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EXHIBIT 8(f)(2)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and between Founders Funds, Inc., a Maryland
corporation, on behalf of its Founders Growth Fund series and such other funds
or portfolios of series-type mutual funds set forth on Schedule A attached
hereto as amended from time to time, ("FUND"), Premier Mutual Fund Services,
Inc. ("DISTRIBUTOR"), Founders Asset Management, LLC ("ADVISER"), and The
Variable Annuity Life Insurance Company ("VALIC"), a life insurance company
organized under the laws of the State of Texas, on its own behalf and on behalf
of each segregated asset account set forth on Schedule B hereto as amended from
time to time (each such account hereinafter referred to as "ACCOUNT").
WHEREAS, FUND is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940 (the "1940 Act") as an
open-end, diversified, management investment company; and
WHEREAS, FUND shares are issued to the general public and to the
separate accounts of insurance companies ("Participating Insurance Companies")
to fund variable insurance products and certain qualified pension and retirement
plans; and
WHEREAS, DISTRIBUTOR is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and any applicable state
securities law; and
WHEREAS, ADVISER is registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law, and as
a transfer agent under the 1934 Act; and
WHEREAS, VALIC has established ACCOUNT to offer variable contracts (the
"Contracts") and is desirous of having FUND as one of the underlying funding
vehicles for the Contracts; and
WHEREAS, FUND, DISTRIBUTOR and ADVISER know of no reason why FUND
shares may not be sold to Participating Insurance Companies to fund variable
insurance products and qualified pension and retirement plans; and
WHEREAS, VALIC intends to purchase shares of other open-end, management
investment companies that offer shares to the general public to fund the
Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, VALIC intends to purchase shares of FUND to fund the Contracts and
FUND is or will be authorized to sell such shares to VALIC at net asset value;
WHEREAS, VALIC and affiliates of VALIC will provide subcustodian,
record keeping, account maintenance and/or other administrative services for
Contract owners and participants, employee benefit plans and participants, and
other investors;
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NOW, THEREFORE, in consideration of their mutual promises, VALIC, FUND,
DISTRIBUTOR and ADVISER agree as follows:
1. FUND and DISTRIBUTOR agree to make FUND shares available for
purchase by VALIC and ACCOUNT at the applicable net asset value per share on
those days on which FUND calculates its net asset value pursuant to SEC rules.
FUND shall use reasonable efforts to calculate such net asset value on each day
which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the FUND or DISTRIBUTOR, as the Fund's designee may refuse to sell
shares to any person, or suspend or terminate the offering of shares, if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the FUND or DISTRIBUTOR acting in good faith and
in light of their fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of the FUND.
2. Issuance and transfer of FUND's shares will be by book entry only.
Stock certificates will not be issued to VALIC or ACCOUNT. Shares ordered from
FUND will be recorded in an appropriate title for ACCOUNT or the appropriate
subaccount of ACCOUNT.
3. FUND shall furnish same day notice (by wire, telecopier, or
telephone followed by written confirmation) to VALIC of any income, dividends or
capital gain distributions payable on FUND's shares. VALIC hereby elects to
receive all such income, dividends and capital gain distributions of a FUND in
the form of additional shares of that FUND. VALIC reserves the right to revoke
this election and to receive all such income, dividends and capital gain
distributions in cash. FUND shall notify VALIC of the number of shares so issued
as payment of such dividends and distributions.
4. (a) FUND agrees to sell to VALIC shares of the FUND which
VALIC orders, executing such orders on a daily basis at the net asset value next
computed after receipt by FUND or its designee in proper form of the order for
the shares of FUND. For purposes of this Section 4(a), VALIC shall be the
designee of FUND for receipt of such orders from VALIC and receipt by such
designee shall constitute receipt by FUND; provided that FUND receives notice of
such order by 9:00 a.m. Eastern 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 FUND calculates its net asset value pursuant to the
rules of the SEC. "Proper form" means that amounts to be invested or redeemed
are identified on VALIC's computer system by Participant, Contract and Fund in
accordance with VALIC's standard procedures for processing transactions.
