meeting of members of
the corporation.
Section 5. Oath of Office. Each director of the corporation, when elected,
shall take and subscribe to an oath that he will insofar as the duty devolves
upon him, faithfully, honestly and diligently administer the affairs of the
corporation and that he will not knowingly violate or willingly permit violation
of any laws applicable to the corporation.
Section 6. Annual Meetings. Unless otherwise unanimously agreed upon, the
board of directors shall meet each year, immediately following the annual
meeting of members, at the place where the meeting of members was held. This
meeting shall be held for the purpose of organization, election of officers of
the corporation and consideration of any other business which may be brought
before the meeting. No notice shall be necessary for the holding of any annual
meeting of the board of directors.
Section 7. Other Meetings. Meetings of the board of directors, other than
the annual meeting, shall be held regularly once each quarter during the second,
third and fourth quarters of each calendar year, in accordance with a duly
adopted resolution or motion of the board of directors. Special meetings may be
called by the chief executive officer of the corporation, the chairman of the
board or any seven directors, upon five days' notice. The time and general
purposes of any such meeting must be specified and given to each director either
personally or by mail or telegram. No notice shall be necessary for any regular
meeting, and notice of any special meeting may be waived in writing or by
telegram. Attendance at any such meeting shall constitute waiver of notice of
such meeting. All meetings of the board of directors shall be held at the
principal office or at such other place as may be unanimously designated by the
board of directors.
Section 8. Quorum. A majority of the whole board of directors shall be
necessary to constitute a quorum for the transaction of any business except the
filling of vacancies. The act of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the board of directors
unless a greater number is required by law, the articles of incorporation or
these By-laws. If a quorum is not present, a majority of the directors present
may adjourn the meeting from time to time without further notice.
Section 9. Honorary Directors. Any person who has served as the chief
executive officer of the corporation may be elected an honorary member of the
board of directors and shall be privileged to attend all meetings of directors,
but shall have no right to vote.
ARTICLE V
COMMITTEES
Section 1. Standing Committees. The standing committees of the corporation
shall be the following: executive committee, finance committee, and audit
committee. The board of directors may from time to time create other standing
committees as deemed desirable by amending these By-laws.
Section 2. Members of Standing Committees. At its annual meeting, the board
of directors shall designate the members of each standing committee and shall,
except as otherwise provided in these Bylaws, name the chairman thereof. The
members shall serve for a term of one year and until their successors are chosen
and qualified unless sooner removed. The chief executive officer of the
corporation shall be an ex- officio member, with full voting power, of each
standing committee except the Audit Committee. Subject to any limitation imposed
by these By-laws, the board of directors shall have the power at any time to
increase or decrease the number of members of any standing committee, to appoint
or remove members from any standing committee and to fill vacancies on any such
committee.
At any meeting of a standing committee, a designated director may act in the
place of an absent member of such committee with full Voting rights. Each
designated director shall be selected in the following manner: The chief
executive officer shall contact a member or members of the board in alphabetical
order according to the member's last name until he obtains agreement of the
necessary number of directors to attend the standing committee meeting. After
the first selection under this section, contact shall commence with the name
alphabetically following that of the director agreeing to serve.
Section 3. Meetings of Standing Committees. Meetings of each standing
committee may be called by its chairman or by the chief executive officer of the
corporation. Each committee shall hold its meetings in accordance with the rules
of procedure and at locations designated by the majority of the committee
members. Except as otherwise provided by these By-laws, each committee shall
select a secretary, who shall not be required to be a member of the committee,
to record the minutes of all its meetings.
Section 4. Special Committees. Special committees may be designated by a
resolution adopted by a majority of the directors present at any board meeting
at which a quorum is present. Except as otherwise provided in the resolution,
members of each special committee shall be members of the corporation, and the
chief executive officer of the corporation shall appoint the committee members.
Any special committee member may be removed by the person or persons authorized
to appoint such member whenever in their
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judgment the best interests of the corporation shall be served by such removal.
Any special committee shall have only the responsibilities for which it was
created. It shall have no power to act except as specifically conferred upon it
by action of the board of directors. Upon completion of its duties, the special
committee shall be discharged. Each member of a special committee shall serve
the committee until it is discharged unless the member is removed from the
committee or ceases to qualify as a member. Committee vacancies shall be filled
by appointments made in the same manner as provided in the case of the original
appointments.
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ARTICLE VI
COMPOSITION AND DUTIES OF STANDING COMMITTEES
Section 1. Executive Committee. he executive committee shall consist of the
chairman of the board and not less shall three nor more than seven other members
of the board of directors. No member of the committee shall Continue as SUCH
after he ceases to be a member of the board of directors. The chairman of the
board shall be chairman of the committee and a vice-chairman may be designated
by the committee. The committee shall select a secretary from among its members
to keep accurate minutes of all meetings. The minutes shall be presented for
approval to the next regular meeting of the board of directors.
During the intervals between meetings of the board of directors and subject to
such limitations as may be imposed by law. the articles of incorporation or
these By-laws, the executive committee shall have and may exercise all the
authority of the board of directors in the management of the corporation.
However, no action shall be taken which will conflict with the expressed
policies of the board of directors.
Section 2. Finance Committee. The finance committee shall consist of the
chief executive officer, not less than three other members of the board of
directors and not more than two officers of the corporation who are not members
of the board of directors. The secretary of the committee shall keep accurate
minutes of all meetings which shall he presented for approval to the next
regular meeting of the board of directors.
Except as otherwise provided in these By-laws, and subject to law and to the
general control of the board of directors, the finance committee shall
supervise, pass upon and authorize the investment of all funds of the
corporation. It shall have the power to purchase and sell or otherwise acquire
or dispose of real estate, bonds, mortgages, securities or other investments, to
authorize and direct conveyances of real estate and interests therein and
thereunder, including the execution of deeds, leases, releases, discharges and
other related documents, and to direct all other things necessary or incidental
to the authorization, acquisition, supervision, control and disposition of all
the investments of the corporation. I he finance committee shall also perform
such other duties as these By-laws or the board of directors may prescribe.
Section 3. Audit Committee. The audit committee shall consist of three
members of the board of directors. All members of the audit committee shall he
independent directors.
The audit committee shall, prior to the annual meeting, recommend selection of
independent certified public accountants for the fiscal year to the board of
directors. The audit committee shall engage the independent auditors selected by
the voting members, be responsible for establishing the independent audit and
review the results of the independent audit prior to presentation to the board
of directors. The audit committee
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shall also be responsible for establishing the scope of the internal audit
function, reviewing internal controls and following tip on deficiencies noted.
The audit committee will confer with internal auditing, auditors and other
consultants as deemed necessary on significant audit findings and shall report
and make recommendations to the board of directors as necessary.
ARTICLE VII
OFFICERS
Section 1. Number and Qualification. The officers of the corporation shall
consist of a chairman of the board of directors, a president, a chief executive
officer, one or more senior vice presidents and one or more additional vice
presidents, a general counsel, a medical director, a secretary, a treasurer, a
controller, an actuary, and such other officers as the board of directors may
elect in accordance with the provisions of this article. The board of directors
may elect or appoint other assistant or subordinate officers, as it deems
desirable, to have the authority to perform the duties prescribed. The chairman
of the board, the president, and the chief executive officer shall be chosen
from among the directors of the corporation, and if any one of such officers
ceases to he a director he shall cease to hold such office as soon as his
successor is elected and qualified. More shall one office. may be held by the
same person, except the duties of the president and secretary shall not be
performed by the same person.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its annual meeting If
tile election of officers is not held at the annual meeting, the election shall
be held as soon thereafter as is convenient. New offices may be created and
filled at any meeting of the board of directors. Each officer shall hold office
until his successor is duly elected and qualified.
Section 3. Vacancies. Whenever any vacancies occur in any of the offices of
the corporation by reason of death, resignation, disqualification, removal or
otherwise, the office may be filled by the board of directors at a regular or
special meeting I he newly elected officer shall hold office until the next
annual meeting of the board of directors and until his successor is duly elected
and qualified.
Section 4. Removal. Any officer of the corporation elected or appointed by
the board of directors may be removed by the hoard of directors whenever, in its
judgment, the best interest of the corporation would be served. Such removal
shall be without prejudice to any contract rights of the officer so removed.
Section 5. Salaries of Officers and Employees. 'I he salaries of the
chairman of the board, the president, the chief executive officer, all vice
presidents (except regional vice presidents), the secretary, the treasurer, the
controller, medical director, general counsel, actuary, anti of all employees
receiving compensation of $75,000 a year or more, shall be approved by the board
of directors.
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ARTICLE VIII
DUTIES OF OFFICERS
Section 1. Chairman of the Board. The chairman of the board of directors
shall preside at all meetings of members and at all meetings of directors. He
shall be entitled to vote upon questions and motions submitted to vote of the
board of directors only when his vote is required to break a tie. He shall
perform such duties as these By-laws or the board of directors prescribe.
Section 2. President. The president shall have power to perform the duties
prescribed by the board of directors, the chairman of the board, or these
By-laws. Section 3. Vice Presidents. The vice presidents shall have the powers
to perform the duties prescribed by the board of directors, the chief executive
officer of the corporation, or these By-laws.
Section 4. General Counsel. The general counsel shall be the chief
consulting officer of the corporation on all legal matters. He shall, subject to
the control of the board of directors and executive committee, have control of
all legal matters pertaining to the business of the corporation and shall
perform such other duties as these By-laws or the board of directors prescribe.
Section 5. Medical Director The medical director shall he the chief
underwriting officer of the corporation on all medical matters. He shall,
subject to the control of the board of directors and executive committee, have
control of all medical matters pertaining to applications for new insurance or
reinstatement of old insurance, appointment and supervision of medical
examiners, and other medical matters pertaining to the corporation's
underwriting operations. He shall perform other duties as these By-laws or the
board of directors prescribe.
Section 6. Secretary. The secretary shall attend all meetings of members
and meetings of the board of directors and shall be responsible for a true anti
complete record of the proceedings of such meetings. He shall serve notice of
all corporate meetings in accordance with these By-laws, have custody of the
books (except books of account), records and corporate seal of the corporation,
affix the corporate seal to all papers and documents requiring a seal, and
perform other duties as these By-laws or the board of directors prescribe.
Section 7. Treasurer. The treasurer shall be the custodian of all funds,
notes, securities, and instruments of title and valuables belonging to and in
the possession of the corporation. He shall deposit, or
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cause to be deposited, all funds of the corporation not required to be on hand
in the operation of the business, in banks or depositories designated by the
board of directors. He shall disburse the funds of the corporation as
authorized, and take proper vouchers for such disbursements. He shall furnish
the board of directors a statement of the financial condition of the corporation
at or before each annual meeting and perform other duties as these By-laws or
the board of directors prescribe.
Section 8. Controller. The controller shall be responsible for keeping
current and complete records of account, showing accurately the financial
condition of the corporation. He shall assemble budget information and keep
budgetary control of disbursements of the corporation, and perform other duties
as these By-laws or the board of directors prescribe.
Section 9. Actuary. I he actuary shall be the chief consulting officer on
all matters relating to the pricing and designing of insurance contracts issued
by the corporation. He shall, subject to the controls of the board of directors
and executive committee, have control of matters pertaining to premium rates,
dividends, policy values, reserve basis, and benefits provided in the insurance
contracts issued by the corporation. He shall perform such other duties as these
By-laws or the board of directors prescribe.
Section 10. Assistant Officers. Assistant officers that the board of
directors may elect or appoint shall have duties specified by the board of
directors. In the absence of such specification, duties shall be specified by
the officer whom the person was appointed to assist.
Section 11. Chief Executive Officer. The chief executive officer of the
corporation shall be the chairman of the board or the president, as determined
by the board of directors Subject to the general control of the corporation by
the board of directors and the executive committee, the chief executive officer
shall supervise, direct anti control the business and affairs of the corporation
and shall discharge all the unusual functions and duties of his office. Except
as otherwise provided in these By-laws he shall appoint, and at his discretion,
remove employees of the corporation, fix and at times change their compensation,
designate their titles and determine their duties. He shall appoint temporary or
permanent committees of officers and employees as he deems necessary for the
control and supervision of the business. He shall have general supervision and
direction of all of the other officers of the corporation and the employees of
all departments. He shall keep the board of directors and executive committee
fully informed as to the activities of the corporation, and shall prepare and
submit to each annual meeting of members a report on the business of the
corporation for the preceding year and a statement of its current financial
condition. He shall perform such other duties as these By-laws or the board of
directors prescribe.
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ARTICLE IX
INDEMNIFICATION
Section 1. Indemnification of Directors and Officers. The corporation shall
indemnify any director or officer or former director or officer against expenses
actually and reasonably incurred by him (and for which he is not covered by
insurance) in connection with the defense of any action, suit or proceeding
(unless such action, suit or proceeding is settled) in which he is made a party
by reason of being or having been such director or officer, except in relation
to matters as to which he shall be adjudged in such action, suit or proceeding,
to be liable for negligence or misconduct in the performance of his duties. The
corporation may also reimburse any director or officer or former director or
officer for the reasonable costs of settlement of any such action, suit or
proceeding, if it shall be found by a majority of the directors not involved in
the matter in controversy (whether or not a quorum) that it was to the interest
of the corporation that such settlement be made and that such director or
officer was not guilty of negligence or misconduct. Such rights of
indemnification and reimbursement shall not be exclusive of any other rights to
which such director or officer may be entitled under any By-law, agreement, vote
of members or otherwise.
