EXHIBIT 8(c)(i)
PARTICIPATION AGREEMENT
AMONG
AMERICAN BEACON FUNDS (THE "TRUST")
ACTING SOLELY ON BEHALF OF
EACH OF ITS SERIES LISTED ON SCHEDULE C HERETO, SEVERALLY AND NOT JOINTLY
(EACH SUCH SERIES A "FUND")
AND
AMERICAN BEACON ADVISORS, INC.
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 23 day of March, 2012 by
and among THE VARIABLE ANNUITY LIFE INSURANCE COMPANY, (hereinafter the
"Company"), organized under the laws of the State of Texas, on its own behalf
and on behalf of each segregated asset account of the Company set forth on
Schedule A hereto as such schedule may be amended from time to time (each such
account hereinafter referred to as the "Account"), and the AMERICAN BEACON
FUNDS, a Massachusetts business trust (hereinafter the "Trust") acting solely
on behalf of each of its series listed on Schedule C hereto as such schedule
may be amended from time to time (each such series hereinafter referred to as
the "Fund") and AMERICAN BEACON ADVISORS, INC. (hereinafter the "Adviser"), a
Delaware corporation.
It is understood and agreed that (a) this document shall constitute a
separate agreement between the parties and each Fund in Schedule C hereto, as
if each Fund had executed a separate document naming only itself as the Fund (a
"Separate Agreement"), and (b) no Fund shall have any liability for the
obligations of any other Fund.
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
to be offered by insurance companies which have entered into participation
agreements with the Fund and the Adviser (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act") and its
shares are registered under the Securities Act of 1933, as amended (hereinafter
the "1933 Act"); and
WHEREAS, the Fund intends to offer shares of the series set forth on
Schedule C, as may be amended from time to time by mutual agreement of the
parties hereto; under this Agreement to the Accounts of the Company; and
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WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company, on
the date shown for such Account on Schedule hereto, to set aside and invest
assets attributable to one or more variable life insurance policies and/or
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Fund at net asset
value on behalf of each Account to fund certain of the aforesaid variable life
insurance policies and/or variable annuity contracts; and
NOW THEREFORE, in consideration of their mutual promises, the Company and,
the Fund agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Fund agrees to make available to the Company those shares of the
Fund which each Account orders, executing such purchase and/or redemption
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
8:00 a.m. Eastern time on the next following Business Day. In placing orders
with the Fund, the Company shall net all purchases and redemptions into one
order request; the Company will not place two separate orders with the Fund.
"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.
1.2 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 SEC 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 Fund may refuse to offer shares to any
person, or suspend or terminate the offering of its shares as authorized in the
Fund's current registration statement. To the maximum extent permissible and
practicable, notice of election to suspend or terminate shall be furnished in
writing, by the Fund. Absent extraordinary circumstances, said termination
would be effective no earlier than ten (10) Business Days after receipt of such
notice by the Company in order to give the Company sufficient time to take
appropriate steps in response to such suspension or termination.
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1.3 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 1.3, 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. Proceeds shall be
wired to the Company within three (3) Business Days or such longer period
permitted by the 1940 Act or the rules, orders or regulations thereunder, and
the Fund shall notify the person designated in writing by the Company as the
recipient for such notice of such delay by 3:00 p.m. Central time the same
Business Day that the Company transmits the redemption order to the Fund. The
Parties recognize the impact to the Company and its Contract owners of failing
to satisfy redemption requests in cash and recognize that the need to redeem in
kind would only occur in extraordinary circumstances. If such a circumstance
were to occur, the Fund will use best efforts to satisfy redemption proceeds
solely in cash, in accordance with applicable law. Notwithstanding anything to
the contrary, the Fund reserves the right to make redemptions in kind if the
Board determines extraordinary circumstances require such an election.
1.4 The Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of this Agreement and the Fund's then current
prospectus and statement of additional information. In the event of a conflict
between this Agreement and the Fund's prospectus or statement of additional
information, the Fund's prospectus and statement of additional information
shall control. The Company agrees that all net amounts available under the
variable life insurance policies and/or variable annuity contracts with the
form number(s) which are listed on Schedule B attached hereto and incorporated
herein by this reference, as such Schedule B 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, in the
Company's general account, or in an investment company other than the Fund.
1.5 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.
1.6 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.
1.7 The Fund shall furnish same day access (by internet, followed by written
confirmation mailed the next business day) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares.
Notwithstanding this Section 1.7, the Fund shall utilize its best efforts to
provide the Company with at least ten (10) Business Days advance notice of any
forthcoming dividend or capital gain distributions. The Company hereby elects
to receive all such income dividends and capital gain distributions as are
payable on the Fund
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shares in additional shares of the Fund. 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.