(b) FUND agrees to redeem for cash (or in kind to the limited
extent disclosed in the Fund's prospectus), on VALIC's request, any full or
fractional shares of FUND held by VALIC, executing such requests on a daily
basis at the net asset value next computed after receipt by FUND or its designee
of the request for redemption in proper form. For purposes of this Section 4(b),
VALIC shall be the designee of FUND for receipt of requests for redemption from
VALIC and receipt by such designee shall constitute receipt by FUND; provided
that FUND receives notice of such request for redemption by 9:00 a.m. Eastern
time on the next following Business Day.
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(c) FUND shall make the net asset value per share available to
VALIC on a daily basis as soon as reasonably practical after the net asset value
per share is calculated but shall use its best efforts to make such net asset
value available by 6:30 p.m. Eastern time. If FUND provides VALIC with the
incorrect share net asset value information through no fault of VALIC, VALIC on
behalf of the Separate Accounts, shall be entitled to an adjustment to the
number of shares purchased or redeemed to reflect the correct share net asset
value. Any error in the calculation of net asset value, dividend and capital
gain information (each, a "Pricing Error") greater than or equal to $.01 per
share of FUND, shall be reported immediately upon discovery to VALIC. Pricing
Errors will be corrected in accordance with the FUND's pricing error policy
established by its board of directors.
(d) If VALIC requests the purchase of FUND shares, VALIC shall
pay for such purchase by wiring federal funds to FUND or its designated
custodial account on the day the order is transmitted by VALIC. If VALIC
requests a net redemption resulting in a payment of redemption proceeds to
VALIC, FUND shall wire the redemption proceeds to VALIC on the day the order is
transmitted by VALIC, unless doing so would require FUND to dispose of portfolio
securities or otherwise incur additional costs, but in such event, proceeds
shall be wired to VALIC within three business days and FUND shall notify the
person designated in writing by VALIC as the recipient for such notice of such
delay by 3:00 p.m. Eastern time the same Business Day that VALIC transmits the
redemption order to FUND. If VALIC's order requests the application of
redemption proceeds from the redemption of shares of one FUND to the purchase of
shares of another FUND, FUND shall so apply such proceeds the same Business Day
that VALIC transmits such order to FUND.
5. (a) FUND or ADVISER shall provide VALIC with as many copies of
FUND's current prospectus as VALIC may reasonably request. If requested by VALIC
in lieu thereof, FUND shall provide such documentation (including a copy of the
new prospectus in computer form) and other assistance as is reasonably necessary
in order for VALIC once each year (or more frequently if the prospectus for FUND
is amended) to have the prospectuses for the Contracts and for the FUND printed
together in one document. FUND or ADVISER shall provide VALIC with as many
copies of any prospectus supplement as VALIC may reasonably request.
(b) Unless otherwise provided herein, all parties to this
Agreement shall bear all expenses incident to the performance of their
respective duties under this Agreement. FUND will bear the printing costs (or
duplicating costs with respect to the statement of additional information) and
mailing costs associated with the delivery, to the extent legally required, of
the following FUND (or individual portfolio) documents, and any supplements
thereto, to existing variable contract owners of VALIC:
(i) prospectuses and statements of additional
information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
VALIC will submit any bills for printing, duplicating and/or mailing costs,
relating to FUND documents described above, to FUND for reimbursement by FUND.
VALIC shall monitor such costs and shall use its best efforts to control these
costs. VALIC will provide FUND on a
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semi-annual basis, or more frequently as reasonably requested by FUND, with a
current tabulation of the number of existing variable contract owners of VALIC
whose variable contract values are invested in FUND. This tabulation will be
sent to FUND in the form of a letter signed by a duly authorized officer of
VALIC attesting to the accuracy of the information contained in the letter.
(c) At its expense ADVISER will provide VALIC with the
following FUND documents, and any supplements thereto, with respect to
prospective variable contract owners of VALIC:
(i) camera ready copy of the current prospectus
for printing by VALIC;
(ii) a copy of the statement of additional
information suitable for duplication; and
(iii) camera ready copy of the annual and
semi-annual reports for printing by VALIC.
6. (a) VALIC will furnish, or will cause to be furnished, to
ADVISER or its designee, each piece of sales literature or other promotional
material in which FUND or ADVISER is named at least fifteen days prior to its
intended use. No such material will be used if ADVISER or its designee objects
to its use in writing within ten days after receipt of such material.
