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EXHIBIT 8(k)(i)
PARTICIPATION AGREEMENT
AMONG
SIT MUTUAL FUNDS, INC.
SIT INVESTMENT ASSOCIATES, INC.
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the 1st day of November,
2000 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 Sit Mutual Funds, Inc. a
Minnesota corporation (hereinafter the "Fund") and Sit Investment Associates,
Inc. (hereinafter the "Adviser"), a Minnesota 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 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 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 form time to time by mutual agreement of the
parties hereto; under this Agreement to the Accounts of the Company; and
WHEREAS, 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
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WHEREAS, SIA Securities Corp. (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, 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.
NOW THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Adviser 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 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 as provided for in the then-current prospectus for the Contracts,
and receipt by such designee shall constitute receipt by the Fund; provided that
the Fund receives notice of such order by 6:45 a.m. Central 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.
1.2 The Fund agrees to make its shares available 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 as provided for in the then-current prospectus and statement of
additional information for the Fund, 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 Directors of
the Fund (hereinafter the "Board") may refuse to sell shares of the Fund to any
person, or suspend or terminate the offering of its shares if such action is
required by law or by regulatory authorities having jurisdiction, and as
provided for in the then-current prospectus and statement of additional
information for the Fund. Notice of election to suspend or terminate shall be
furnished in writing, by the Fund, other than as required by law or other
regulatory authority, said termination to be effective 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.
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
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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 as
provided for in the then-current prospectus for the Contracts, and receipt by
such designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such request for redemption by 6:45 a.m. Central Time.
Proceeds shall be wired to Company within three (3) Business Days or such longer
period permitted by the Investment Company Act of 1940, as amended (the "1940
Act") or the rules, orders or regulations thereunder, and the Fund shall notify
the person designated in writing by Company as the recipient for such notice of
such delay by 3:00 p.m. Central time the same Business Day that Company
transmits the redemption order to the Fund.
1.4 The Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of this Agreement, and as provided for in the
then-current prospectus and statement of additional information for the Fund.
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 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. Notwithstanding this
Section 1.9, 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 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 make such net asset value per share
available by 6:30 p.m. Eastern time. If the Fund is unable to meet the 6:30 p.m.
time stated herein, it shall provide additional time for the Company to place
orders for the purchase and redemption of shares and make any applicable
purchase payments.
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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 owners account value effected 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 confirmation 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. Such information shall be furnished by 1:00 p.m. Eastern time on the next
Business Day.
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 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, 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 the laws of the State of Minnesota, and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 0000 Xxx. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Adviser.
2.3 The Fund represents that, under the terms of its investment
advisory agreements with 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
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
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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 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. To the extent that it decides
to finance distribution expenses pursuant to Rule 12b-1, the Fund undertakes to
have a board of directors, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.5 The Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Minnesota, and the Fund and the Adviser, represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Minnesota to the extent required to perform this
Agreement.
2.6 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Minnesota and that it does and will
comply in all material respects with the 0000 Xxx.
2.7 The Adviser represents and warrants that it is duly organized and
in good standing under the laws of the State of Minnesota.
2.8 The Adviser represents and warrants that the Adviser is and shall
remain duly registered in all material respects under all applicable federal or
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
Minnesota and any applicable state and federal securities laws.
2.9 The Fund and Adviser represent and warrant that all of their
directors, officers, employees, investment advisers, 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.
2.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other 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
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coverage for the benefit of the Fund, in an amount not less than two million
dollars ($2 million). The aforesaid Bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
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. All expenses of printing Fund prospectuses and statements of
additional information provided by the Company to its existing owners of
Contracts in order to update disclosure as required by the 1933 Act and/or the
1940 Act 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. All expenses of printing Fund
prospectuses for the Company's use in marketing and distribution purposes shall
be paid for by the Company.
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.
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
distribution to Contract owners.
3.4 If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance wit 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,
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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 above standards.
ARTICLE IV. Sales Material and Information
4.1 The Company or its designee 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, the Underwriter or the Adviser, is named
at least fifteen Business Days prior to its use. No such material shall be used
if the Fund or its designee object to such use within fifteen Business Days
after receipt of such material. Notwithstanding that the Fund did not initially
object, the Fund 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 Fund, the Underwriter or the Adviser is named, and no such material
shall be used thereafter if the Fund 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 Adviser, except with the permission of the Fund or the
Adviser or the designee of either.