ARTICLE X
MISCELLANEOUS
Section 1. Fiscal Year. I he fiscal year of the corporation begins on the
first day of January of each year and ends on the thirty-first day of December
of the same year.
Section 2. Execution of Instruments. Except as may otherwise be provided by
resolution of the board of directors or executive committee, all contracts,
bills of sale, deeds, mortgages, leases, and other similar instruments, as well
as all policies of insurance and annuity contracts of the corporation, shall be
signed by the chairman of the board or by the president. The secretary, or an
assistant secretary, shall affix the corporate seal and attest the same.
Section 3. Checks. All checks, drafts, notes and other instruments calling
for the payment of money by or to the corporation shall be executed or endorsed
by the officers who the board of directors or executive committee shall specify
by resolution.
Section 4. Bonds and Insurance. All officers, employees and other persons
who have control of or access to the moneys, securities or properties of the
company shall be bonded with adequate surety. Fire, casualty and other insurance
shall also be carried for the protection of the company, its personnel and
property.
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The sufficiency of sureties on all bonds, the contingencies insured against in
such bonds and insurance policies and the amount thereof shall be in compliance
with the requirements of law. A report showing the status of such bonds and
hazard insurance shall be submitted to the board of directors at each annual
meeting.
ARTICLE XI
AMENDMENTS
Section 1. Amendments to By-laws. The power to make, alter, amend or repeal
all or any part of these By-laws is vested in the board of directors, and the
affirmative vote of a majority of all the members of the board of directors
shall be necessary to effect any such change in these By-laws.
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EXHIBIT 1.8.a
PARTICIPATION AGREEMENT WITH ALGER AMERICAN FUND
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FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 14th day of March, 1995, by and between
American United Life Insurance Company(R) (the "Company"), a life insurance
company domiciled in Indiana, on its behalf and on behalf of the segregated
asset accounts of the Company (the "Separate Accounts"); Alger American Fund
(the "Fund"), a Massachusetts business trust; and Fred Alger & Company,
Incorporated (the "Distributor"), a Delaware corporation.
WITNESSETH
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to
issue separate classes of shares of beneficial interests ("shares"), each
representing an interest in a separate portfolio of assets known as a "series"
and each series has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series
to separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of six separate series, and other series may be established in the
future; and
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2
WHEREAS, the Fund has obtained an order from the SEC, granting
Participating insurance Companies, separate accounts funding Variable Contracts
of Participating Insurance Companies, and the Fund exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
paragraph (b)(15) of each of Rules 6e-2 and 6e-3(T) under the 1940 Act, to the
extent necessary to permit shares of the Fund to be sold to and held by separate
accounts funding variable annuity contracts or scheduled or flexible premium
variable life insurance contracts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company wishes to purchase shares of one or more of the Fund's
series on behalf of its Separate Accounts to serve as an investment medium for
Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's series;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
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3
ARTICLE I. Sale of Fund Shares
1.1. The Distributor agrees to sell to the Company those shares of the
series offered and made available by the Fund and identified on Exhibit A
("Series") that the Company orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund.
1.2. The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts; provided, however, that the Trustees of the
Fund may refuse to sell shares of any Series to any person, or suspend or
terminate the offering of shares of any Series, if such action is required by
law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Trustees, acting in good faith and in light of the Trustees'
fiduciary duties under applicable law, necessary in the best interests of the
shareholders of any Series.
1.3. The Fund and the Distributor agree that shares of the Series of the
Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Series being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code") and the regulations thereunder. No shares of any Series will be
sold directly to the general public.
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4
1.4. The Fund and the Distributor will not sell shares of the Series to any
insurance company or separate account unless an agreement containing provisions
substantially the same as this Agreement is in effect to govern such sales.
1.5. Upon receipt of a request for redemption in proper form from the
Company, the Fund agrees to redeem in cash any full or fractional shares of the
Series held by the Company, ordinarily executing such requests on each business
day at the net asset value next computed after receipt and acceptance by the
Fund or its designee of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. 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 Fund or
its designee of notice of the order for redemption; however the Fund reserves
the right to postpone payment upon redemption consistent with Section 22(e) of
the Act and any Rules thereunder.
1.6. For purposes of Sections 1.1 and 1.5, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Separate Account, and receipt by such designee shall constitute receipt by the
Fund; provided that the Company receives the order by the close of business of
the New York Stock Exchange. The Company will use its best efforts to ensure
that the Fund receives notice of such order by 9:30 a.m. New York City time on
the next following business day.
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5
1.7. The Company shall pay for shares of the Series on the business day
next following the day that the Company receives an order to purchase shares of
the Series, except with respect to shares of any Series of the Fund ("Acquired
Series") ordered by the Company for a Separate Account or any subaccount thereof
in connection with an exchange or transfer from another Separate Account or
another subdivision of a Separate Account under the Variable Contracts, Company
shall pay for shares of the Acquired Series on the later of (1) the next
business day after an order to purchase the shares is made in accordance with
Section 1.1 hereof, or (2) on the same business day that the Separate Account
or subdivision from which the exchange or transfer is being made receives
payment from the investment company portfolio in which it invests, but in no
event later than seven days after the purchase order is received by the Company.
Payment shall be in federal funds transmitted by wire or by any other method
mutually agreed upon by the parties hereto.
1.8. Issuance and transfer of shares of the Series will be by book entry
only unless otherwise agreed by the Fund. Stock certificates will not be issued
to the Company or the Separate Accounts unless otherwise agreed by the Fund.
Fund and Distributor agree that shares ordered from the Fund will be recorded as
specified in such orders in an appropriate title for the Separate Accounts or
the appropriate subaccounts of the Separate Accounts.
1.9. The Fund shall promptly furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the shares of the Series. The Company
hereby elects to reinvest in the Series all such dividends and distributions as
are payable on a Series' shares and to receive such
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6
dividends and distributions in additional shares of that Series. The Company
reserves the right to revoke this election in writing and to receive all such
dividends and distributions in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.10. The Fund shall instruct its recordkeeping agent to advise the Company
on each business day of the net asset value per share for each Series as soon as
reasonably practical after the net asset value per share is calculated, which is
normally 6:30 p.m. New York City time and shall use its best efforts to make
such net asset value per share available by 9:00 p.m. New York City time.
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 Indiana law and that it is taxed as an
insurance company under Subchapter L of the Code.
2.2. The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Indiana Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under Indiana law.
<PAGE>
7
2.3. The Company represents and warrants that the Variable Contracts issued
by the Company or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4. The Company represents and warrants that each of the Separate
Accounts: (1) has been registered as a unit investment trust in accordance with
the provisions of the 1940 Act or, alternatively (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5. The Company represents that it believes, in good faith, that the
Variable Contracts issued by the Company are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6. The Company represents and warrants that any of its Separate Accounts
that fund variable life insurance contracts and that are registered with the SEC
as investment companies, rely on the exemptions provided by Rule 6e-2 or Rule
6e-3(T), or any successor thereto under the 1940 Act.
<PAGE>
8
2.7. The Fund represents and warrants that it is a business trust duly
organized and in good standing under the laws of Massachusetts.
2.8. The Fund represents and warrants that the shares of the Series are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.9. The Fund represents that it believes, in good faith, (i) that the
Series currently comply with the diversification provisions of Section 817(h) of
the Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity contracts
and (ii) that each Series has complied with such provisions since its
commencement of operations.
2. 10. 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.
ARTICLE III. General Duties
3.1. The Fund shall take all such actions as are necessary under applicable
federal and state law to permit the sale of the shares of each Series to the
Separate Accounts, including maintaining its registration as an investment
company under the 1940 Act, and registering the shares of the Series sold to the
Separate Accounts under the 1933 Act for so long as required by applicable law.
The Fund shall amend its Registration Statement filed with the SEC under
<PAGE>
9
the 1933 Act and the 1940 Act from time to time as required in order to permit
the continuous offering of the shares of the Series. The Fund shall register and
qualify the shares of the Series for sale in accordance with the laws of the
various states to the extent deemed necessary by the Fund or the Distributor.
3.2. The Fund shall make every effort to maintain qualification of each
Series as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.
3.3. The Fund will invest assets of the Series in such a manner to permit
the Series to be used for investment by Separate Accounts of life insurance
companies funding variable annuity or life insurance contracts, whichever is
appropriate, under the Code and the regulations thereunder (or any successor
provisions). Without limiting the scope of the foregoing, the Fund shall make
every effort to enable each Series to comply with the diversification provisions
of Section 817(h) of the Code and the regulations issued thereunder relating to
the diversification requirements for variable life insurance policies and
variable annuity contracts and any prospective amendments or other modifications
to Section 817 or regulations thereunder, and shall notify the Company
immediately upon having a reasonable basis for believing that any Series has
ceased or might cease to comply.
3.4. Fund agrees to use its best efforts to ensure that each Series of the
Fund shall be managed consistent with its investment objective or objectives,
investment policies, and invest-
<PAGE>
10
ment restrictions as described in the Fund's prospectus and registration
statement, as amended or modified from time to time.
3.5. The Company shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Company, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.6. The Company shall make every effort to maintain the treatment of the
Variable Contracts issued by the Company as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future. In the event that a change in
the Code or in the regulations thereunder or in an interpretation thereof makes
it unreasonable for the Company to continue to treat Variable Contracts as
annuity contracts or life insurance policies, whichever is appropriate, then the
Company shall, as soon as may be practical under the circumstances, notify the
Fund and the Distributor of its intent or plans with respect to such affected
annuity contracts or life insurance policies.
3.7. The Company shall require that any persons who offer and sell the
Variable Contracts issued by the Company do so in accordance with applicable
provisions of the 1933
<PAGE>
11
Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law
respecting the offering of variable life insurance policies and variable annuity
contracts.
3.8. The Distributor shall sell and distribute the shares of the Series of
the Fund in accordance with the applicable provisions of the 1933 Act, the 1934
Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.9. A majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.10. 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.
<PAGE>
12
3.11. The Company shall, at least annually, submit to the Board of Trustees
of the Fund such reports, materials or data as the Trustees may reasonably
request so that the Trustees may carry out the obligations imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and data shall
be submitted more frequently if deemed appropriate by the Board of Trustees.
ARTICLE IV. Potential Conflicts
4.1. The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Insurance Companies that invest in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of the Fund or any
Series are being managed; or (e) a decision by a Participating Insurance Company
to disregard the voting instructions of Variable Contract Owners.
4.2. The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees. The Company
will be responsible for
<PAGE>
13
assisting the Board of Trustees of the Fund in carrying out its responsibilities
under this Agreement, by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This includes, but is not
limited to, an obligation by the Company to inform the Board whenever Variable
Contract Owner voting instructions are disregarded. The Company shall carry out
its responsibility under this Section 4.2 with a view only to the interests of
the Variable Contract Owners.
4.3. The Company agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Company shall, in cooperation with other Participating Insurance Companies whose
Variable Contract owners are affected, at its own expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
Trustees of the Board of the Fund), take whatever steps are necessary to
eliminate the irreconcilable material conflict, including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Series and reinvesting such assets in a different investment medium, which may
include another series of the Fund, or submitting the question of whether such
segregation should be implemented to a vote of all affected Variable Contract
Owners and, as appropriate, segregating the assets of any appropriate group
(i.e., Contract Owners of Variable Contracts issued by one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected Variable Contract Owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account. If a material irreconcilable conflict arises because of the Company's
decision to disregard Variable Contract Owners' voting instructions and that
<PAGE>
14
decision represents a minority position or would preclude a majority vote, the
Company shall be required, at the Fund's election, to withdraw the Separate
Accounts' investment in the Fund, and no charge or penalty will be imposed as a
result of such withdrawal. The Fund shall neither be required to bear the costs
of remedial actions taken to remedy a material irreconcilable conflict nor shall
it be requested to pay a higher investment advisory fee for the sole purpose of
covering such costs. In addition, no Variable Contract Owner shall be required
directly or indirectly to bear the direct or indirect costs of remedial actions
taken to remedy a material irreconcilable conflict. A majority of the
disinterested members of the Board of Trustees of the Fund shall determine
whether any proposed action adequately remedies any material irreconcilable
conflict, but in no event will the Fund be required to establish a new funding
medium for any Variable Contract. A new funding medium for any Variable Contract
need not be established by the Company pursuant to this Section 4.3, if an offer
to do so has been declined by vote of a majority of Variable Contract Owners who
would be adversely affected by the irreconcilable material conflict. All reports
received by the Fund's Board of Trustees of potential or existing conflicts, and
all Board action with regard to determining the existence of a conflict,
notifying Participating Insurance Companies and the Fund's investment adviser of
a conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees of
the Fund or other appropriate records, and such minutes or other records shall
be made available to the SEC upon request. The Company and the Fund shall carry
out their responsibilities under this Section 4.3 with a view only to the
interests of the Variable Contract Owners.
<PAGE>
15
4.4. The Board of Trustees of the Fund shall promptly notify the Company in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2. The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current prospectus for the
Variable Contracts issued by the Company and the current prospectus for the
Fund. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Company shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Company.