(b) ADVISER or its designee will furnish, or will cause to be
furnished, to VALIC, each piece of sales literature or other promotional
material in which VALIC is named at least fifteen days prior to its intended
use. No such material will be used if VALIC objects to its use in writing within
ten days after receipt of such material.
(c) FUND and its affiliates and agents shall not give any
information or make any representations on behalf of VALIC or concerning VALIC,
ACCOUNT, or the Contracts issued by VALIC, other than the information or
representations contained in a registration statement or prospectus for such
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports for ACCOUNT or prepared for
distribution to owners of the Contracts, or in sales literature or other
promotional material approved by VALIC or its designee, except with the
permission of VALIC.
(d) VALIC and its affiliates and agents shall not give any
information or make any representations on behalf of FUND or ADVISER or
concerning FUND or ADVISER other than the information or representations
contained in a registration statement or prospectus for FUND, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in sales literature or other promotional material approved by
ADVISER or its designee, except with the permission of ADVISER.
(e) For purposes of this Agreement, the phrase "sales
literature or other promotional material" or words of similar import include,
without limitation, 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,
computer facility or service including the Internet, or other public media),
sales literature (such as any written communication distributed or made
generally available to
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customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, or reprints or excerpts or 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, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules or the 1933 or 1940 Acts. Notwithstanding the foregoing, the fifteen-day
notice requirement of this Section 6 does not apply to FUND registration
statements, prospectuses, statements of additional information, reports to
shareholders, proxy materials, and any other document filed with the SEC,
provided that the reference to VALIC in those documents is limited to: (1)
disclosing that VALIC and ACCOUNT are shareholders of FUND; (2) information
about the amount of shares held by VALIC and ACCOUNT; (3) disclosing that VALIC
purchased seed money shares and information about those shares; and (4) basic
information about VALIC such as its address and state of organization.
7. Compensation and Expenses. In consideration of its providing the
administrative and record-keeping services below, VALIC shall be entitled to
receive from DISTRIBUTOR and ADVISER, or the FUND, the fees set forth in Exhibit
C hereto. The obligation of DISTRIBUTOR and ADVISER, or FUND, to pay VALIC fees
and expenses shall continue, notwithstanding the termination of this Agreement,
as long as the ACCOUNT holds shares of the FUNDS on behalf of any Contract
owner. The administrative and record-keeping services include:
(a) responding to inquiries from Contract owners using one or
more of the FUNDs as an investment vehicle regarding the services performed by
VALIC as they relate to a FUND;
(b) providing information to ADVISER and to Contract owners
with respect to shares attributable to Contract owner accounts;
(c) developing and maintaining a means of identifying and
analyzing information relating to contract owners using one or more of the FUNDS
as an investment vehicle through computer databases or similar approaches;
(d) printing and mailing of shareholder communications from
each FUND as may be required;
(e) serving as the designee of the FUND for the receipt of
orders to purchase and redeem shares of the FUND pursuant to Section 4;
(f) cooperating with the FUND, DISTRIBUTOR, ADVISER and
governmental authorities in connection with the regulation of the FUNDS and the
sale of the shares of the FUNDS;
(g) providing data and materials to the FUND needed to
maintain the compliance of the FUND with the securities laws; and
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(h) communicating directly with Contract owners concerning
FUND operations. FUND or ADVISER shall pay all reasonable out-of-pocket expenses
actually incurred by VALIC in connection with the transfer of proxy statements
and reports to shareholders.