1.8 The Fund shall make its net asset value per share 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 7:00 p.m. Eastern time. Notwithstanding this
Section 1.8, the Fund shall provide its net asset value per share to the
Company no later than 7:30 p.m. Eastern time.
1.9 If the Fund provides the Company with materially incorrect net asset
value information through no fault of the Company, the Company shall be
entitled to (1) an adjustment with respect to the Fund shares purchased or
redeemed to reflect the correct net asset value per share and (2) reimbursement
of expenses incurred by the Company in connection with the Company's
responsibility to adjust any Contract owner's account value affected by the
materially incorrect net asset value. The determination of materiality of any
net asset value pricing error shall be based on the SEC's recommended
guidelines regarding such errors. Any material error in the calculation or
reporting of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery by the Fund to the Company.
1.10 The Fund shall provide same day access (by internet, followed by
written confirmation mailed the next business day following a transaction) to
the Company of the amount of shares traded and the associated net asset value
total trade amount and the outstanding share balances held in the Account(s) as
of the end of each Business Day.
1.11 The Company agrees that purchases and redemptions of Fund shares
offered by the then current prospectus and statement of additional information
of the Fund shall be made in accordance with the provisions of the prospectus
and statement of additional information provided, however, that the Company
will apply its frequent trading policy described in and attached as Schedule D
to this Agreement to Contract owners investing in the shares of the Fund, as
such Schedule may be amended by the Company from time to time.
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; 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 is responsible for
determining the suitability of the Fund and share class for Company's Accounts.
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 the Insurance Code of the State of
Texas and has registered or, prior to any issuance or sale of the Contracts,
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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.
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 all applicable federal and state securities laws
and that the Fund is and shall remain registered under the 0000 Xxx. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or its then current principal underwriter
("Underwriter").
2.3 The Fund represents that, under the terms of its investment advisory
agreements with the Adviser, the Adviser is and will be responsible for
managing the Fund in compliance with the Fund's investment objectives, policies
and restrictions as set forth in the Fund Prospectus. The Fund represents that
these objectives, policies and restrictions do and will include operating as a
regulated investment company ("RIC") in compliance with Subchapter M of the
Code and regulations thereunder. The Fund has adopted and will maintain
procedures for ensuring that the Fund is managed in compliance with Subchapter
M and regulations thereunder. On request, the Fund shall also provide the
Company with such materials, cooperation and assistance as may be reasonably
necessary for the Company or any appropriate person designated by the Company
to review from time to time the procedures and practices of the Adviser or each
sub-investment adviser to the Fund for ensuring that the Fund is managed in
compliance with Subchapter M and regulations thereunder. In the event of any
noncompliance regarding its status as a RIC, the Fund shall notify the Company
immediately and shall pursue those efforts necessary to enable each affected
series of the Fund to qualify once again for treatment as a RIC in compliance
with Subchapter M, including cooperation in good faith with the Company.
2.4 The share class of the Fund listed on Schedule C hereto currently does
not make any payments to finance distribution expenses pursuant to Rule 12b-1
under the 1940 Act or otherwise, although it may make such payments in the
future. To the extent that share class of the Fund begins to finance
distribution expense pursuant to Rule 12b-1, the Fund undertakes to have its
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan for the share class under Rule 12b-1 to finance distribution
expenses. The Board has adopted a shareholder service fee for the share class
of the Fund listed on Schedule C hereto to cover certain services provided by
financial intermediaries.
2.5 The Fund represents that the Fund's investment policies, fees and
expenses are and shall at all time remain in compliance with applicable federal
and state laws, and the Fund and the Adviser represent that their respective
operations are and shall at all times remain in material compliance with
applicable federal and state laws to the extent required to perform this
Agreement.
2.6 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.
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2.7 The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal or state
securities laws and that it shall perform its obligations for the Fund in
compliance in all material respects any applicable state and federal securities
laws.
2.8 The Fund and Adviser represent and warrant that all of their directors,
officers, employees, and other individuals/entities dealing with the money 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.