4.3 The Fund 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 or its Account(s), is named at
least fifteen Business Days prior to its use. No such material shall be used if
the Company or its designee object to such use within fifteen 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 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
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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, in connection with the Contracts,
contemporaneously with the filing of such document with, or the issuance of such
documents by, 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, 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, in connection with the Fund, 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.
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,
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preparation and filing of the Fund's prospectus and registration statement,
proxy materials and reports, setting the prospectus in type, setting in type and
printing the proxy materials and reports to shareholders (including the costs of
printing a prospectus that constitutes an annual report), the preparation of all
statements and notices required by any federal or state law, all taxes on the
issuance or transfer of the Fund's shares.
5.3 The Fund shall bear the expenses of printing the Fund's prospectus
and of printing and the Fund's proxy materials and reports to existing Contract
owners.
ARTICLE VI. Foreign Tax Credits
6.1 The Fund agrees to consult in advance with the Company concerning
any decision 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, the
Underwriter, and the Adviser, 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
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 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)
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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 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.
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7.2 Indemnification by the Adviser
7.2(a) The Adviser agrees to indemnify and hold harmless the Company
and the principal Adviser for the Contracts and each of their respective
directors and officers and the principal Adviser for the Contracts 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
7.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) 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 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 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
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for
the Contracts not supplied by the Adviser or persons under
its control) or wrongful conduct of the Fund, Adviser or
Adviser 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, 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
(iv) arise as a result of a failure to qualify as a regulated
investment company under Subchapter M of the Code; or
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(v) arise as a result of the following errors of th Fund's or
Adviser's (or their designated agent's) that require
adjustment to the Fund's shareholder records maintained by
the Fund on behalf of an Account as determined by the Fund
in its sole discretion pursuant to the Fund's then current
policies and procedures; (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
Adviser's (or their 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 or the Adviser regarding such incorrect
calculation or reporting; or
(vi) arise out of or result from any material breach of any
representation or warranty made by the Fund or the Adviser
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Fund or the
Adviser; as limited by and in accordance with the provisions
of Section 7.2(b) and 7.2(c) hereof.
7.2(b) The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
7.2(c) The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Adviser to such party of the Adviser's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Adviser will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.2(d) The Company agrees promptly to notify the Adviser 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.
Page 12 of 21
13
7.3 Indemnification By the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Company and
the principal Adviser for Contracts and each of their respective directors and
officers and each person, if any, who controls the Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes
of this Section 7.3) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Fund, are related to the operations of the Fund and:
(i) arise as a result of a failure to qualify as a regulated
investment company under Subchapter M of the Code; or
(ii) arise as a result of the following errors of the Fund's or
Adviser's (or their designated agent's) that require
adjustment to the Fund's shareholder records maintained by
the Fund on behalf of an Account as determined by the Fund
in its sole discretion pursuant to the Fund's then current
policies and procedures; (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 agents) 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
(iii) 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) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against on 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) 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
Page 13 of 21
14
after such Indemnified Party shall have received notice of such service on any
designated agent). but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party 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.
7.3(d) The Company and the Adviser 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 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.
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 reaso 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
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 Regulated Investment
Page 14 of 21
15
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 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, the
Adviser 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, the Adviser or the Adviser by the NASD, 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 fro 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 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 o the Adviser by
written notice to the other parties upon a material breach
of the Agreement by the other party; or
Page 15 of 21
16
9.2 Effect of Termination. Notwithstanding any termination of this
Agreement, 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 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.
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:
Sit Mutual Funds, Inc.
4600 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Attention: Xxxx Xxxxxxxxx
Fax No. 000-000-0000
If to the Adviser:
Sit Investment Associates, Inc.
4600 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Attention: Xxxx Xxxxxxxxx
Fax No. 000-000-0000
If to the Company:
0000 Xxxxx Xxxxxxx
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, 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,
Page 16 of 21
17
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 (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 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.
Page 17 of 21
18
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 SIT MUTUAL FUNDS, INC.
INSURANCE COMPANY
-----------------------------------
By: By:
---------------------------- --------------------------------
Title: Title:
------------------------- -----------------------------
Date: Date:
-------------------------- ------------------------------
SIT INVESTMENT ASSOCIATES, INC.
-----------------------------------
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
Page 18 of 21
19
Schedule A
Accounts
Date of Resolution of Company's Board
Name of Account which Established the Account
--------------- -------------------------------------
The Variable Annuity Life Insurance April 18, 1979
Company Separate Account A
Page 19 of 21
20
Schedule B
Contracts
o Portfolio Director Series
Page 20 of 21
21
Schedule C
series of the Fund
o Sit Small Cap Growth Fund (Series D)
Page 21 of 21