8. (a) Except as limited by and in accordance with the provisions
of Sections 8(b) and 8(c) hereof, VALIC agrees to indemnify and hold harmless
FUND, DISTRIBUTOR and ADVISER and each director of the Board of FUND and
officers of FUND and each person, if any, who controls FUND and each of the
directors and officers of DISTRIBUTOR or of ADVISER and each person, if any, who
controls DISTRIBUTOR or ADVISER within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8) against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of VALIC) 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 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 or
sales literature for the Contracts or
contained in 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 of 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
VALIC by or on behalf of FUND for use in the
registration statement or prospectus for the
Contracts or in the Contracts or sales
literature (or any amendment or supplement)
or otherwise for use in connection with the
sale of the Contracts or FUND shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the
registration statement, prospectus or sales
literature of FUND not supplied by VALIC, or
persons under its control) or wrongful
conduct of VALIC or persons under its
control, with respect to the sale or
distribution of the Contracts or FUND
shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, or sales literature of 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
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to make the statements therein not
misleading if such statement or omission or
such alleged statement or omission was made
in reliance upon and in conformity with
information furnished to FUND by or on
behalf of VALIC; or
(iv) arise as a result of any failure by VALIC to
substantially provide the services and
furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material
breach of any representation and/or warranty
made by VALIC in this Agreement or arise out
of or result from any other material breach
of this Agreement by VALIC.
(b) VALIC shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party is 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 or duties under this Agreement or to FUND.
(c) VALIC 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 VALIC 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 VALIC of any such claim shall not
relieve VALIC from any liability for indemnification which it may have to the
Indemnified Party against whom such action is brought other than that liability
which may have been incurred solely as a result of the failure to give notice.
In case any such action is brought against an Indemnified Party, VALIC shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from VALIC to such party of VALIC's election
to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and VALIC 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.
9. (a) Except as limited by and in accordance with the provisions
of Sections 9(b) and 9(c), ADVISER agrees to indemnify and hold harmless VALIC
and each of its directors and officers and each person, if any, who controls
VALIC within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 9) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of ADVISER) 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 FUND's shares or the Contracts and:
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(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any
material fact contained in the registration
statement or prospectus or sales literature
of 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
ADVISER or FUND or its adviser by or on
behalf of VALIC for use in the registration
statement or prospectus for 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
ADVISER or FUND or its adviser or persons
under their control) or wrongful conduct of
FUND 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, 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 statements therein not
misleading, if such statement or omission or
such alleged statement or omission was made
in reliance upon and in conformity with
information furnished to VALIC by or on
behalf of FUND; or
(iv) arise as a result of (1) a failure by FUND
to substantially provide the services and
furnish the materials under the terms of
this Agreement; (2) a failure by FUND to
qualify as a Regulated Investment Company
under Subchapter M of the Code; or (3) a
failure by FUND to register its shares but
only if such registration is required in
those states where the FUND is subject to
the state securities commission.
(v) arise out of or result from any material
breach of any representation and/or warranty
made by ADVISER in this
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Agreement or arise out of or result from
any other material breach of this
Agreement by ADVISER.
(b) ADVISER shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party is 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 VALIC.
(c) 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 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 ADVISER of any such
claim shall not relieve ADVISER from any liability for indemnification which it
may have to the Indemnified Party against whom such action is brought other than
that liability which may have been incurred solely as a result of the failure to
give notice. In case any such action is brought against the Indemnified Parties,
ADVISER shall be entitled to participate at its own expense in the defense
thereof. ADVISER also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from ADVISER
to such party of 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 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.
10. (a) Except as limited by and in accordance with the provisions
of Sections 10(b) and 10(c), DISTRIBUTOR agrees to indemnify and hold harmless
VALIC and each of its directors and officers and each person, if any, who
controls VALIC within the meaning of Section 15 of the 1933 Act (collectively,
the "Indemnified Parties" for purposes of this Section 10) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of DISTRIBUTOR) 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 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 sales literature
of 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
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upon and in conformity with information
furnished to DISTRIBUTOR or FUND or its
adviser by or on behalf of VALIC for use in
the registration statement or prospectus for
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
DISTRIBUTOR or FUND or its adviser or
persons under their control) or wrongful
conduct of FUND or DISTRIBUTOR or persons
under their control, with respect to the
sale or distribution of the Contracts or
FUND shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact
contained in a registration statement,
prospectus, or sales literature covering the
Contracts, or any amendment thereof or
supplement thereto, or the omission or
alleged omission to state therein a material
fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission or
such alleged statement or omission was made
in reliance upon and in conformity with
information furnished to VALIC by or on
behalf of FUND; or
(iv) arise as a result of (1) a failure by FUND
to substantially provide the services and
furnish the materials under the terms of
this Agreement; (2) a failure by FUND to
qualify as a Regulated Investment Company
under Subchapter M of the Code; or (3) a
failure by FUND to register its shares but
only if such registration is required in
those states where the FUND is subject to
the state securities commission.