5.3. The Fund and the Distributor shall provide (1) at the Fund's expense,
one copy of the Fund's current Statement of Additional Information ("SAI") to
the Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Com-
<PAGE>
16
pany's expense, such additional copies of the Fund'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.
5.4. The Fund, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Company.
The Fund, at the Company's expense, shall provide the Company with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Company.
5.5. For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act ("Registered Separate
Accounts"), the Company shall vote shares of each Series of the Fund held in
Registered Separate Accounts or subaccounts thereof, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Company (or its designated agent) from owners of Variable Contracts funded by
such
<PAGE>
17
Registered Separate Accounts or subaccounts thereof having a voting interest in
the Series. The Company shall vote shares of a Series of the Fund held in
Registered Separate Accounts or subaccounts thereof that are attributable to the
Variable Contracts as to which no timely instructions are received, as well as
shares held in such Registered Separate Accounts or subaccounts thereof that are
not attributable to the Variable Contracts and owned beneficially by the Company
(resulting from charges against the Variable Contracts or otherwise), in the
same proportion as the votes cast by owners of the Variable Contracts funded by
that Separate Account or subaccount thereof having a voting interest in the
Series from whom instructions have been timely received. The Company shall vote
shares of each Series of the Fund held in its general account or in any Separate
Account that is not registered under the 1940 Act, if any, in its discretion or
in the same proportion as the votes cast with respect to shares of the Series
held in all Registered Separate Accounts of the Company or subaccounts thereof,
in the aggregate. The Company agrees to take steps so that each Registered
Separate Account or subaccount thereof investing in the Fund calculates voting
privileges in a reasonable manner which will be communicated to the Company by
the Fund and that such manner will be consistent with other registered variable
annuity or variable life insurance separate accounts investing in the Fund.
5.6. To the extent applicable, the Fund shall disclose in its prospectus,
in substance, that: (1) shares of the Series of the Fund are offered to
affiliated or unaffiliated insurance company separate accounts which fund both
annuity and life insurance contracts, (2) due to differences in tax treatment or
other considerations, the interests of various Variable Contract Owners
participating in the Fund or a Series might at some time be in irreconcilable
conflict,
<PAGE>
18
and (3) the Board of Trustees of the Fund will monitor for any material
irreconcilable conflicts and determine what action, if any, should be taken.
ARTICLE VI. Sales Material and Information
6.1. 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 (or any Series thereof) or its investment adviser or the
Distributor is named, and no such sales literature or other promotional material
shall be used without the prior approval of the Fund and the Distributor or the
designee of either. The Fund and the Distributor shall use their best efforts to
provide such approval or, if approval is not given, then to provide comments
suggesting appropriate changes to any piece of sales literature or other
promotional material within two (2) business days of receipt of such materials.
6.2. The Company agrees that neither it nor any of its affiliates shall
give any information or make any representations or statements on behalf of the
Fund or concerning the Fund 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
and/or by the Distributor or its designee, except with the prior permission of
the Fund or its designee and/or the Distributor or its designee.
<PAGE>
19
6.3. The Fund or the Distributor or the designee of either shall furnish to
the Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Separate Accounts are named, and no such
material shall be used without the prior approval of the Company or its
designee.
6.4. The Fund and the Distributor agree that each and the affiliates of
each shall not give any information or make any representations on behalf of the
Company or concerning the Company, the Separate Accounts, or the Variable
Contracts issued by the Company, other than the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the prior permission of the Company.
6.5. The Fund will provide to the Company at least one complete copy of all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6. The Company will provide to the Fund at least one complete copy of all
prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the
<PAGE>
20
Company or interests therein are not registered under the 1933 Act), Statements
of Additional Information, reports, solicitations for voting instructions, and
all amendments or supplements to any of the above, that relate to the Variable
Contracts issued by the Company or the Separate Accounts promptly after the
filing of such document with the SEC or other regulatory authority.
6.7. For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1. Indemnification By the Company
7.l (a). The Company agrees to indemnify and hold harmless the Fund, each
of its Trustees and officers and the Distributor and each of the Directors and
officers of the
<PAGE>
21
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 expenses (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
litigation expenses:
(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 (which shall include an offering memorandum) for the Variable
Contracts issued by the Company or sales literature for such Variable
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement or prospectus for the
Variable Contracts issued by the Company or in sales literature (or any
amendment or supplement to any of the foregoing) or otherwise for use in
connection with the sale of the Variable Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations (1) contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control, or (2) contained in the registration statement,
prospectus, SAI, or sales literature for the Variable Contracts made in
reliance upon and in conformity with information furnished to the Company
by or on behalf of the Fund or the Distributor) or wrongful conduct of the
Company or persons under the control thereof with respect to the sale or
distribution of the Variable Contracts issued by the Company or the 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 thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated
<PAGE>
22
therein or necessary to make the statements therein not misleading if such
a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) arise out of or result from the material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof
7.l(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations or
duties under this Agreement or to the Fund.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such 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
Party shall have received notice of such service on any 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 an Indemnified Party, 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
<PAGE>
23
defense thereof, with counsel satisfactory to the Indemnified Party named in the
action. After notice from the Company to such 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.
7.1(d). The Indemnified Parties shall 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 hereunder or the Variable Contracts
issued by the Company or the operation of the Fund provided that such litigation
or proceedings relate to or affect the interests of the Company.
7.2. Indemnification By the Distributor
7.2(a). The Distributor agrees to indemnify and hold harmless the Company
and each of its directors and officers and the Separate Accounts (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 Distributor) or litigation expenses (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 litigation expenses:
<PAGE>
24
(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 or the designee of either 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 to any
of the foregoing) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations (1) contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by
the Distributor or persons under the control thereof, or (2) contained in
the registration statement, prospectus, SAI, or sales literature for the
Fund made in reliance upon and in conformity with information furnished to
the Fund by or on behalf of the Company) or wrongful conduct of the Fund or
Distributor or persons under their control with respect to the sale or
distribution of the Variable Contracts or the 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 Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by the Distributor or by or on behalf of the Fund; or
(iv) arise out of or result from the 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 or the Fund, including but not limited to, compliance with
the diversification requirements of Section 817(h) of the Code and
qualification of each Series of the Fund as a Regulated Investment Company
under Subchapter M of the Code;
<PAGE>
25
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.
7.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such 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 Party shall have received notice of 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 case any such action is brought against an
Indemnified Party, the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the Indemnified Party
named in the action. After notice from the Distributor to such party of the
Distributor's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Distributor will not be liable to such party under this Agree-
<PAGE>
26
meet for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.2(d). The Company shall promptly notify the Distributor of the
commencement of any litigation or proceedings against any Indemnified Party in
connection with the issuance or sale of the Fund shares hereunder or the
Variable Contracts issued by the Company or the operation of the Separate
Accounts provided that such litigation or proceedings relate to or affect the
interests of the Fund or the Distributor.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Indiana.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
<PAGE>
27
ARTICLE IX. Termination
9.1. This Agreement shall terminate:
(a) at the option of any party upon 90 days advance written notice to
the other parties, unless a shorter time is agreed to by the parties to
this Agreement; or
(b) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable Contracts
issued by the Company, as determined by the Company, and upon written
notice by the Company to the other parties to this Agreement; or,
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Company by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body if the Fund
or the Distributor shall determine, in its sole judgment exercised in good
faith, that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body
if the Company shall determine, in its sole judgment exercised in good
faith, that the Fund or the Distributor has suffered a material adverse
change in its business, operations, financial condition, or prospects since
the date of this Agreement or is the subject of material adverse publicity;
or
<PAGE>
28
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to
substitute the shares of another investment company or series thereof for
the corresponding shares of the Fund or a Series in accordance with the
terms of the Variable Contracts for which those shares had been selected to
serve as the underlying investment media; or
(f) in the event any of the shares of a Series 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 Contracts issued or to be issued by the Company; or
(g) at the option of any party to the Agreement upon a determination
by a majority of the Trustees of the Fund, or a majority of its
disinterested Trustees, that an irreconcilable material conflict exists; or
(h) at the option of the Company if the Fund or a Series fails to meet
the diversification requirements specified in Section 3.2 or 3.3 hereof; or
(i) at the option of the Fund or the Distributor if the Variable
Contracts issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if the Variable
Contracts are not registered, issued or sold in accordance with applicable
state and/or federal law; or
(j) at the option of the Company upon any substitution of the shares
of another investment company or series thereof for shares of the Fund or a
Series in accordance with the terms of the Contracts, provided that the
Company has given at least 45 days prior written notice to the Fund or
Distributor of the date of the substitution.
<PAGE>
29
(k) at the option of the Company upon a material breach of this
Agreement or of any representation or warranty herein by the Fund or the
Distributor, or at the option of the Fund or the Distributor upon a
material breach of this Agreement or of any representation or warranty
herein by the Company.
9.2. Each party to this Agreement shall promptly notify the other parties
to the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.l(c) and (d) hereof. The Company shall
give 45 days prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3. Under the terms of the Variable Contracts, the Company reserves the
right, subject to compliance with the law as then in effect, to make
substitutions for the securities that are held by a Separate Account of Company
under certain circumstances. The parties acknowledge that Company has the right
to substitute other securities for the shares of the Fund or a Series already
purchased or to be purchased in the future if the shares of the Fund or any or
all of the Series should no longer be available for investment, or if, in the
judgment of Company management, further investment in shares of the Fund or any
or all of the Series thereof should become inappropriate in view of the purposes
of the Contracts. Company will provide 45 days written notice to the Fund or to
the Distributor prior to effecting any such substitution.
<PAGE>
30
9.4. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund: The Alger American Fund
75 Maiden Lane
New York, New York 10038
Attn: Gregory Duch
If to the Distributor: Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Attn: Gregory Duch
If to the Company: American United Life Insurance Company(R)
One American Square
Indianapolis, Indiana 46206
Attn: Richard A. Wacker
ARTICLE XI.
11. 1. The Fund 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 appli-
<PAGE>
31
cable, the Fund and the Company shall each take such steps as may be necessary
to comply with such Rule as amended or adopted in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that the Agreement has been executed on behalf of the Fund by a Trustee of
the Fund in his or her capacity as Trustee and not individually. The obligations
of this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Trustee, officer or shareholder of the Fund
individually.
11.3. It is understood that the name "American United Life Insurance
Company(R)", "AUL", or any derivative thereof or logo associated with that name
is the valuable property of the Company and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect. Upon termination of this Agreement the Company shall
forthwith cease to use such name (or derivative or logo).
11.4. It is understood that the name "Alger", or any derivative thereof or
logo associated with that name is the valuable property of the Distributor and
its affiliates, and that the Company has the right to use such name (or
derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Company shall forthwith cease to use such name
(or derivative or logo).
<PAGE>
32
11.5. The Fund and the Distributor 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
the Variable Contracts acquired in the course of performing under this Agreement
and agree not to use such information for any purpose without the prior written
consent of the Company.
11.6. 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.
11.7. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.9. 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
<PAGE>
33
executed as of the day and year first above written.
THE ALGER AMERICAN FUND
ATTEST: __________________ BY: __________________
Name: Nanci Staple Name: Gregory Duch
Tile: Secretary Title: Treasurer
FRED ALGER & COMPANY, INCORPORATED
ATTEST: __________________ BY: __________________
Name: Nanci Staple Name: Gregory Duch
Tile: Secretary Title: Treasurer
AMERICAN UNITED LIFE INSURANCE COMPANY(R)
ATTEST: __________________ BY:___________________.
Name: Richard A. Wacker Name: James H. Akins, Jr.
Tile: Associate General Counsel Title: Vice President
Pension Contracts
<PAGE>
34
Exhibit A
List of Series Currently available to American United Life Insurance
Company(R):
Alger American Growth Portfolio
- --------------------------------------------------------------------------------
EXHIBIT 1.8.b
PARTICIPATION AGREEMENT WITH AMERICAN CENTURY PORTFOLIOS, INC.
- --------------------------------------------------------------------------------
FUND PARTICIPATION AGREEMENT
American United Life Insurance Company (the "Company") and TCI Portfolios,
Inc. ("TCIP") and its investment adviser, Investors Research Corporation
("Investors Research") hereby agree to an arrangement whereby shares of TCI
Growth (the "Fund") shall be made available to serve as underlying investment
media for Individual and Group Annuity Contracts ("Contracts") to be offered to
the public by the Company, subject to the following provisions:
1. Establishment of Account; Availability of Fund.
The Company represents that it has established or will establish one or
more separate accounts (an "Account") under state insurance law, each of which
is or will be registered as a unit investment trust under the Investment Company
Act of 1940 (the "1940 Act"), to serve as an investment vehicle for the
Contracts. The Contracts provide for the allocation of net amounts received by
the Company to separate series of an Account for investment in the shares of a
specified investment company selected from among those companies available
through an Account to act as underlying investment media. Selection of a
particular series of an Account is made by the Contract owner, who may change
such selection from time to time in accordance with the terms of the applicable
Contract.
2. Marketing and Promotion.
The Company agrees to make every reasonable effort to market its Contracts.
It will not give disproportionately unequal emphasis and promotion to shares of
the Fund as compared to other underlying investments of an Account. In addition,
the Company shall not
<PAGE>
2
impose any fee, condition, rule or regulation for the use by a Contract owner of
the Fund as an investment option that operates to the specific prejudice of the
Fund vis-a-vis the other investment options offered by the Company to Contract
owners. In marketing and administering its Contracts, the Company will comply
with all applicable state and Federal laws.