2.09 The Company represents and warrants that it will maintain errors and
omissions or other professional liability insurance coverage with coverage
limits in amounts standard in the industry, covering its activities as
contemplated by this Agreement. The Company shall provide any party to this
Agreement with evidence of insurance coverage upon request.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Adviser shall provide the Company 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 camera-ready film containing
the Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and
to have the Statement of Additional Information for the Fund and the Statement
of Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other Fund companies'
prospectuses and statements of additional information or place the Fund's
Prospectus and Statement of Additional Information on the Company's internet
website or other electronic media. For Fund prospectuses and Statements of
Additional Information provided by the Company to its existing owners of
Contracts, who are invested in the Fund on or about the date of the Fund's
then-current prospectus, in order to update disclosure as required by the 1933
Act and/or the 1940 Act, the cost of printing shall be borne by the Fund. If
the Company chooses to receive camera-ready film in lieu of receiving printed
copies of the Fund's prospectus, the Fund will reimburse the Company in an
amount equal to the product of A and B where A is the number of such
prospectuses distributed to owners of the Contracts, and B is the Fund's per
unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
3.2 The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Adviser or the Fund, at its
expense.
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3.3 The Fund, at its expense, shall provide the Company with copies of its
reports to shareholders, and other communications to shareholders in such
quantity as the Company shall reasonably require for distribution to Contract
owners.
3.4 Upon notification of an upcoming proxy mailing, the Company shall
provide to the Fund's print/mail vendor a list of plan or participant
addresses, as appropriate, as of the requested record date for inclusion in the
proxy mailing. Unless otherwise provided in the plan document, participants
will be responsible for voting all proxies. Non-routine materials such as
prospectus supplements and proxy or information statement materials shall be
printed and distributed at the expense of the Fund or an affiliate.
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 the Adviser is named, at least fifteen (15) Business Days
prior to its use. No such material shall be used if the Fund or its designee
object to such use within fifteen (15) Business Days after receipt of such
material. The Fund, the Adviser, or the designee of either reserves the right
to reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund or the Adviser is named, and no such
material shall be used if the Fund, the Adviser, or the designee of either so
objects.
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 Adviser or
the designee of either.
4.3 The Fund, the Adviser, or the designee of either shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or its
Account(s), is named at least fifteen (15) Business Days prior to its use. No
such material shall be used if the Company or its designee object to such use
within fifteen (15) Business Days after receipt of such material.
Notwithstanding that the Company did not initially object, the Company reserves
the right to object at any time thereafter to the continued use of any such
sales literature or other promotional material in which the Company is named,
and no such material shall be used thereafter if the Company so objects.
4.4 The Fund and the Adviser 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
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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
public 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
notices, orders or responses relating thereto and all supplements and
amendments to any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of such document with, or the issuance of
such documents by, the SEC or other regulatory authorities.
4.6 Upon request, 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 notices, orders or responses relating thereto and all
supplements and amendments to any of the above, that relate to the Contracts or
each Account, contemporaneously with the filing of such document with, or the
issuance of such documents by, 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, telephone directories (other than routine
listings), electronic or other public media), sales literature (i.e., any
written or electronic communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, performance reports or summaries, form letters, telemarketing
scripts, 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.
4.8 The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for the Fund, and of any material change
in the Fund's registration statement or prospectus, 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 registration
statement and prospectus, 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.
ARTICLE V. Fees and Expenses
5.1 The Fund and Adviser shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses or a shareholder
services fee for the servicing of a participating Fund class' shares, then the
Adviser, Fund, or Underwriter, as may be applicable,
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shall make payments to the Company or to the Underwriter, as applicable, for
the Contracts if and in amounts agreed to by the applicable parties in writing.
No Rule 12b-1 payments shall be made directly by the Fund.
5.2 All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall be responsible for ensuring 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,
all taxes on the issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expense of printing the Fund's prospectus for
owners of Contracts, who are invested in the Fund on or about the date of the
Fund's then-current prospectus, pursuant to Section 3.1 of this Agreement. The
Fund shall also bear the expense of printing the Fund's proxy materials and
reports to such Contract owners.
ARTICLE VI. Foreign Tax Credits
6.1 The Fund agrees to consult in advance with the Company concerning any
change to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
ARTICLE VII. Indemnification
7.1 Indemnification By The Company
7.1(a) The Company agrees to indemnify and hold harmless the Fund and each
director of the Board and officers (collectively, the "Indemnified Parties" for
purposes of this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or litigation (including reasonable 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
advertisements 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
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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 advertisements 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,
advertisements 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 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 7.1(b) and
7.1(c) hereof.
7.1(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.
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
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 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
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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 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.