(v) arise out of or result from any material
breach of any representation and/or warranty
made by DISTRIBUTOR in this Agreement or
arise out of or result from any other
material breach of this Agreement by
DISTRIBUTOR.
(b) DISTRIBUTOR shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party is 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 VALIC.
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(c) DISTRIBUTOR 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 DISTRIBUTOR in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify DISTRIBUTOR of any
such claim shall not relieve DISTRIBUTOR from any liability for indemnification
which it may have to the Indemnified Party against whom such action is brought
other than that liability which may have been incurred solely as a result of the
failure to give notice. In case any such action is brought against the
Indemnified Parties, DISTRIBUTOR shall be entitled to participate at its own
expense in the defense thereof. DISTRIBUTOR also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from DISTRIBUTOR to such party of DISTRIBUTOR's election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and DISTRIBUTOR 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.
11. FUND represents and warrants that FUND shares sold pursuant to this
Agreement shall be registered under the 1933 Act and duly authorized for
issuance, and shall be issued, in compliance in all material respects with
applicable law, and that FUND is and shall remain registered under the 1940 Act
for so long as required thereunder. FUND further represents and warrants that
FUND qualifies as a Regulated Investment Company under Subchapter M of the Code,
and will make every effort to maintain such qualification (under Subchapter M or
any successor or similar provisions), and that FUND will notify VALIC
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future. FUND will register and
qualify its shares for sale in accordance with the laws of the various states as
may be required by law in those states where this FUND is subject to the
jurisdiction of the state securities commission.
12. VALIC 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 ACCOUNT as a segregated asset account under Texas law and
has registered ACCOUNT as a unit investment trust under the 1940 Act. VALIC
represents and warrants that the Contracts are or will be registered under the
1933 Act and that the Contracts will be issued in compliance in all material
respects with all applicable federal and state laws.
13. FUND will provide VALIC with at least one complete copy of all
prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications which disclose the
relationship of the FUND and VALIC or which may have an effect upon the FUND's
relationship with VALIC, and all amendments or supplements to any of the above
that relate to the FUND promptly after the filing of each such document with the
SEC or other regulatory authority. VALIC will provide FUND or its designee with
at least one complete copy of all prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, exemptive
applications and all amendments or supplements to
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any of the above that relate to ACCOUNT promptly after the filing of each such
document with the SEC or other regulatory authority.
14. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
15. VALIC will provide pass-through voting privileges to all Contract
owners so long as the Commission continues to interpret the 1940 Act as
requiring pass-through voting privileges for variable contract owners.
Accordingly, VALIC will vote shares of FUND held in ACCOUNT in a manner
consistent with voting instructions timely-received from Contract owners. VALIC
will vote shares of FUND held in ACCOUNT for which no voting instructions from
Contract owners are timely-received, as well as shares of FUND which VALIC
itself owns, in the same proportion as those shares of FUND for which voting
instructions from Contract owners are timely-received. Participating Insurance
Companies will be responsible for assuring that each of their separate accounts
participating in FUND calculates voting privileges in a manner consistent with
other Participating Insurance Companies.
16. FUND, DISTRIBUTOR and ADVISER agree to comply with any applicable
state insurance laws or regulations, including cooperating with VALIC in any
filings of sales literature for the Contracts, to the extent notified thereof in
writing by VALIC, unless such compliance is deemed by FUND, DISTRIBUTOR or
ADVISER to be unduly burdensome, in which event any Party may exercise its
option to terminate this Agreement under Section 17 hereof, except that such
termination shall be effective immediately.
17. (a) This Agreement shall be effective as of the date hereof
and shall continue in force until terminated in accordance with the provisions
herein. This Agreement shall supersede the Participation Agreement, dated May 1,
1996, and any amendments, among FUND, ADVISER and VALIC, the ADVISER's interest
in which was assigned to DISTRIBUTOR effective April 1, 1998.
(b) This Agreement shall terminate automatically in the event
of its assignment unless such assignment is made with the written consent of
each party.