3. Pricing Information; Orders; Settlement.
(a) TCIP will make Fund shares available to be purchased by the Company on
behalf of an Account at the net asset value applicable to each order. Fund
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
Contracts for which the Fund serves as underlying investment media.
(b) TCIP 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 will send directly to TCIP or its specified agent orders to purchase
and/or redeem Fund shares by 10:00 a.m. Eastern Time the following business day.
Payment for net purchases will be wired by the Company to a custodial account
designated by TCIP to coincide with the order for shares of the Fund.
(c) TCIP hereby appoints the Company as its agent for the limited purpose
of accepting purchase and redemption orders for Fund shares from Contract
owners. Orders from Contract owners received by the Company acting as agent for
TCIP prior to the close of the Exchange on any given business day will be
executed by TCIP at the net asset value determined as of the close of the
Exchange on such business day. Any orders received by the
<PAGE>
3
Company acting as agent on such day but after the close of the Exchange will be
executed by TCIP at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be paid in cash
and will be wired by TCIP from the TCIP custodial account to an account
designated by the Company. Payment for net redemptions will ordinarily be wired
one business day after the order for the redemptions has been sent by the
Company to TCIP or its specified agent.
4. Compliance.
(a) In managing and administering TCIP,. TCIP and Investors Research will
comply in all material respects with all applicable state and Federal securities
laws.
(b) TCIP and Investors Research shall use their respective best efforts to
ensure that the Fund qualifies and continues to qualify as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code (or any
successor or similar provision).
(c) TCIP and Investors Research shall use their respective best efforts to
ensure that the Fund complies and maintains compliance with the diversification
provisions of Section 817(h) of the Internal Revenue Code and the regulations
issued thereunder relating to the diversification requirements for variable
annuity contracts, and with any prospective amendments or other modifications to
Section 817 or regulations thereunder.
(d) Unless it notifies the Company with reasonable promptness that it does
not intend to do so, TCIP shall take all steps necessary to adhere to any
requirements under tax or insurance law or otherwise that pertain to the Fund by
virtue of serving as an investment media for the Contracts for which notice is
provided to TCIP by the Company.
(e) Investors Research shall notify the Company with reasonable promptness
after
<PAGE>
4
having a reasonable basis for believing that the Fund has ceased to comply or
likely will cease to comply with any of the requirements described or referenced
in Section 4(a), (b), (c), or (d) of this Agreement.
(f) TCIP and Investors Research represent and warrant that as of the date
of this Agreement the shares of the Fund are duly authorized for issuance in
accordance with applicable law, that the shares of the Fund are registered with
the Securities and Exchange Commission ("SEC") as securities under the
Securities Act of 1933 (the "1933 Act") and that TCIP is registered as an
open-end management investment company under the 1940 Act.
5. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by TCIP under this Agreement shall be paid by Investors
Research or TCIP, including the cost of registration of TCIP's shares with the
SEC and in states where required.
(b) TCIP shall provide to the Company its proxy materials, periodic fund
reports to shareholders and other materials that are required by law to be sent
to Contract owners. In addition, TCIP shall provide the Company with a
sufficient quantity of its prospectuses to be used in connection with the
offerings and transactions contemplated by this Agreement. The cost of preparing
and printing such materials shall be paid by Investors Research or TCIP, and the
cost of distributing such materials shall be paid by the Company; provided,
however, that at any time TCIP reasonably deems the usage of such materials to
be excessive, it may request that the Company pay the cost of printing
(including press time and paper) of any additional copies of such materials
requested by the Company.
6. Representations.
The Company and its agents shall not, without the written consent of TCIP,
make
<PAGE>
5
representations concerning TCIP or its shares except those contained in the then
current prospectuses, registration statement and in the then current printed
sales literature of TCIP.
7. Administration of Accounts.
(a) Administrative services to purchasers of Contracts shall be the
responsibility of the Company and shall not be the responsibility of TCIP or
Investors Research. TCIP and Investors Research recognize the Company as the
sole shareholder of TCIP shares issued under this Agreement. TCIP and Investors
Research further recognize that they will derive a substantial savings in
administrative expense, such as significant reductions in postage expense and
shareholder communications and recordkeeping, by virtue of having a sole
shareholder rather than multiple shareholders. In consideration of the
administrative savings resulting from such arrangement, Investors Research
agrees to pay to the Company an amount equal to 15 basis points (0.15%) per
annum of the average aggregate amount invested by the Company under this
Agreement, commencing with the month in which the average aggregate investment
by the Company (on behalf of the Contract owners) in the Fund exceeds $10
million. No payment obligation shall arise until the Company's average aggregate
investment in the Fund reaches $10 million, and such payment obligation, once
commenced, shall be suspended with respect to any month during which the
Company's average aggregate investment in the Fund drops below $10 million.
(b) Investors Research has advised the Company that it customarily pays,
out of its management fee, another affiliated corporation for the type of
administrative services to be provided by the Company to the Contract holders.
The parties agree that Investors Research's payments to the Company, like
Investors Research's payments to its affiliated corporation, are for
administrative services only and do not constitute payment in any manner for
investment
<PAGE>
6
advisory services or for costs of distribution.
(c) For the purposes of computing the payment to the Company contemplated
by this Section 7, the average aggregate amount invested by the Company over a
one month period shall be computed by totaling the Company's aggregate
investment (share net asset value multiplied by total number of shares held by
the Company) on each business day during the month and dividing by the total
number of business days during such month.
(d) Investors Research will calculate the payment contemplated by this
Section 7 at the end of each calendar quarter and will make such payment to the
Company within 30 days thereafter. The check for such payment will be
accompanied by a statement showing the calculation of the monthly amounts
payable by Investors Research and such other supporting data as may be
reasonably requested by the Company.
8. Termination.
This Agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or TCIP upon 90 days' advance
written notice to the other;
(b) at the option of the Company if shares of the Fund are not available
for any reason or if the Company shall reasonably determine in good faith that
further investment in shares of the Fund is inappropriate in view of the
purposes of the Contracts, provided that reasonable advance notice of election
to terminate shall be furnished by the Company;
(c) at the option of either the Company or TCIP, upon institution of formal
proceedings against the broker-dealer or broker-dealers underwriting the
Contracts, the Account, the Company, Investors Research or TCIP by the National
Association of Securities Dealers, Inc. (the "NASD"), the SEC or any other
regulatory body;
<PAGE>
7
(d) at the option of TCIP, if TCIP shall reasonably determine in good faith
that the Company is not offering shares of the Fund in conformity with the terms
of this Agreement;
(e) upon termination of the Management Agreement between TCIP and Investors
Research, notice of which shall be promptly furnished to the Company; provided,
however, that this subsection (e) shall not apply if contemporaneously with such
termination a new contract of substantially similar terms is entered into
between TCIP and Investors Research;
(f) upon the requisite vote of Contract owners having an interest in the
Fund to substitute for Fund shares the shares of another investment company in
accordance with the terms of Contracts for which Fund shares had been selected
to serve as an underlying investment medium; provided, however, that the Company
shall give 60 days' written notice to TCIP of any proposed vote to replace the
Fund's shares;
(g) upon assignment of this Agreement, unless made with the written consent
of all other parties hereto;
(h) if TCIP's shares are not registered, issued or sold in conformance with
Federal or applicable state law or such law precludes the use of Fund shares as
the underlying investment medium of Contracts issued or to be issued by the
Company, provided that prompt notice shall be given by either party should such
situation occur;
(i) at the option of the Company by written notice to the other parties in
the event that the Fund ceases to qualify as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code or in the event that the Fund
fails to meet the diversification requirements specified in Section 4(c) of this
Agreement, or if the Company reasonably believes in good faith that the fund may
fail to so qualify as a Regulated Investment Company or may fail to meet such
diversification requirements; or
<PAGE>
8
(j) at the option of any party in the event that a majority of the Board of
TCIP determines that a material irreconcilable conflict exists as provided in
Section 14 of this Agreement.
9. Continuation of Agreement.
Termination as the result of any cause listed in Section 8 shall not affect
TCIP's obligation maintain an account in the name of the Company on behalf of
those Contract owners who selected the Fund as an investment option prior to the
termination of this Agreement; provided, however, TCIP shall have no
administrative services payment obligation to the Company after such
termination.
10. Substitution.
The Company has advised TCIP and Investors Research, and TCIP and Investors
Research understand that the Contracts provide that the Company reserves the
night to substitute the shares of another investment company or series thereof
for the shares of TCIP if such shares are no longer available for investment, or
if, in the judgment of the Company's management, further investment in the
shares of the Fund would be inappropriate in view of the purposes of the
Contracts. The Company hereby represents that all determinations of
appropriateness will be reasonably made in good faith.
11. Advertising Materials; Filed Documents.
(a) Advertising and literature with respect to TCIP prepared by the Company
or its agents for use in marketing its Contracts will be submitted to TCIP for
review before such material is submitted to the SEC or NASD for review.
(b) TCIP will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and semi-
<PAGE>
9
annual reports, proxy statements and all amendments or supplements to any of the
above that relate to the Fund promptly after the filing of such document with
the SEC or other regulatory authorities. The Company will provide to TCIP 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 an Account
promptly after the filing of such document with the SEC or other regulatory
authority.
12. Proxy Voting.
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges. It shall be the responsibility of the Company to
assure that it and the separate accounts of the other Participating Companies
(as defined in Section 14(a) below) participating in the Fund calculate voting
privileges in a consistent manner. TCIP and Investors Research agree to advise
the Company if either shall be notified by a Participating Company of a change
in the calculation of voting privileges.
(b) The Company will distribute to Contract owners all proxy material
furnished by TCIP and will vote shares in accordance with instructions received
from such Contract owners. The Company shall vote TCIP shares for which no
instructions have been received in the same proportion as shares for which such
instructions have been received. The Company and its agents shall not oppose or
interfere with the solicitation of proxies for TCIP shares held for Contract
owners.
13. Indemnification.
(a) The Company agrees to indemnify and hold harmless TCIP and each of its
<PAGE>
10
directors, officers, employees, agents and each person, if any, who controls
TCIP or its investment adviser within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which TCIP 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 (i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, prospectus or sales literature of the Company 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, or arise out of or as a result of conduct, statements or
representations (other than statements or representations contained in the
registration statement, as amended, the prospectuses or sales literature of
TCIP) of the Company or its agents, with respect to the sale and distribution of
Contracts for which the shares of the Fund are the underlying investment, or
(ii) result from a breach of material provision of this Agreement. The Company
will reimburse any legal or other expenses reasonably incurred by TCIP or any
such director, officer, employee, agent, investment adviser, or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; 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 alleged untrue
statement or omission or alleged omission made in such Registration Statement,
prospectus or sales literature in conformity with written materials furnished to
the Company by TCIP or Investors Research specifically for use therein.
(b) Investors Research agrees to indemnify and hold harmless the Account,
<PAGE>
11
Company and each of its directors, officers, employees, 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 Account, the Company 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 (i) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales literature of the
Fund 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 material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (ii) result from a breach of a material provision of this
Agreement. Investors Research will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, employee,
agent, or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Investors
Research 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
alleged untrue statement or omission or alleged omission made in such
Registration Statement, prospectuses or sales literature in conformity with
written materials furnished to TCIP by the Company specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party of the commencement thereof, 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
<PAGE>
12
Section 13. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish to, assume the defense thereof, with counsel 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 13 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
14. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by TCIP on December 21, 1987, with the SEC and the order
issued by the SEC 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 Directors of TCIP (the "Board") will monitor TCIP for the existence of
any material irreconcilable conflict between the interests of the
contractholders of all separate accounts ("Participating Companies") investing
in TCIP. An irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory authority; (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 actions 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 any portfolio
are being managed; (v) a difference in voting instructions given by variable
annuity contractholders and variable life insurance
<PAGE>
13
contractholders; or (vi) a decision by an insurer to disregard the voting
instructions of contractholders. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of which it
is 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 includes, but is not limited to, an obligation by the Company to
inform the Board whenever contractholder voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contractholder investments in the Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is 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 Account from the Fund and
reinvesting such assets in a different investment medium or submitting
the question of whether such segregation should be implemented to a
vote of all affected contractholders 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 contractholders the option of making such
a change; and/or
(ii) establishing a new registered management investment company or
<PAGE>
14
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contractholders having an interest in TCIP, the Company at its sole cost,
may be required, at the Board's election, to withdraw the Account's investment
in TCIP and terminate this Agreement; provided, however, that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this Section 14, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will TCIP be
required to establish a new funding medium for any Contract. The Company shall
not be required by this Section 14 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.
15. 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, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party
<PAGE>
15
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.
To the Company: American United Life Insurance Company
One American Square
Indianapolis, Indiana 42606-0368
Attention: Richard A. Wacker
To TCI or Investors Research:
TCI Portfolios, Inc.
4500 Main Street
Kansas City, Missouri 64111
Attention: Patrick A. Looby
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 between the parties hereto and supersedes all prior agreement and
understandings relating to the subject matter hereof.
<PAGE>
16
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers as of this 1st day of March 1994.