7.2 [Reserved]
7.3 Indemnification By The Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Company and the
principal underwriter for the Contracts and each of their respective directors,
trustees, and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation (including reasonable 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 qualify as a RIC under Subchapter M of the Code); or
(ii)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 advertisements 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 Adviser 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(iii) arise out of or as a result of
statements or representations (other than statements or representations
contained in the Registration Statement, prospectus or sales literature
for the Contracts not supplied by the Adviser or persons under its
control) or wrongful conduct of the Fund, Adviser or persons under their
control, with respect to the sale or distribution of the Contracts or
Fund shares; or
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(iv)arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus,
advertisements 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
(v)arise as a result of the Fund's (or its designated agent's)
(i) incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate; (ii) incorrect reporting of the daily
net asset value, dividend rate or capital gain distribution rate; or
(iii) untimely reporting of the net asset value, dividend rate or
capital gain distribution rate. Any gain accruing to the Company
attributable to the Fund's (or its designated agent's) incorrect
calculation or reporting of the daily net asset value shall be returned
to the Fund by the Company upon receipt of notice from the Fund
regarding such incorrect calculation or reporting; or
(vi)arise out of or result from any material breach of any representations
or warranty made by the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof.
7.3(b) Neither the Fund nor the Adviser shall have any liability 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 Adviser or each Account,
whichever is applicable.
7.3(c) Neither the Fund nor the Adviser shall have any liability under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to 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.
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7.3(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, trustees, 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.
7.3(e) The Company and its Indemnified Parties agree to look first to the
Fund for the satisfaction of any indemnification. If the insurance coverage
and/or assets of the Fund are insufficient to satisfy the indemnification, the
Company and its Indemnified Parties may then look to the Adviser for any excess
amount.
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 Texas without giving
effect to conflict of laws. Each party also hereby irrevocably submits to the
exclusive jurisdiction of the courts located in the State of Texas in any
proceeding arising out of or relating to this agreement, agrees not to commence
any suit, action or proceeding relating thereto except in such courts, and
waives, to the fullest extent permitted by law, the right to move to dismiss or
transfer any action brought in such court on the basis of any objection to
personal jurisdiction or venue. Each party hereby irrevocably consents to the
service of process in any such proceeding by the mailing of copies of such
process to it at its address set forth in Article X hereto.
8.2 This Agreement shall be subject to the provisions of the 1933 Act, 1934
Act and 1940 Act, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. Termination
9.1 This Agreement shall continue in full force and effect until the first
to occur of:
(a)termination by any party for any reason by one hundred eighty
(180) day's advance written notice delivered to the other parties; or
(b)termination by the Company by written notice to the Fund and the Adviser
based upon the Company's determination that shares of such 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 Adviser
in the event the Fund's shares are not registered, issued or sold in
accordance with applicable state or federal law or such law precludes
the use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d)termination by the Company by written notice to the Fund and the Adviser
in the event that the Fund ceases to qualify as a RIC under Subchapter M
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of the Code or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to do so qualify; or
(e)termination by either the Fund or the Adviser by written notice to the
Company, if either one or both of the Fund or the Adviser respectively,
shall determine, in their sole judgment exercised in good faith, that
the Company 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
(f)termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised
in good faith, that either the Fund or the Adviser 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 any party by written notice upon the institution of
formal proceedings against the Company, the Fund, or the Adviser by the
Financial Industry Regulatory Authority ("FINRA"), the SEC or other
regulatory body; or
(h)termination by the Company or the Fund by written notice to the other
party upon a determination by the majority of the Fund's Board that a
material irreconcilable conflict exists among the interests of (i) all
contract owners of all separate accounts or (ii) the interests of the
Participating Insurance Companies; or
(i)termination by any party by advance written notice upon the "assignment"
of the Agreement (as defined under the 0000 Xxx) unless made with the
written consent of each party to the Agreement; or
(j)termination by the Company by written notice upon the sale, acquisition
or change of control of the Adviser; or
(k)termination by the Company arising from the substitution of Fund shares
with the shares of another investment company for the Contracts for
which the Fund shares have been selected to serve as the underlying
investment medium, subject to compliance with applicable regulations of
the SEC, Company will give sixty (60) day's written notice to the Fund
and the Adviser of any proposed action to replace Fund shares; or
(l)termination by the Company, the Fund or the Adviser by written notice to
the other parties upon a material breach of the Agreement by the other
party; or
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(m)termination by the Fund or the Adviser by written notice to the Company,
if the Company gives the Fund and the Adviser the written notice
specified in Section 1.6(b) hereof and at the time such notice as given
there was no notice of termination outstanding under any other provision
of this Agreement; provided, however any termination under this
Section 10.1(n) shall be effective forty-five (45) days after the notice
specified in Section 1.6(b) was given.
9.2 Effect of Termination. Notwithstanding any termination of this Agreement
and for so long as Fund continues to be available for sale to existing
shareholders, the Fund and the Adviser 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 or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 9.2 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.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight delivery or facsimile to the other party at the address of such
party set forth below or at such other address as such party may from time to
time specify in writing to the other party.
