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EXHIBIT 8(p)(i)
PARTICIPATION AGREEMENT
AMONG
XXX XXXXXXX FUND
HCM INVESTMENTS, INC.
AND
THE VARIABLE ANNUITY LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 1 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 the XXX XXXXXXX FUND, a
Delaware corporation (hereinafter the "Fund") and HCM INVESTMENTS, INC.
(hereinafter the "Underwriter"), a Delaware 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 Underwriter (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, Hollard Capital Management, L.P. (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
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WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission ("SEC") under the Securities Exchange Act of
1934, as amended (hereinafter the "1934 Act"), and is a member in good standing
of the National Association of Securities Dealers, Inc. (hereinafter "NASD");
and
WHEREAS, 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,
the Fund and the Underwriter 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
10:15 a.m. Eastern time on the next following Business Day. In placing orders
with the Fund, the Company shall net all purchases and 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 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. Notice of election to
suspend or terminate shall be furnished in writing, by the Fund, 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.
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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 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day. 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. 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 use its best efforts to make such net
asset value per share available by 7:00 p.m. Eastern
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time. Notwithstanding this Section 1.8, the Fund shall provide its not asset
value per share to the Company no later than 7:30 p.m. Eastern time. If the Fund
is unable to meet the 7:30 p.m. Eastern 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.
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 written 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 4:00 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 Delaware, 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
Underwriter.
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.
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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 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 Delaware, and the Fund and the Underwriter, represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Delaware 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 Delaware and that it does and will
comply in all material respects with the 1940 Act.
2.7 The Underwriter represents and warrants that it is duly organized
and in good standing under the laws of the State of Delaware. The Underwriter
represents and warrants that it is a member in good standing of the National
Association of Securities Dealers, Inc. and is registered as a broker-dealer
with the SEC. The Underwriter further represents that it will sell and
distribute the Fund shares in accordance with the laws of the State of Delaware
and all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act and the 0000 Xxx.
2.8 The Underwriter 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 Delaware and any applicable state and federal securities laws.
2.9 The Fund and Underwriter 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
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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 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 Underwriter 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 Underwriter 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;
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(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the above standards.
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, the Adviser or the Underwriter 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. The Fund, the Adviser, the Underwriter, or its
designee reserves the right to reasonably object to the continued use of any
such sales literature or other promotional material in which the Fund, the
Adviser or the Underwriter is named, and no such material shall be used if the
Fund, the Adviser, the Underwriter, or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3 The Fund, the Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company 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 Underwriter shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Contracts other than the information or representations
contained in a registration statement or
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prospectus for the Contracts, as such registration statement and prospectus may
be amended or supplemented from time to time, or in published reports for each
Account which are in the public domain or approved by the Company for
distribution to Contract owners, or in sales literature or other promotional
material approved by the Company or its designee, except with the permission of
the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, Statements of Additional Information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and 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 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 a 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.
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ARTICLE V. Fees and Expenses
5.1 The Fund and Underwriter shall pay no fee or other compensation to
the Company under this Agreement, except that if the Fund adopts and implements
a plan pursuant to Rule 12b-1 to finance distribution expenses, then the
Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the Underwriter.
No such payments shall be made directly by the Fund. Currently, no such payments
are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall 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 expenses 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 expenses 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 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 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:
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(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) 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
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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.
7.2 Indemnification by the Underwriter
7.2(a) The Underwriter agrees to indemnify and hold harmless the
Company and the principal underwriter for the Contracts and each of their
respective directors and officers and the principal underwriter 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 Underwriter) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts 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 Underwriter or Fund by or on
behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales
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literature for the Contracts not supplied by the Underwriter
or persons under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, 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 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 regulated
investment company under Subchapter M of the Code); or
(v) arise as a result of the Fund's or Adviser's (or their
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 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 Underwriter
in this Agreement or arise out of or result from any other
material breach of this Agreement by the Fund or the
Underwriter; as limited by and in accordance with the
provisions of Section 7.2(b) and 7.2(c) hereof.
7.2(b) The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
each Company or the Account, whichever is applicable.
7.2(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve
Page 12 of 21
13
the Underwriter from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the Underwriter's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Underwriter will not
be liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.2(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
7.3 Indemnification By the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the Company and
the principal underwriter 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 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 regulated
investment company under Subchapter M of the Code); or
(ii) 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
(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.
Page 13 of 21
14
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 Underwriter 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 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 Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceedings against it or any of
its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE 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 reason by one
hundred eighty (180) day's advance written notice
delivered to the other parties; or
Page 14 of 21
15
(b) termination by the Company by written notice to the
Fund and Underwriter 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 Underwriter 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 Underwriter in the event that the Fund
ceases to qualify as a Regulated Investment Company
under Subchapter M of the Code or under any successor
or similar provision, or if the Company reasonably
believes that the Fund may fail to do so qualify; or
(e) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both
of the Fund or the Underwriter respectively, shall
determine, in their sole judgment exercised in good
faith, that the Company 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 Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that either the Fund, the Adviser or the
Underwriter has suffered a material adverse change in
its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(g) termination by any party by written notice upon the
institution of formal proceedings against the
Company, the Fund, the Adviser or the Underwriter 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
Page 15 of 21
16
(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 60 day's written notice to the Fund
and the Underwriter of any proposed action to replace
Fund shares; or
(l) termination by the Company, the Fund or the
Underwriter by written notice to the other parties
upon a material breach of the Agreement by the other
party; or
(m) termination by the Fund or the Underwriter by written
notice to the Company, if the Company gives the Fund
and the Underwriter the written notice specified in
Section 1.6(b) hereof and at the time such notice was
given there was no notice of termination outstanding
under any other provision of this Agreement;
provided, however any termination under this Section
10.1(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, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation. the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund 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:
----------------------------------
----------------------------------
Attention:
------------------------
Fax No.
---------------------------
Page 16 of 21
17
If to the Underwriter:
----------------------------------
----------------------------------
Attention:
------------------------
Fax No.
---------------------------
If to the Company:
0000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxx
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, 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.
Page 17 of 21
18
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 Underwriter may assign this Agreement or any rights
or obligations hereunder to any affiliate of or company under common control
with the Underwriter, if such assignee is duly organized, licensed and
registered to perform the obligations of the Underwriter under this Agreement.
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 XXX XXXXXXX FUND
INSURANCE COMPANY
By: By:
---------------------------- ----------------------------
Title: Title:
------------------------- -------------------------
Date: Date:
------------------------- -------------------------
HCM INVESTMENTS, INC.
By:
----------------------------
Title:
-------------------------
Date:
-------------------------
Page 18 of 21
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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
Portfolio Director Series
Page 20 of 21
21
Schedule C
series of the Fund
Growth Fund
Page 21 of 21