AMERICAN UNITED LIFE INSURANCE
COMPANY
By: ____________________________
Name: James H. Akins, Jr.
Title: Vice President
INVESTORS RESEARCH CORPORATION
By: ____________________________
Name: William M. Lyons
Title: Executive Vice President
TCI PORTFOLIOS, INC.
By: ____________________________
Name: Patrick A. Looby
Title: Vice President
AMENDMENT NO. 1 TO
FUND PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT is made and entered
into as of the 31st day of August, 1994, by and among AMERICAN UNITED LIFE
INSURANCE COMPANY (the "Company"), TCI PORTFOLIOS,INC. ("TCIP") and its invest-
ment adviser, INVESTORS RESEARCH CORPORATION ("Investors Research"). Capitalized
terms not otherwise defined herein shall have the meaning ascribed to them in
the Agreement (defined below).
WITNESSETH
WHEREAS, the Company, TCIP and Investors Research are parties to a Fund
Participation Agreement (the "Agreement") dated as of March 1, 1994, whereby
shares of TCI Growth, a series of mutual fund shares registered under the
Investment Company Act of 1940 and issued by TCIP, were made available by TCIP
to serve as underlying investment media for individual and group annuity
contracts to be issued through one or more separate accounts established by the
Company under state law; and
WHEREAS, the Company, TCIP and Investors Research now desire to modify the
Agreement so that shares of TCI International (another series of registered
mutual fund shares issued by TCIP) may be made available to the Company to serve
as underlying investment media for such contracts.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties agree as follows:
1. From the date hereof pursuant to the terms of the Agreement, as
amended from time to time, shares of TCI International shall be made
available to serve as underlying investment media for the Contracts.
2. The Company represents that it has established the All American
Individual Separate Account and the All American Group Separate
Account (the "Accounts") as separate accounts under Indiana Insurance
Law to serve as investment vehicles for the Contracts. The Accounts
are registered as unit investment trusts under the Investment Company
Act of 1940 to serve as investment vehicles for the Contracts.
3. All references to "Account" under the Agreement shall be deemed to
refer to the Accounts under this First Amendment.
4. From and after the date hereof, unless the context otherwise requires,
all references in the Agreement to the term "Fund" shall be deemed to
include TCI International.
5. In the event that there is any conflict between the terms of this
Amendment No. 1 and the Agreement, it is the intention of the parties
hereto that the terms of this Amendment No. 1 shall
<PAGE>
2
control, and the Agreement shall be interpreted on that basis. To the
extent that the provisions of the Agreement have not been amended by
this Amendment No. 1, the parties hereto hereby confirm and ratify the
Agreement.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of
the date first above written.
AMERICAN UNITED LIFE INSURANCE COMPANY
By: ___________________________________
Name: James H. Akins, Jr.
Title: Vice President Pensions
Contracts to Compliance
INVESTORS RESEARCH CORPORATION
By: ___________________________________
William M. Lyons
Executive Vice President
TCI PORTFOLIOS, INC.
By: ___________________________________
William M. Lyons
Executive Vice President
AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 2 TO FUND PARTICIPATION AGREEMENT is made and entered
into as of the 16th day of September 1997, by and among AMERICAN UNITED LIFE
INSURANCE COMPANY (the "Company"), AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.,
formerly known as TCI Portfolios, Inc. (the "Issuer"), and its investment
adviser, AMERICAN CENTURY INVESTMENT MANAGEMENT, INC., formerly known as
Investors Research Corporation (the "Adviser"). Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Agreement (as
defined below).
WHEREAS, the Company, the Issuer and the Adviser are parties to a Fund
Participation Agreement, dated as of March 1, 1994 and amended as of August 31,
1994 (the "Agreement"), whereby shares of VP Capital Appreciation, formerly
known as TCI Growth, and shares of VP International, formerly known as TCI
International, each of which is a series of mutual fund shares registered under
the Investment Company Act of 1940, as amended, and issued by the Issuer
(collectively, the "Funds"), were made available by the Issuer to serve as
underlying investment media for individual and group annuity contracts to be
issued through one or more separate accounts established by the Company under
state law; and
WHEREAS, the Company offers or will offer to the public certain individual
and group variable life insurance contracts (the "Variable Life Contracts"); and
WHEREAS, the Company, the Issuer and the Adviser now desire to modify the
Agreement so that shares of the Funds may be made available to the Company to
serve as underlying investment media for the Variable Life Contracts in addition
to the annuity contracts.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises expressed herein, the parties hereto hereby agree as follows:
1. The Company represents that it has established or will establish one
or more separate accounts (each a "Variable Life Account") under state
insurance law, each of which is or will be registered as a unit
investment trust under the 1940 Act, to serve as investment vehicles
for the Variable Life Contracts.
2. From and after the date hereof, pursuant to the terms of the Agreement
as amended from time to time, shares of the Funds shall be made
available to serve as underlying investment media for the Variable
Life Contracts in addition to the annuity contracts.
3. From and after the date hereof, unless the context otherwise requires,
(a) references in the Agreement to the term "Account" shall be deemed
to include the Variable Life Accounts and (b) references in the
Agreement to the term "Contracts" shall be deemed to include the
Variable Life Contracts.
<PAGE>
2
4. In the event that there is any conflict between the terms of this
Amendment No. 2 and the Agreement, it is the intention of the parties
hereto that the terms of this Amendment No. 2 shall control, and the
Agreement shall be interpreted on that basis. To the extent that the
provisions of the Agreement have not been amended by this Amendment
No. 2, the parties hereto hereby confirm and ratify the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2
as of the date first above written,
AMERICAN UNITED LIFE INSURANCE COMPANY
By: ______________________________________
Name: Richard A. Wacker
Title: Associate General Counsel
AMERICAN CENTURY INVESTMENT
MANAGEMENT, INC.
By: ______________________________________
William M. Lyons
Executive Vice President
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
By: ______________________________________
William M. Lyons
Executive Vice President
- --------------------------------------------------------------------------------
EXHIBIT 1.8.c
PARTICIPATION AGREEMENT WITH FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN UNITED LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of May, 1993 by and
among AMERICAN UNITED LIFE INSURANCE COMPANY, (hereinafter the "Company"), an
Indiana corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (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 has obtained an order from the Securities and Exchange
Commission, dated October 15, 1985 (File No. 812-6102), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
<PAGE>
2
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable stare securities law; and, to the extent required by
law,
WHEREAS, the Company has, to the extent required by law, registered or will
register interests in each Account funding certain variable annuity contracts
under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established under the provisions of Indian law, on the date shown
for such Account on Schedule A hereto, to set aside and invest assets
attributable to attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register, as required by law,
certain of the Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the " 1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity contracts and
the Underwriter is authorized to sell such shares to unit investment trusts such
as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt by the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9.00 am. Boston time on the next following
Business Day. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
<PAGE>
3
1.2. The Fund 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 rules of
the Securities and Exchange Commission and the Fund shall use reasonable efforts
to calculate such net asset value on each day which the New York Stock Exchange
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, 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.
1.3. The Fund and the Underwriter 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 Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, II, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund in accordance with the
provisions of such prospectus. The Company agrees that all net amounts available
under the variable annuity contracts with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as such
Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available or contemplated as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
<PAGE>
4
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the 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.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such income dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that interests in the Separate
Account funding the Contracts are or will be registered under the 1933 Act if
required by law; that the 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 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 under Section 27-1-5-1 of
the Indiana Insurance Code and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, if required by law.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Indiana and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as
<PAGE>
5
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 or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
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 has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
annuity 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
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5. 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,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
2.7. The Underwriter 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
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Indiana and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered as an investment adviser in all material respects under
all applicable federal and
<PAGE>
6
stare securities laws and that the Adviser shad perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Indiana and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, trustees, 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
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.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
the minimum 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
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts 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 Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners or Participants under Contracts.
3.4. If and to the extent required by law the Company shall:
<PAGE>
7
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which
instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund 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 Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
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 or its investment adviser or the Underwriter is named, at least
ten Business Days prior to its use. 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.
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 Contracts 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 Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3. The Fund, Underwriter, or its 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 and/or its separate
account(s), is named at least ten Business Days
<PAGE>
8
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 and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and 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 Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports' proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, 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 Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Underwriter may make payments to the Company or to the underwriter for
the Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable
<PAGE>
9
to the Underwriter, past profits of the Underwriter or other resources available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
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 necessary in accordance with applicable state laws
prior to their sale. The Fund shall bear the 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, and all taxes on the issuance or transfer
of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. 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 the
Fund so as to achieve compliance with the grace period afforded by Regulation
817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall
<PAGE>
10
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is 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 includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
<PAGE>
11
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be Limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-9 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable;
and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall
continue in effect only to the extent that terms and conditions substantially
identical to such Sections are contained in such Rule(s) as so amended or
adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1 (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 (collectively, the
"Indemnified Parties" for purposes of this Section 8.l) 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 Contracts
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 Contracts or
contained in the Contracts or sales Literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material
<PAGE>
12
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 Parry such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information fur-
nished to the Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts or in the
Contracts or sales Literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts
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 of the
Fund not supplied by the Company, or persons under its control)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Contracts 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
thereof or supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to mace the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of 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 other material
breach of this Agreement by the Company, as Limited by and in
accordance with the provisions of Sections 8.1(b) and 8.1(c)
hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(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 any designated agent), but failure to
<PAGE>
13
notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party 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 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.
8.1(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 Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter 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 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) 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 Contracts or the operations of
the Fund 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 Underwriter
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) or otherwise for use
in connection with the sale of the Contracts 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,
<PAGE>
14
prospectus sides literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of
the Fund, Adviser or Underwriter or persons under their control,
with respect to the sale or distribution of the Contracts 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 Contracts, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the 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) 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, whether unintentional or in good
faith or otherwise, 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 Underwriter or the
Fund in this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as limited
by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter 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
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter will not be liable to such party under this Agreement for
any legal or other expenses
<PAGE>
15
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter 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 Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(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 8.3) 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 actions in respect thereof) or settlements result from the
gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the diversification
requirements specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(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
<PAGE>
16
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 of 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
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.
8.3(d). The Company and the Underwriter 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 Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. 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 Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. 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
Underwriter 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 Contracts;
or
(c) termination by the Company by written notice to the Fund and the
Underwriter 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 Contracts issued or to be issued by the Company, or
<PAGE>
17
(d) termination by the Company by written notice to the Fund and the
Underwriter 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; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements
specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company and/or its affiliated
companies has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter
has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity;
or
(h) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.6(b) hereof and at the
time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however any termination under this Section 10.1 (h)
shall be effective forty five (45) days after the notice
specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts 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. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) 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"), or (iii) pursuant
to the terms of the Contracts. Upon request, the
<PAGE>
18
Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
American United Life Insurance Company
One American Square, P.O. Box 368
Indianapolis, IN 46206-0368
Attention: Dusty Akins
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
<PAGE>
19
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. 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.
12.8. 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; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory
accounting principles) and annual report (prepared under
accounting practices prescribed by the Insurance Department of
the State of Indiana), as soon as practical and in any event
within 90 days after the end of each fiscal year;
(b) the Company's quarterly statements (statutory), as soon as
practical and in any event within 45 days after the end of each
quarterly period:
<PAGE>
20
(c) any financial statement, proxy statement, notice or report of the
Company sent to policyholders, as soon as practical after the
delivery thereof to policyholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as practical
after the filing, thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
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
and its seal to be hereunder affixed hereto as of the date specified below.
AMERICAN UNITED LIFE INSURANCE COMPANY
By its authorized officer,
By:_______________________
Title: V.P. Pension Contracts and Compliance
Date:_____________________
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By:_______________________
Title:____________________
Date:_____________________
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By:_______________________
Title:____________________
Date:_____________________
<PAGE>
21
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Name of Separate Account
and Date Established by the Contracts Funded by the
Executive Committee of AUL Separate Account
- -----------------------------------------------------------------------------------------
1.AUL American Unit Trust DCP Multiple-Fund Group Variable Annuity (P-12518)
Separate Account TDA Multiple-Fund Group Variable Annuity (P-12511)
(Established 8/17/89) TDA Multiple-Fund Group Variable Annuity (P-12511,WA)
TDA Multiple-Fund Group Variable Annuity (P-12833)
TDA Multiple-Fund Group Variable Annuity (P-12833SPL)
IRA Multiple-Fund Group Variable Annuity(P-12366)
IRA Multiple-Fund Group Variable Annuity (P-12867)
Employer-Sponsored TDA Multiple-Fund Group Variable
Annuity (P-12621)
Employer-Sponsored TDA Multiple-Fund Group Variable
Annuity [P-12621(BR)]
Employer-Sponsored TDA and Qualified Plan Multiple-
Fund Group Variable Annuity [P-13098(BR)]
2. Group Retirement Annuity Separate Accounts Group Retirement Annuity
Separate Account I (GRA VIII)[P-12947(BR)]
(Established 12-17-92)
3.Group Retirement Annuity Separate Accounts Group Retirement Annuity
Separate Account II (GRA IV) (P-11710)
(established 4/15/93) Separate Accounts Group Retirement Annuity
(GRA V) (P-11736)
Separate Accounts Group Retirement Annuity
(GRA VI) (P-12390)
Separate Accounts Group Retirement Annuity
(GRA VI & IX) ((BR) (P-12390(BR))
</TABLE>
<PAGE>
22
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund
for the shareholder meeting to facilitate the establishment of
tabulation procedures. At this time the Underwriter will inform
the Company of the Record, Mailing and Meeting dates. This will
be done verbally approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
Contractowner/policyholder (the "Customer") as of the Record
Date. Allowance should be made for account adjustments made after
this date that could affect the status of the Customers' accounts
as of the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to Fidelity, as soon
as possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the
Company either before or together with the Customers' receipt of
a proxy statement. Underwriter will provide at least one copy of
the last Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at
its expense, shall produce and personalize the Voting Instruction
Cards. The Legal Department of the Underwriter or its affiliate
("Fidelity legal") must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on
the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed
by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
23
5. During this time, Fidelity Legal will develop, produce, and the
Fund will pay for the Notice of Proxy and the Proxy Statement
(one document). Printed and folded notices and statements will be
sent to Company for insertion into envelopes (envelopes and
return envelopes are provided and paid for by the Insurance
Company). Contents of envelope sent to Customers by Company will
include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company
approximately 3-5 business days before mail date. Individual in
charge at Company reviews and approves the contents of the
mailing package to ensure correctness and completeness. Copy of
this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to
the Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually
takes place in another department or another vendor depending on
process used. An often used procedure is to sort Cards on arrival
by proposal into vote categories of all yes, no, or mixed
replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal
procedure and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account
registration which was printed on the Card.