If to the Fund:
American Beacon Funds
0000 Xxxx Xxxxxx Xxxx., XX 2450
Xxxx Xxxxx, XX 00000
Attention: President
Fax No. (000) 000-0000
With a copy to General Counsel at the same address.
If to the Adviser:
American Beacon Advisors, Inc.
0000 Xxxx Xxxxxx Xxxx., XX 0000
Xxxx Xxxxx, XX 00000
Attention: President
Fax No. (000) 000-0000
With a copy to General Counsel at the same address.
If to the Company:
0000 Xxxxx Xxxxxxx X0-00
00
Xxxxxxx, XX 00000
Attention: General Counsel
Fax No. (000) 000-0000
ARTICLE XI. Miscellaneous
11.1 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, trustees, officers, agents or shareholders assume any personal liability
for obligations entered into on behalf of the Fund.
11.2 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.
11.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
11.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction over them (which may
include but not be limited to the SEC and state insurance regulators) and shall
permit such authorities reasonable access to its relevant non-privileged books
and records in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby to the extent practicable and
except where a party's respective interests are adverse to or in conflict with
another party's interests.
11.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.8 This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior consent of all parties hereto;
provided, however, that the Adviser may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common control with
the Adviser if such assignee is duly organized, licensed and registered to
perform the obligations of the Adviser under this Agreement.
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IN WITNESS HEREOF, each of the parties 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 as of the date specified below.
THE VARIABLE ANNUITY LIFE AMERICAN BEACON FUNDS, acting
INSURANCE COMPANY solely on behalf of EACH OF ITS SERIES
LISTED ON SCHEDULE C HERETO,
severally and not jointly
By: /s/ Xxxxxx X. Xxxx By: /s/Xxxxxxxx X. Xxxxx
Title: Vice President Title: Vice President/Secretary
Date: 3/15/12 Date: 3/14/12
AMERICAN BEACON ADVISORS, INC.
By: /s/ X. X. Xxxxxxxx
Title: Xxxxxxx X. Xxxxxxxx / Chief
Operating Officer
Date: 3/14/12
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Schedule A
Accounts
Name of Account Date of Resolution of Company's Board
which Established the Account
The Variable Annuity Life Insurance April 18, 1979
Company Separate Account A
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Schedule B
Contracts
Portfolio Director Series
Equity Director Series
19
Schedule C
Series
American Beacon Holland Large Cap Growth Fund, Investor Class Shares
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Schedule D
Investor Trading Policy
VALIC has a policy to discourage excessive trading and market timing. Our
investment options are not designed to accommodate short-term trading or
"market timing" organizations, or individuals engaged in certain trading
strategies, such as programmed transfers, frequent transfers, or transfers that
are large in relation to the total assets of a mutual fund. These trading
strategies may be disruptive to mutual funds by diluting the value of the fund
shares, negatively affecting investment strategies and increasing portfolio
turnover. Excessive trading also raises fund expenses, such as recordkeeping
and transaction costs, and xxxxx fund performance.
Accordingly, VALIC implemented certain policies and procedures intended to
hinder short-term trading. If an investor sells fund shares valued at $5,000 or
more, whether through an exchange, transfer, or any other redemption, the
investor will not be able to make a purchase of $5,000 or more in that same
fund for 30 calendar days.
This policy applies only to investor-initiated trades of $5,000 or more, and
does not apply to the following:
. Plan-level or employer-initiated transactions;
. Purchase transactions involving transfers of assets or rollovers;
. Retirement plan contributions, loans, and distributions (including
hardship withdrawals);
. Xxxx XXX conversions or XXX recharacterizations;
. Systematic purchases or redemptions;
. Systematic account rebalancing; or
. Trades of less than $5,000.
As described in a fund's prospectus and statement of additional information, in
addition to the above, fund purchases, transfers and other redemptions may be
subject to other investor trading policies, including redemption fees, if
applicable. Certain funds may set limits on transfers in and out of a fund
within a set time period in addition to or in lieu of the policy above. Also,
an employer's benefit plan may limit an investor's rights to transfer.
We intend to enforce these investor trading policies uniformly. We make no
assurances, however, that all the risks associated with frequent trading will
be completely eliminated by these policies and/or restrictions. If we are
unable to detect or prevent market timing activity, the effect of such activity
may result in additional transaction costs for the investment options and
dilution of long-term performance returns. Thus, an investor's account value
may be lower due to the effect of the extra costs and resultant lower
performance. We reserve the right to modify these policies at any time.
VALIC represents The Variable Annuity Life Insurance Company and its
subsidiaries VALIC Financial Advisors, Inc. and VALIC Retirement Services
Company.
Last updated: April 8, 2009
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