(c) This Agreement shall terminate without penalty at the
option of the terminating party in accordance with the following provisions:
(i) At the option of each party at any time from
the date hereof upon 90 days' advance
written notice, unless a shorter time is
agreed to by the parties;
(ii) At the option of VALIC if FUND shares are
not reasonably available to meet the
requirements of the Contracts. Notice of
election to terminate shall be furnished by
VALIC and termination shall be effective ten
days after FUND's receipt of said notice
unless FUND makes available a sufficient
number of shares to meet the requirements of
the Contracts within said ten-day period;
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(iii) At the option of VALIC, upon the institution
of formal proceedings against FUND by the
SEC, the NASD, or any other regulatory body,
the expected or anticipated ruling, judgment
or outcome of which would, in VALIC'S
reasonable judgment, materially impair
FUND'S ability to meet and perform FUND'S
obligations and duties hereunder. Prompt
notice of election to terminate under this
paragraph shall be furnished by VALIC with
said termination to be effective upon
receipt of notice;
(iv) At the option of FUND, upon the institution
of formal proceedings against VALIC by the
SEC, the NASD, or any other regulatory body,
the expected or anticipated ruling,
judgement or outcome which would, in FUND'S
reasonable judgment, materially impair
VALIC'S ability to meet and perform its
obligations and duties hereunder. Prompt
notice of election to terminate under this
paragraph shall be furnished by FUND with
said termination to be effective upon
receipt of notice;
(v) At the option of FUND, if (1) FUND shall
determine in its sole judgment reasonably
exercised in good faith, that VALIC has
suffered a material adverse change in its
business or financial condition or is the
subject of material adverse publicity and
such material adverse change or material
adverse publicity is likely to have a
material adverse impact upon the operation
or business reputation of FUND and/or
ADVISER, (2) FUND shall have notified VALIC
in writing of such determination and its
intent to terminate this Agreement, and, (3)
after consideration of the actions taken by
VALIC and any other changes in circumstances
since the giving of such notice, the
determination of FUND shall continue to
apply on the sixtieth (60th) day since
giving of such notice, then such sixtieth
day shall be the effective date of
termination;
(vi) At the option of VALIC after having been
notified by FUND of a termination or
proposed termination of the Investment
Advisory Agreement between FUND and ADVISER
or its successors, which notice FUND shall
provide promptly to VALIC, the effective
date of termination of the Agreement to be
as determined by VALIC;
(vii) In the event FUND's shares are not
registered, issued or sold in accordance
with applicable federal law, or such law
precludes
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the use of such shares of the FUND as the
underlying investment medium of the
Contracts issued or to be issued by VALIC.
Prompt notice of election to terminate under
this paragraph shall be furnished by VALIC
with said termination to be effective upon
receipt of notice;
(viii) At the option of FUND upon a reasonable
determination by the Board in good faith
that it is no longer advisable and in the
best interests of shareholders for FUND to
continue to operate pursuant to this
Agreement. Prompt notice of election to
terminate under this paragraph shall be
furnished by FUND with said termination to
be effective upon receipt of notice;
(ix) At the option of FUND if the Contracts cease
to qualify as annuity contracts or life
insurance contracts, as applicable, under
the Code, or if FUND reasonably believes
that the Contracts may fail to so qualify.
Prompt notice of election to terminate under
this paragraph shall be furnished by FUND
with said termination to be effective upon
receipt of notice;
(x) At the option of VALIC, upon FUND'S breach
of any material provision of this Agreement,
which breach has not been cured to the
satisfaction of VALIC within ten days after
written notice of such breach is delivered
to FUND;
(xi) At the option of FUND, upon VALIC's breach
of any material provision of this Agreement,
which breach has not been cured to the
satisfaction of FUND within ten days after
written notice of such breach is delivered
to VALIC;
(xii) At the option of FUND, if the variable
contracts are not registered, issued or sold
in accordance with applicable federal and/or
state law. Prompt notice of election to
terminate under this paragraph shall be
furnished by FUND with said termination to
be effective upon receipt of notice;
(xiii) At the option of VALIC, if (1) VALIC shall
determine, in its sole judgment reasonably
exercised in good faith, that FUND is the
subject of material adverse publicity and
such material adverse publicity is likely to
have a material adverse impact on the sale
of the Contracts and/or the operations or
business reputation of VALIC, (2) VALIC
shall have notified FUND in writing of such
determination and its intent to terminate
this Agreement, and, (3) after consideration
of the actions taken by FUND and any other
changes in circumstances since the giving of
such notice, the determination of VALIC
shall continue to
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apply on the sixtieth (60th) day since
giving of such notice, then such sixtieth
day shall be the effective date of
termination;
(xiv) At the option of VALIC, if VALIC shall
determine that it is no longer advisable and
in the best interests of Contract owners to
utilize the FUND as underlying investment
vehicle and VALIC determines to substitute
the shares of another investment company for
the corresponding shares of FUND in
accordance with the terms of the Contracts
for which those shares had been selected to
serve as the underlying investment media.