Note: For Example, If the account registration is under "Bertram
C. Jones, Trustee," then that is the exact legal name to be
printed on the Card and is the signature needed on the Card.
<PAGE>
24
10. If Cards are mutilated, or for any reason are illegible or are
not signed properly, they are sent back to Customer with an
explanatory letter, a new Card and return envelope. The mutilated
or illegible Card is disregarded and considered to be not
received for purposes of vote tabulation. Any Cards that have
"kicked out" (e.g. mutilated, illegible) of the procedure are
"hand verified," i.e., examined as to why they did not complete
the system. Any questions on those Cards are usually remedied
individually.
11. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the vote
is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of
that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives
the tabulations stated in terms of a percentage and the number of
shares.) Fidelity Legal must review and approve tabulation
format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00
a.m. Boston time. Fidelity Legal may request an earlier deadline
if required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will
be required from the Company as well as an original copy of the
final vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards
received from the Customers. In the event that any vote is
challenged or if otherwise necessary for legal, regulatory, or
accounting purposes, Fidelity Legal will be permitted reasonable
access to such Cards.
l6. All approvals and "signing-off" may be done orally, but must
always be followed up in writing.
<PAGE>
25
SCHEDULE C
Other investment companies currently available or contemplated under
variable annuities issued by the Company:
All Portfolios currently offered by (a) Scudder Variable Life Investment
Fund, (b) Twentieth Century Investors, Inc., (c) Dreyfus Investment Fund, (d)
Dreyfus Life and Annuity Index Fund, Inc., (e) Dreyfus Socially Responsible
Growth Fund, Inc.
AMENDMENT NO. 1
Amendment to the Participation Agreement among Variable Insurance Products Fund
(the Fund), Fidelity Distributors Corporation (the Underwriter) and American
United Life Insurance Company (the Company) dated May l, 1993 (the Agreement).
WHEREAS each of the parties desire to expand the Accounts of the Company which
invest in shares of the Fund. The Fund, Underwriter and the Company hereby agree
to amend Schedule A of the Agreement by inserting the following in its entirety:
Name of Separate Account and
Date Established by Contracts Funded Executive
Committee of Board of Directors By Separate Account
All of the Separate Accounts listed in Schedule A of the original Participation
Agreement between the parties hereto as well as the ALL American Individual
Separate Account, which was established by AUL on April 14, 1994 for the purpose
of providing a funding medium for the Individual Flexible Premium Deferred
Variable Annuity (Contract LA-28) and the Individual One Year Flexible Premium
Deferred Variable Annuity (Contract LA-27).
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be
executed in its name and on its behalf by its duly authorized representative as
of 8/31,1994.
AMERICAN UNITED LIFE INSURANCE
COMPANY
By its authorized officer,
By: _________________________________________
Title: V.P. Pension Contracts and Compliance
Date: ________________________________
VARIABLE INSURANCE PRODUCTS FUND
By its authorized officer,
By: _________________________________________
Title: Senior Vice President
Date: ________________________________
FIDELITY DISTRIBUTORS CORPORATION
By: _________________________________________
Title: President
Date:_________________________________
- --------------------------------------------------------------------------------
EXHIBIT 1.8.d
PARTICIPATION AGREEMENT WITH FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
and
AMERICAN UNITED LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of May, 1993 by and
among AMERICAN UNITED LIFE INSURANCE COMPANY, (hereinafter the "Company"), an
Indiana corporation, on its own behalf and on behalf of each segregated asset
account of the Company set forth on Schedule A hereto as may be amended from
time to time (each such account hereinafter referred to as the "Account"), and
the VARIABLE INSURANCE PRODUCTS FUND, an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively, the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and the
Underwriter (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 has obtained an order from the Securities and Exchange
Commission, dated September 17, 1986 (File No. 812-6422), granting Participating
Insurance Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a), and
15(b) of the Investment Company Act of 1940, as amended, (hereinafter the "1940
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
<PAGE>
2
WHEREAS, the Fund is registered as an open-ended management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940 and any applicable state securities law; and
WHEREAS, the Company has, to the extent required by law, registered or will
register interests in each Account funding certain variable annuity contracts
under the 1933 Act if required by law; and
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established under the provisions of Indiana law, on the date
shown for such Account on Schedule A hereto, to set aside and invest assets
attributable to attributable to the aforesaid variable annuity contracts; and
WHEREAS, the Company has registered or will register, as required by law,
certain of the Accounts as unit investment trusts under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended, (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable annuity contracts and
the Underwriter is authorized to sell such shares to unit investment trusts such
as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt of the Fund or its designee of the order
for the shares of the Fund. For purposes of this Section 1.1, the Company shall
be the designee of the Fund for receipt of such orders from each Account and
receipt by such designee shall constitute receipt by the Fund; provided that the
Fund receives notice of such order by 9:00 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
<PAGE>
3
1.2. The Fund 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 rules of
the Securities and Exchange Commission and the Fund shall use reasonable efforts
to calculate such net asset value on each day which the New York Stock Exchange
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, 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.
1.3. The Fund and the Underwriter 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 Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.5,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund; provided that the Fund receives notice of such request for
redemption on the next following Business Day.
1.6. The Company agrees to purchase and redeem the shares of each Portfolio
offered by the then current prospectus of the Fund in accordance with the
provisions of such prospectus. The Company agrees that all net amounts available
under the variable annuity contracts with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as such
Schedule A may be amended from time to time hereafter by mutual written
agreement of all the parties hereto, (the "Contracts") shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund if (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of all the Portfolios of the Fund; or (b) the Company
gives the Fund and the Underwriter 45 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available or contemplated as
a funding vehicle for the Contracts prior to the date of this Agreement and the
Company so informs the Fund and Underwriter prior to their signing this
Agreement (a list of such funds appearing on Schedule C to this Agreement); or
(d) the Fund or Underwriter consents to the use of such other investment
company.
<PAGE>
4
1.7. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire. For
purpose of Section 2.10 and 2.11, upon receipt by the Fund of the federal funds
so wired, such funds shall cease to be the responsibility of the Company and
shall become the responsibility of the Fund.
1.8. Issuance and transfer of the 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.
1.9. The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such income dividends and capital gain distributions as are payable on the
Portfolio shares in additional shares of that Portfolio. The Company reserves
the right to revoke this election and to receive all such income dividends and
capital main distributions in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated and shall use its best efforts to
make such net asset value per share available by 7 p.m. Boston time.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that interests in the Separate
Account funding the Contracts are or will be registered under the 1933 Act if
required by law; that the 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 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 under Section 27-1-5-1 of
the Indiana Insurance Code and has registered or, prior to any issuance or sale
of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts, if required by law.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Indiana and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as
<PAGE>
5
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 or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and that it will make every effort to maintain such
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 has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Company represents that the Contracts are currently treated as
annuity 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
Underwriter immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5. 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,
although it may make such payments in the future. The Fund has adopted a "no
fee" or "defensive" Rule 12b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a board of
trustees, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
2.6. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
2.7. The Underwriter 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
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Indiana and all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is and shall
remain duly registered as an investment adviser in all material respects under
all applicable federal and
<PAGE>
6
state securities laws and that the Advise shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Indiana and any applicable state or federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of their
directors, trustees, 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
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.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund, in an amount not less than
the minimum 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
includes coverage for larceny and embezzlement is issued by a reputable bonding
company. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Underwriter shall provide the Company (at the Company's expense)
with as many copies of the Fund's current prospectus as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund shall
provide such documentation (including a final copy of the new prospectus as set
in type at the Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
for the Fund is amended) to have the prospectus for the Contracts 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 Underwriter (or in the Fund's
discretion, the Prospectus shall state that such Statement is available from the
Fund), and the Underwriter (or the Fund), at its expense, shall print and
provide such Statement free of charge to the Company and to any owner of a
Contract or prospective owner who requests such Statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners or Participants under Contracts.
3.4. If and to the extent required by law the Company shall:
<PAGE>
7
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such
portfolio for which instructions have been received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund 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 Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. Sale 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 or its investment adviser or the Underwriter is named, at least
ten Business Days prior to its use. 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.
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 Contracts 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 Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3. The Fund, Underwriter, or its 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 and/or its separate
account(s), is named at least ten Business Days
<PAGE>
8
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 and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and 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 Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Securities and Exchange Commission or
other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, Statements of Additional Information,
reports, solicitations for voting instructions, 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 Contracts or
each Account, contemporaneously with the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Underwriter may make payments to the Company or to the underwriter for
the Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable
<PAGE>
9
to the Underwriter, past profits of the Underwriter or other resource available
to the Underwriter. No such payments shall be made directly by the Fund.
Currently, no such payments are contemplated.
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 necessary in accordance with applicable state laws
prior to their sale. The Fund shall bear the 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, and all taxes on the issuance
or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of printing and distributing the
Fund's prospectus to owners of Contracts issued by the Company and of
distributing the Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Code and the regulations issued thereunder. Without limiting the scope
of the foregoing, the Fund will at all times comply with Section 817(h) of the
Code and Treasury Regulation 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or Regulations. 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 the
Fund so as to achieve compliance with the grace period afforded by Regulation
817-5.
ARTICLE VII. Potential Conflicts
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall
<PAGE>
10
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is 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 includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested trustees, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account; provided, however that such withdrawal and termination shall be limited
to the extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
<PAGE>
11
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination, provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification By The Company
8.1(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 (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses, claims,
damages, liabilities (including amounts paid in the Company) or litigation
(including legal and other settlement with the written consent of 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 Contracts 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 Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material
<PAGE>
12
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 Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts 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 of the Fund not supplied by
the Company, or persons under its control) or wrongful conduct of the
Company or persons under its control, with respect to the sale or
distribution of the Contracts 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 thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of 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 other material breach of this Agreement by the
Company, as limited by and in accordance with the provisions of
Sections 8.l(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party as such may arise from such Indemnified Party's willful
misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Parties duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund,
whichever is applicable.
8.1(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 any designated agent), but failure to
<PAGE>
13
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 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.
8.1(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 Contracts or the operation of the
Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter 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 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) 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 Contracts or the operations of
the Fund 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 Underwriter
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) or otherwise for use in connection with the
sale of the Contracts 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,
<PAGE>
14
prospectus or sales Literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the
Fund, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts 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 Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the 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) 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, whether unintentional or in good faith or otherwise, 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 warranty made by the Underwriter or the Fund in this Agreement or
arise out of or result from any other material breach of this
Agreement by the Underwriter; as limited by and in accordance with the
provisions of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter 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
each Company or the Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter'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 Underwriter will not be liable to such party under this Agreement for
any legal or other expenses
<PAGE>
15
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter 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 Contracts or the
operation of each Account.
8.3. Indemnification By the Fund
8.3(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 8.3) 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 actions in respect thereof) or settlements result from the gross
negligence, bad faith or willful misconduct of the Board or any member thereof,
are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement (including
a failure to comply with the diversification requirements specified in
Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(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
<PAGE>
16
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 of 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
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.
8.3(d). The Company and the Underwriter 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 Contracts, with respect to the operation of either Account, or
the sale or acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1993, 1934,
and 1940 acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. Termination
10.1. 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
Underwriter 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 Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter 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 Contracts
issued or to be issued by the Company; or
<PAGE>
17
(d) termination by the Company by written notice to the Fund and the
Underwriter 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; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified in
Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice to
the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.6(b) hereof and at the time such notice
was given there was no notice of termination outstanding under any
other provision. of this Agreement; provided, however any termination
under this Section 10.1(h) shall be effective forty five (45) days
after the notice specified in Section 1.6(b) was given.
10.2. Effect of Termination. Notwithstanding any termination of this
Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts 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. The parties agree that this
Section 10.2 shall not apply to any terminations under Article VII and the
effect of such Article VII terminations shall be governed by Article VII of this
Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) 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"), or (iii) pursuant
to the terms of the Contracts. Upon request, the
<PAGE>
18
Company will promptly furnish to the Fund and the Underwriter the opinion of
counsel for the Company (which counsel shall be reasonably satisfactory to the
Fund and the Underwriter) to the effect that any redemption pursuant to clause
(ii) above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not prevent
Contract Owners from allocating payments to a Portfolio that was otherwise
available under the Contracts without first giving the Fund or the Underwriter
90 days notice of its intention to do so.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
92 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
American United Life Insurance Company
One American Square, P.O. Box 368
Indianapolis, IN 46206-0368
Attention: Dusty Akins
If to the Underwriter:
92 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
<PAGE>
19
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. 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.
12.8. This Agreement or any of the rights and obligations hereunder may not
be sent of all parties without the prior written consent of all parties hereto;
provided, however, that the Underwriter may assign this Agreement or any rights
or obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly licensed and registered to
perform the obligations of the Underwriter under this Agreement.
12.9. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement prepared under statutory accounting
principles and annual report (prepared under accounting practices
prescribed by the Insurance Department of the State of Indiana), as
soon as practical and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory), as soon as practical
and in any event within 45 days after the end of each quarterly
period;
<PAGE>
20
(c) any financial statement, proxy statement, notice or report of the
Company sent to policyholders, as soon as practical after the delivery
thereof to policyholders;
(d) any registration statement (without exhibits) and financial reports of
the Company filed with the Securities and Exchange Commission or any
state insurance regulator, as soon as practical after the filing
thereof;
(e) any other report submitted to the Company by independent accountants
in connection with any annual, interim or special audit made by them
of the books of the Company, as soon as practical after the receipt
thereof.
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
and its seal to be hereunder affixed hereto as of the date specified below.
AMERICAN UNITED LIFE INSURANCE COMPANY
By its authorized officer,
By: _______________________
Title: V.P. Pension Contracts and Compliance
Date: _____________________
VARIABLE INSURANCE PRODUCTS FUND II
By its authorized officer,
By:________________________
Title:
Date:______________________
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By:________________________
Title:
Date:______________________
<PAGE>
21
<TABLE>
Schedule A
----------
Separate Accounts and Associated Contracts
------------------------------------------
<CAPTION>
<S> <C>
Name of Separate Account
and Date Established by the Contracts Funded by the
Executive Committee of AUL Separate Account
- -----------------------------------------------------------------------------------------
1.AUL American Unit Trust DCP Multiple-Fund Group Variable Annuity (P-12518)
Separate Account TDA Multiple-Fund Group Variable Annuity (P-12511)
(Established 8/17/89) TDA Multiple-Fund Group Variable Annuity (P-12511,WA)
TDA Multiple-Fund Group Variable Annuity (P-12833)
TDA Multiple-Fund Group Variable Annuity (P-12833SPL)
IRA Multiple-Fund Group Variable Annuity(P-12366)
IRA Multiple-Fund Group Variable Annuity (P-12867)
Employer-Sponsored TDA Multiple-Fund Group Variable
Annuity (P-12621)
Employer-Sponsored TDA Multiple-Fund Group Variable
Annuity [P-12621(BR)]
Employer-Sponsored TDA and Qualified Plan Multiple-
Fund Group Variable Annuity [P-13098(BR)]
2. Group Retirement Annuity Separate Accounts Group Retirement Annuity
Separate Account I (GRA VIII)[P-12947(BR)]
(Established 12-17-92)
3.Group Retirement Annuity Separate Accounts Group Retirement Annuity
Separate Account II (GRA IV) (P-11710)
(established 4/15/93) Separate Accounts Group Retirement Annuity
(GRA V) (P-11736)
Separate Accounts Group Retirement Annuity
(GRA VI) (P-12390)
Separate Accounts Group Retirement Annuity
(GRA VI & IX) ((BR) (P-12390(BR))
</TABLE>
<PAGE>
22
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund by the Underwriter, the Fund
and the Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Company" shall also include
the department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for
the shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses and
number of units which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this date
that could affect the status of the Customers' accounts as of the
Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of a proxy
statement. Underwriter will provide at least one copy of the last
Annual Report to the Company.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed
by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
23
5. During this time, Fidelity legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company)
addressed to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests
Customers to vote as quickly as possible and that
their vote is important. One copy will be supplied
by the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but not
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark infor-
mation would be due to an insurance company's internal procedure and
has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on
the Card and is the signature needed on the Card.
<PAGE>
24
10. If cards are mutilated, or for any reason illegible or are not signed
properly, they are sent back to Customer with an explanatory letter, a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be not received for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified" i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of shares.)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
25
SCHEDULE C
Other investment companies currently available or contemplated under variable
annuities issued by the Company:
All Portfolios currently offered by (a) Scudder Variable Life Investment Fund,
(b) Twentieth Century Investors, Inc., (c) Dreyfus Investment Fund, (d) Dreyfus
Life and Annuity Index Fund, Inc., (e) Dreyfus Socially Responsible Growth Fund,
Inc.
AMENDMENT NO. 1
Amendment to the Participation Agreement among Variable Insurance Products
Fund II (the Fund), Fidelity Distributors Corporation (the Underwriter) and
American United Life Insurance Company (the Company) dated May 1, 1993 (the
Agreement).
WHEREAS each of the parties desire to expand the Accounts of the Company
which invest in shares of the Fund. The Fund, Underwriter and the Company hereby
agree to amend Schedule A of the Agreement by inserting the following in its
entirety:
Name of Separate Account and
Date Established by Contracts Funded
Executive Committee of Board of Directors By Separate Account
- --------------------------------------------------------------------------------
All of the Separate Accounts listed in Schedule A of the original
Participation Agreement between the parties hereto as well as the AUL American
Individual Separate Account, which was established by AUL on April 14, 1994 for
the purpose of providing a funding medium for the Individual Flexible Premium
Deferred Variable Annuity (Contract LA-28) and the Individual One Year Flexible
Premium Deferred Variable Annuity (Contract LA-27).
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be executed in its name and on its behalf by its duly authorized representative
as of 8/31, 1994.
AMERICAN UNITED LIFE INSURANCE
COMPANY
By its authorized officer,
By:_______________________________________
Title: V.P. Pension Contracts & Compliance
Date:_____________________________________
VARIABLE INSURANCE PRODUCTS
FUND II
By its authorized officer,
By:_______________________________________
Title: Senior Vice President
Date: ____________________________________
FIDELITY DISTRIBUTORS
CORPORATION
By its authorized officer,
By:_______________________________________
Title: President
Date: ____________________________________
- --------------------------------------------------------------------------------
EXHIBIT 1.8.e
PARTICIPATION AGREEMENT WITH T. ROWE PRICE EQUITY SERIES, INC.
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Among
AMERICAN UNITED LIFE INSURANCE COMPANY,
T. ROWE PRICE INVESTMENT SERVICES, INC.,
and
T. ROWE PRICE EQUITY SERIES, INC.,
THIS AGREEMENT, effective as of the 3rd day of April, 1995 by and among
American United Life (hereinafter, the "Company"), an Indiana life insurance
company, on its own behalf and on behalf of each segregated asset account of the
Company set forth on Schedule A hereto as may be amended from time to time
(each account hereinafter referred to as the "Account"), and the T. Rowe Price
Equity Series Inc. (the "Fund"), a corporation organized under the laws of
Maryland, and T. Rowe Price Investment Services, Inc. (hereinafter the
"Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management investment
company and is or will be available to act as the investment vehicle for
separate accounts established for variable life insurance and variable annuity
contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (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 will obtain an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment. Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T) (b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, T. Rowe Price Associates, Inc. (the "Adviser"), which serves as
investment adviser to the Fund, is duly registered as an investment adviser
under the federal Investment Advisers Act of 1940, as amended, and any
applicable state securities laws; and
<PAGE>
2
WHEREAS, the Company has issued or will issue certain variable life
insurance and variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company, on the date shown for such
Account on Schedule A hereto, to set aside and invest assets attributable to the
aforesaid Contracts; and
WHEREAS, the Underwriter, which serves as distributor to the Fund, is
registered as a broker dealer with the SEC under the Securities Exchange Act of
1934, as amended (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios available
for purchase at the applicable net asset value per share by the Company and the
Account on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission, and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees or Directors of the Fund (hereinafter the "Board") may refuse
to sell shares of any Designated Portfolio to any person, or suspend or
terminate the offering of shares of any Designated 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 Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be sold
only to Participating Insurance Companies and their separate accounts. No shares
of any Designated Portfolios will be sold to the general public. The Fund and
the Underwriter will not sell Fund shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles I, III and VII of this Agreement is in effect to govern such sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, ordinarily
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption, except
that the Fund reserves the right to suspend the right of redemption or postpone
the date of payment or satisfaction upon redemption consistent with Section
22(e) of the 1940 Act and any rules thereunder, and in accordance with the
procedures and policies of the Fund as described in the then current prospectus.
<PAGE>
3
Subject to the foregoing, the Fund ordinarily expects to pay redemption proceeds
in cash on the next Business Day after an order to redeem Fund shares is made in
accordance with the provisions of Section 1.5 hereof. Payment shall be in
federal funds transmitted by wire by 3:00 p.m. Baltimore time.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the designee
of the Fund for receipt of purchase and redemption orders from the Account, and
receipt by such designee shall constitute receipt by the Fund; provided that the
Company receives the order by 4:00 p.m. Baltimore time and the Fund receives
notice of such order by 9:30 a.m. Baltimore time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of the Designated
Portfolios offered by the then current prospectus of the Fund and in accordance
with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day after an
order to purchase Fund shares is made in accordance with the provisions of
Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time. If payment in federal funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowing or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For purposes
of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
1.8 Issuance and transfer of the 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 properly recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Designated Portfolios' shares. The Company hereby
elects to receive all such income, dividends, and capital gain distributions as
are payable on Designated 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 such
dividends and distributions.
1.10 The Fund shall make the net asset value per share for each Designated
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Baltimore time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Baltimore time.
1.11 The Parties hereto acknowledge that the arrangement contemplated by
this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of the Fund; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment
<PAGE>
4
company was available as a funding vehicle for the Contracts prior to the date
of this Agreement and the Company so informs the Fund and Underwriter prior to
their signing this Agreement; or (d) the Fund or Underwriter consents to the use
of such other investment company, such consent not to be unreasonably withhold.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts (a) are or,
prior to issuance, will be registered under the 1933 Act or, alternatively (b)
are not registered because they are properly exempt from registration under the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under the 1933 Act. The Company further represents and
warrants that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal securities and state securities
and insurance laws and that the sale of the 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, that it has legally and validly
established the Account prior to any issuance or sale thereof as a segregated
asset account under Indiana insurance laws, and that it (a) has registered or,
prior to any issuance or sale of the Contracts, will register the Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts, or alternatively (b) has
not registered the Account in proper reliance upon an exclusion from
registration under the 1940 Act. The Company shall register and qualify the
contracts or interests therein as securities in accordance with the laws of the
various states only if and to the extent deemed advisable by the Company.
2.2 The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sold in compliance with the laws of the State of Indiana and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. 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 or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, 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 Fund will undertake to have
the Board of Directors or Trustees of the Fund (the "Board"), a majority of whom
are not interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the State of Indiana to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly existing
under the laws of the State of Maryland and that it does and will comply in all
material respects with the 1940 Act.
2.6 The Underwriter 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
Underwriter further represents that it will
<PAGE>
5
sell and distribute the Fund shares in accordance with the laws of the State of
Indiana and any applicable state and federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and shall
remain duly registered under all applicable federal and state securities laws
and that the Adviser shall perform its obligations for the Fund in compliance in
all material respects with the laws of the State of Indiana and any applicable
state and federal securities laws.
2.8 The Fund and the Underwriter represent and warrant that all of their
directors, officers, employees, investment advisers, and other individuals or
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 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.
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
employed or controlled by the Company dealing with the money and/or securities
of the Account are covered by a blanket fidelity bond or similar coverage for
the benefit of the Account, in an amount not less than $5 million. The aforesaid
bond includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees to hold for the benefit of the Fund and to
pay to the Fund any amounts lost from larceny, embezzlement or other events
covered by the aforesaid bond to the extent such amounts properly belong to the
Fund pursuant to the terms of this Agreement. The Company agrees to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Underwriter shall provide the Company with as many copies of the
Fund's current prospectus (describing only the Designated Portfolios listed on
Schedule A) as the Company may reasonably request. The Company shall bear the
expense of printing copies of its current prospectus that will be distributed to
existing Contract owners, and the Company shall bear the expense of printing
copies of the Fund's prospectus that are used in connection with offering the
Contracts issued by the Company. If requested by the Company in lieu thereof,
the Fund shall provide such documentation (including a final copy of the new
prospectus on diskette at the Fund's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is amended) to have the prospectus for the
Contracts 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 current Statement of
Additional Information ("SAI") for the Fund is available from the Company, and
the Underwriter (or the Fund), at its expense, shall provide copies of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
<PAGE>
6
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received in
the same proportion as Fund shares of such portfolio for which
instructions have been received,
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt and provide
in writing.