(xv) At the option of DISTRIBUTOR upon prior
written notice in the event that
DISTRIBUTOR'S Underwriting Agreement with
FUND is terminated and DISTRIBUTOR'S
interest in this Agreement has not been
assigned to a successor distributor prior to
the effective date of the termination of
such Underwriting Agreement.
(d) No termination of this Agreement (except a termination
under Section 17(c)(xiv) immediately above) shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination.
(e) Notwithstanding any termination of this Agreement pursuant
to Section 17(c) hereof, at the election of VALIC, FUND shall continue to make
available additional FUND shares, as provided below, 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, if VALIC elects to have FUND make
additional shares available, the owners of the Existing Contracts or VALIC,
whichever shall have legal authority to do so, shall be permitted to reallocate
investments in FUND, redeem investments in FUND and/or invest in FUND upon the
payment of additional premiums under the Existing Contracts. In the event of a
termination of this Agreement pursuant to Section 16(c) hereof, VALIC, as
promptly as is practicable under the circumstances, shall notify FUND whether
VALIC shall elect to continue to have FUND shares made available after such
termination. If FUND shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect and
thereafter either FUND or VALIC may terminate the Agreement, as so continued
pursuant to this Section 16(e), upon prior written notice to the other party
such notice to be for a period that is reasonable under the circumstances. In
determining whether to elect to continue to have additional FUND shares made
available, VALIC shall act in good faith, giving due consideration to the
interests of existing shareholders, including holders of Existing Contracts.
Notwithstanding the foregoing, FUND shall not be required to make available
additional FUND shares if doing so would be prohibited by law.
18. Any notice shall be sufficiently given when sent by registered or
certified mail (return receipt requested) 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.
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If to FUND or ADVISER: Founders Asset Management LLC
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: General Counsel
If to VALIC: The Variable Annuity Life Insurance Company
0000 Xxxxx Xxxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
If to DISTRIBUTOR: Premier Mutual Fund Services, Inc.
00 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: President
(with a copy to General Counsel at same address)
19. Confidentiality. Each party agrees that all books, records,
information and data pertaining to the business of the other parties which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall be kept confidential and shall not be voluntarily disclosed to
any other person, except as may be required by law. This provision shall survive
the termination of this Agreement.
20. This Agreement shall be subject to the provisions of the 1940 Act
and the rules and regulations thereunder, including any exemptive relief
therefrom and the orders of the SEC setting forth such relief.
21. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Texas.
22. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one instrument.
Executed effective the 1st day of July, 1999.
Founders Funds, Inc.
Attest: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ --------------------------------------
Founders Asset Management, LLC
Attest: /s/ XXXXXXX X. XXXXXXXXXXXXXX By: /s/ XXXXX X. XXX
------------------------------ --------------------------------------
Xxxxx X. Xxx
Xx. Vice President-Administration
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The Variable Annuity Life
Insurance Company
Attest: /s/ XXXXX X. XXXXXXXX By: /s/ XXXXXX X. XXXXXX
------------------------------ --------------------------------------
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxxx
Executive Vice President-AGRS
Premier Mutual Fund Services, Inc.
Attest: By: /s/ [ILLEGIBLE]
------------------------------ --------------------------------------
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SCHEDULE A
Funds
The following series of Founders Funds, Inc.:
Founders Growth Fund
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SCHEDULE B
Accounts
The Variable Annuity Life Insurance Company
Separate Account A