3.6 The Fund 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 directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
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
that the Company develops or uses and in which the Fund (or a Designated
Portfolio thereof) or the Adviser or the Underwriter is named, at least ten
Business Days prior to its use. No such material shall be used if the Fund or
its designee reasonably object to such use within ten Business Days after
receipt of such material. The Fund or its designee reserves the night to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Adviser or the Underwriter is named, and no such material shall be used if
the Fund or its designee so object.
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 Contracts other than the information or representations
contained in the registration statement or prospectus or SAI for the Fund
shares, as such registration statement and prospectus or SAI 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 Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to
be furnished, to the Company, each piece of sales literature or other
promotional material that it develops or uses and in which
<PAGE>
7
the Company, and/or its Account, is named at least ten Business Days prior to
its use. No such material shall be used if the Company reasonably objects to
such use within ten Business Days after receipt of such material. The Company
reserves the right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Company and/or its Account
is named, and no such material shall be used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus (which shall include an
offering memorandum, if any, if the Contracts issued by the Company or interests
therein are not registered under the 1933 Act), or SAI for the Contracts, as
such registration statement, prospectus, or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract Owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, 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 Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract Owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
<PAGE>
8
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
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 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, and all taxes on the issuance
or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund will invest its assets in such a manner as to ensure that the
Contracts will be treated as annuity or life insurance contracts, whichever is
appropriate, under the Internal Revenue Code of 1986, as amended (the "Code")
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, each Designated Portfolio has complied and
will continue to comply with Section 817(h) of the Code and Treasury Regulation
Sec. 1.817-5, and any Treasury interpretations thereof, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts, and any amendments or other modifications or successor provisions to
such Section or Regulations. In the event of a breach of this Article VI by the
Fund, it will take all reasonable steps (a) to notify the Company of such breach
and (b) to adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance or annuity 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
Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of
<PAGE>
9
the Code (or any successor or similar provision), shall identify such contract
as a modified endowment contract.
ARTICLE VII. Potential Conflicts
The following provisions shall apply only upon issuance of the Mixed and Shared
Funding Order and the sale of shares of the Fund to variable life insurance
separate accounts.
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is 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 includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to each Account provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
<PAGE>
10
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Fund be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a new funding
medium for the Contract if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Board determines that any proposed
action does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.7 If and to the extent the Shared Funding Exemption Order or any
amendment thereto contains terms and conditions different from Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with the Shared Funding Exemptive Order, and Sections
3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical to
such Sections are contained in the Shared Funding Exemptive Order or any
amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6c-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1., 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and the
Underwriter and each of its directors and officers, and each person, if any, who
controls the Fund or Underwriter within the meaning of Section 15 of the 1933
Act (collectively, the "Indemnified Parties" for purposes of this Section 8.1)
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 or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in
<PAGE>
11
respect thereof) or settlements are related to the current or prior sale or
acquisition of the Fund's shares or the Contracts 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, prospectus (which shall include an
offering memorandum, if any), or SAI for the Contracts or
contained in the Contracts or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement,
prospectus or SAI for the Contracts or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts 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, SAI, or sales literature of
the Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or persons under its
authorization or control, with respect to the sale or
distribution of the Contracts 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, SAI, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
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 Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8-1(b) and 8.1(c)
hereof.
8.1(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 its obligations or duties under this Agreement.
<PAGE>
12
8.1(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 any
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 an
Indemnified Party, 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 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.
8.1(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 Contracts or the operation of the
Fund.
8.2 Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and hold harmless the Company
and each of it 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 8.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the current or prior sale or acquisition of the Fund's shares or
the Contracts; 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 SAI 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 Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement, prospectus or SAI for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts 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, SAI or sales literature for
the Contracts not supplied by the Underwriter or persons under
its control) or wrongful conduct of the
<PAGE>
13
Fund or Underwriter or persons under their control, with respect
to the sale or distribution of the Contracts 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, SAI or sales literature covering the Contracts, or
any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the 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 the Underwriter; or
(iv) arise as a result of any failure by the Fund or the Underwriter
to provide the services and furnish the materials under the terms
of this Agreement (including a failure of the Fund, whether
unintentional or in good faith or otherwise, to comply with the
diversification and other qualification 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 Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter 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 or 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 Account, whichever is applicable.
8.2(c). The Underwriter 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 Underwriter 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 Underwriter of
any such claim shall not relieve the Underwriter 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 Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter'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 Underwriter 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.
<PAGE>
14
8.2(d). The Company agrees promptly to notify the Underwriter 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 Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
8.3(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 8.3) against any and all losses, claims,
expenses, 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 be required to pay or may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, 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, whether unintentional or in good
faith or otherwise, to comply with the diversification and other
qualification 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 8.3(b) and
8.3(c) hereof.
8.3(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 Underwriter or the Account, whichever is applicable.
8.3(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
expense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of 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
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.
<PAGE>
15
8.3(d). The Company and the Underwriter agree promptly to notify the Fund
of the commencement of any litigation or proceeding against it or any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Maryland.
9.2 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
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until the first
to occur of
(a) termination by any party, for any reason with respect to some or
all Designated Portfolios, by three (3) months advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter based upon the Company's determination that shares of
the Fund are not reasonably available to meet the requirements of
the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter 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 Contracts issued or to
be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by
the NASD, the SEC, the Insurance Commissioner or like official of
any state or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the
Contracts, the operation of any Account, or the purchase of the
Fund shares; provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good faith, that any
such administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its obligations
under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Underwriter to perform its obligations under this Agreement;
or
<PAGE>
16
(f) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Designated Portfolio in the event
that such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M or fails to comply with the Section
817(h) diversification requirements specified in Article VI
hereof, or if the Company reasonably believes that such Portfolio
may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to the
Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof, or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that the Fund, Adviser, or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(j) termination by the Fund or the Underwriter by written notice to
the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.11 (b) hereof and at
the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however, any termination under this Section 10.1(j)
shall be effective forty-five days after the notice specified in
Section 1.11 (b) was given; or
(k) termination by the Company upon any substitution of the shares of
another investment company or series thereof for shares of a
Designated Portfolio of the Fund in accordance with the terms of
the Contracts, provided that the Company has given at least 45
days prior written notice to the Fund and Underwriter of the date
of substitution; or
(1) termination by any party in the event that the Fund's Board of
Directors determines that a material irreconcilable conflict
exists as provided in Article VII.
10.2 Notwithstanding any termination of this Agreement, the Fund and the
Underwriter shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
the owners of the Existing Contracts may 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. The parties
agree that this Section 10.2 shall not apply to any terminations under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement. The parties further agree that this Section 10.2 shall
not apply to any terminations under Section 10.1(g) of this Agreement.
<PAGE>
17
10.3 The Company shall not redeem Fund shares attributable to the Contracts
(as opposed to Fund shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) 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"), (iii) as permitted
by an order of the SEC pursuant to Section 26(b) of the 1940 Act, or (iv) as
permitted under the terms of the Contract. Upon request, the Company will
promptly furnish to the Fund and the Underwriter reasonable assurance that any
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 45 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Henry H. Hopkins, Esq.
If to the Company:
American United Life Insurance Company
One American Square
Indianapolis, Indiana 46204
Attention: Richard A. Wacker, Esq.
If to Underwriter:
T. Rowe Price Investment Services, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Terrie Westren
ARTICLE XII. Miscellaneous
12.1 All persons dealing with the Fund must look solely to the property of
the Fund, and in the case of a series company, the respective Designated
Portfolios listed on Schedule A hereto as though each such Designated Portfolio
had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
12.2 Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information
<PAGE>
18
reasonably identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential information without the
express written consent of the affected party until such time as such
information has come into the public domain.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Indiana Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
Iowa variable annuity laws and regulations and any other applicable law or
regulations.
12.7 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.
12.8 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.
12.9 The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee copies of the following reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP"), if any) filed
with any state or federal regulatory body or otherwise made
available to the public, as soon as practical and in any event
within 90 days after the end of each fiscal year; and
(b) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulatory, as soon as
practical after the filing thereof.
<PAGE>
19
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 and
its seal to be hereunder affixed hereto as of the date specified below.
COMPANY: AMERICAN UNITED LIFE INSURANCE COMPANY
By its authorized officer
By:
-----------------------------------
Title: Vice President
Date: April 6, 1995
FUND: T. Rowe Price Equity Series, Inc.
By its authorized officer
By:
Title: Vice President
Date: April 5, 1995
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer
By:
Title: Vice President
Date: April 5, 1995
<PAGE>
SCHEDULE A
<TABLE>
<S> <C> <C>
Name of Separate Account and
Date Established by the Contracts Funded by
Executive Committee of AUL the Separate Account Designated Portfolios
1. AUL American Unit Trust Separate DCP Multiple-Fund Group Variable Annuity (P-12518) T. Rowe Price Equity
Account (established 8/17/89) TDA Multiple-Fund Group Variable Annuity (P-1 251 1) Series, Inc.
TDA Multiple-Fund Group Variable Annuity (P-12511,WA) ----------
TDA Multiple-Fund Group Variable Annuity (P-12833) T. Rowe Price Equity
TDA Multiple-Fund Group Variable Annuity (P-12833SPL) Income Portfolio
IRA Multiple-Fund Group Variable Annuity (P-12566)
IRA Multiple-Fund Group Variable Annuity (P-12867)
Employer-Sponsored TDA Multiple-Fund Group
Variable Annuity (P-12621)
Employer-Sponsored TDA Multiple-Fund Group
Variable Annuity [(P-12621(BR)]
Employer-Sponsored TDA and Qualified Plan Multiple-Fund
Group Variable Annuity [P-13098(BR)]
2. Group Retirement Annuity Separate Separate Accounts Group Retirement T. Rowe Price Equity
Account II (established 12/17/92) Annuity (GRA VIII) [P-12947(BR)] Series, Inc.
----------
T. Rowe Price Equity
Income Portfolio
3. Group Retirement Annuity Separate Separate Accounts Group Retirement Annuity T. Rowe Price Equity
Account I (established 4/15/93) (GRA IV) (P-11710) Series, Inc.
Separate Accounts Group Retirement Annuity ----------
(GRA V) (P-11736) T. Rowe Price Equity
Separate Accounts Group Retirement Annuity Income Portfolio
(GRA VI) (P-12390)
Separate Accounts Group Retirement Annuity
(GRA VI & IX)(BR) [P-12390(BR)]
Separate Accounts Group Deposit Annuity Contract
4. AUL American Individual Unit Trust Individual Flexible Premium Deferred Variable Annuity T. Rowe Price Equity
Separate Account (established 4/14/94) (LA-27) Series, Inc.
Individual One Year Flexible Premium Deferred ----------
Variable Annuity (LA-27) T. Rowe Price Equity
Income Portfolio
</TABLE>
- --------------------------------------------------------------------------------
EXHIBIT 6
CONSENT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Board of Directors
American United Life Insurance Company(R)
Indianapolis, Indiana
We consent to the inclusion in Post-Effective Amendment No. 1 to the
Registration Statement for the Flexible Premium Adjustable Variable Life
Insurance Policy of our report dated February 27, 1998, on our audit of the
financial statements of American United Life Insurance Company. We also consent
to the reference to our Firm under the caption "Independent Auditors."
/s/ Coopers & Lybrand L.L.P.
Indianapolis, Indiana
April 24, 1998
- --------------------------------------------------------------------------------
EXHIBIT 10
POWERS OF ATTORNEY
- --------------------------------------------------------------------------------
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
--------------------------------
/s/ Steven C. Beering, M.D.
--------------------------------
Steven C. Beering, M.D.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ Arthur L. Bryant
--------------------------------
Arthur L. Bryant
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ James M. Cornelius
--------------------------------
James M. Cornelius
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ James E. Dora
--------------------------------
James E. Dora
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ Otto N. Frenzel III
--------------------------------
Otto N. Frenzel III
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
--------------------------------
/s/ David W. Goodrich
--------------------------------
David W. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ William P. Johnson
--------------------------------
William P. Johnson
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/1/97
--------------------------------
/s/ James T. Morris
--------------------------------
James T. Morris
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ James W. Murphy
--------------------------------
James W. Murphy
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/25/97
--------------------------------
/s/ R. Stephen Radcliffe
--------------------------------
R. Stephen Radcliffe
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
--------------------------------
/s/ Thomas E. Reilly, Jr.
--------------------------------
Thomas E. Reilly, Jr.
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 8/4/97
--------------------------------
/s/ William R. Riggs
--------------------------------
William R. Riggs
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 9/29/97
--------------------------------
/s/ John C. Scully
--------------------------------
John C. Scully
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/25/97
--------------------------------
/s/ Jerry D. Semler
--------------------------------
Jerry D. Semler
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ Yvonne H. Shaheen
--------------------------------
Yvonne H. Shaheen
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes
and appoints Richard A. Wacker and William R. Brown, and each of them his true
and lawful attorney-in-fact and agent, each with full power of substitution and
resubstitution for him in his name, place and stead to sign any and all
Registration Statements (including Registration Statements or any Amendments
thereto arising from any reorganization of a Separate Account with any other
Separate Account) applicable to Separate Accounts established for funding
variable annuity and variable life contracts of American United Life Insurance
Company(R) and any Amendments or supplements thereto, and to file the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Dated: 7/28/97
--------------------------------
/s/ Frank D. Walker
--------------------------------
Frank D. Walker
