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EXHIBIT 8(i)
PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 13 day of June, 1997 by and among
ROYCE CAPITAL FUND (the "Trust"), a Delaware business trust, ROYCE &
ASSOCIATES, INC. ("Royce" or the "Adviser"), a New York corporation and IL
ANNUITY AND INSURANCE COMPANY (the "Company"), a life insurance company
organized under the laws of the State of Massachusetts.
WHEREAS, the Trust is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"'40 Act"), as an open-end, diversified management investment company; and
WHEREAS, the Trust is organized as a series fund comprised of several
Funds ("Funds"), and those currently available are listed on Appendix A hereto
as such Appendix may be amended from time to time; and
WHEREAS, the Trust was organized to act as the funding vehicle for
certain variable life insurance and/or variable annuity contracts ("Variable
Contracts") offered by life insurance companies through separate accounts
("Separate Accounts") of such life insurance companies ("Participating
Insurance Companies") and also offers its shares to certain qualified pension
and retirement plans ("Qualified Plans"); and
WHEREAS, the Trust has received an order from the SEC, granting
Participating Insurance Companies and their separate accounts exemptions from
the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Funds of the Trust to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated Participating Insurance Companies and Qualified Plans ("Exemptive
Order"); and
WHEREAS, Royce is registered under the Investment Advisers Act of
1940, as amended, and serves as investment adviser to the Trust; and
WHEREAS, the Company has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having the Trust as one of the underlying funding vehicles for such
Variable Contracts, as set forth in Appendix B hereto; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Trust to fund the
aforementioned Variable Contracts, and the Trust is authorized to sell such
shares to the Company at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company
and the Trust agree as follows:
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Article I. SALE OF TRUST SHARES
1.1 The Trust agrees to make available to the Separate
Accounts of the Company shares of the selected Funds as listed on Appendix B as
such Appendix may be amended from time to time ("Available Funds") for
investment of purchase payments of Variable Contracts allocated to the
designated Separate Accounts as provided in the Trust's Registration Statement.
1.2 The Trust agrees to sell to the Company those shares of
the selected Funds of the Trust which the Company orders, executing such orders
on a daily basis at the net asset value next computed after receipt by the
Trust or its designee of the order for the shares of the Trust. For purposes
of this Section 1.2, the Company shall be the designee of the Trust for receipt
of such orders from the designated Separate Account and receipt by such
designee shall constitute receipt by the Trust; provided that the Company
receives the order by 4:00 p.m. Eastern time and the Trust receives notice from
the Company by telephone or facsimile (or by such other means as the Trust and
the Company may agree in writing) 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 the Trust
calculates its net asset value pursuant to the rules of the SEC.
1.3 The Trust agrees to redeem on the Company's request,
any full or fractional shares of the Trust held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the request for redemption, in accordance with the
provisions of this Agreement and the Trust's Registration Statement. For
purposes of this Section 1.3, the Company shall be the designee of the Trust
for receipt of requests for redemption from the designated Separate Account and
receipt by such designee shall constitute receipt by the Trust; provided that
the Company receives the request for redemption by 4:00 p.m. Eastern time and
the Trust receives notice from the Company by telephone or facsimile (or by
such other means as the Trust and the Company may agree in writing) of such
request for redemption by 9:00 a.m. Eastern time on the next following Business
Day. The Trust reserves the right to suspend the right of redemption or
postpone the date of payment or satisfaction upon redemption consistent with
Section 22(e) of the '40 Act and any rules, regulations or orders thereunder,
and in accordance with any procedures and policies described in the current
prospectus of the Fund(s).
1.4 The Trust shall furnish, on or before the ex-dividend
date, notice to the Company of any income dividends or capital gain
distributions payable on the shares of any Fund of the Trust. The Company
hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Fund's shares in additional shares of the
Fund. The Trust shall notify the Company or its designee of the number of
shares so issued as payment of such dividends and distributions.
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1.5 The Trust shall make the net asset value per share for
the selected Fund(s) available to the Company on a daily basis as soon as
reasonably practicable 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 the Trust provides the Company with materially incorrect
share net asset value information through no fault of the Company, the Company
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, and the Trust shall reimburse the Company for any charges, costs, fees,
or other expenses incurred by the Company as a result of such incorrect
information. Any material error in the calculation of net asset value per
share, dividend or capital gain information shall be reported promptly upon
discovery to the Company. Neither the Trust, the Funds, the Funds' investment
adviser, nor any of their affiliates shall be liable for any information
provided to the Company pursuant to this Agreement which information is based
on incorrect information furnished by the Company to the Trust or the Funds'
investment adviser.
1.6 At the end of each Business Day, the Company shall use
the information described in Section 1.5 to calculate Separate Account unit
values for the day. Using these unit values, the Company shall process each
such Business Day's Separate Account transactions based on requests and
premiums received by it by the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net dollar
amount of the Trust shares which shall be purchased or redeemed at that day's
closing net asset value per share. The net purchase or redemption orders so
determined shall be transmitted to the Trust by the Company by 9:00 a.m.
Eastern time on the Business Day next following the Company's receipt of such
requests and premiums in accordance with the terms of Sections 1.2 and 1.3
hereof.
1.7 If the Company's order requests the net purchase of
Trust shares, the Company shall pay for such purchase by wiring federal funds
to the Trust or its designated custodial account on the day the order is
transmitted by the Company. If payment in federal funds is not received or is
received by the Trust after 4:00 p.m. Eastern time on such day, the Company
shall promptly, upon request by the Trust, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in connection with
any advances to, or borrowings or overdrafts by, the Fund, or any similar
expenses incurred by the Fund, as a result of portfolio transactions effected
by the Fund based upon such purchase request. If the Company's order requests
a net redemption resulting in a payment of redemption proceeds to the Company,
the Trust shall use its best efforts to wire the redemption proceeds to the
Company by the next Business Day. In any event, proceeds shall be wired to the
Company within three Business Days or such longer period permitted by the '40
Act or the rules, orders or regulations thereunder, and the Trust shall use its
best efforts to notify the person designated in writing by the Company as the
recipient for such notice of such delay by 3:00 p.m. Eastern time the same
Business Day that the Company transmits the redemption order to the Trust. If
the Company's order requests the application of redemption proceeds from the
redemption of shares to the purchase of shares of another Fund set forth on
Appendix B hereto, the Trust shall so apply such proceeds the same Business Day
that the Company transmits such orders to the Trust.
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1.8 The Trust agrees that all shares of the Funds of the
Trust will be sold only to Participating Insurance Companies which have agreed
to participate in the Trust to fund their Separate Accounts and/or to Qualified
Plans, all in accordance with the requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended ("Code"), and Treasury Regulation
1.817-5. Shares of the Funds of the Trust will not be sold directly to the
general public.
1.9 The Trust may refuse to sell shares of any Fund to any
person, or suspend or terminate the offering of the shares of any Fund if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board of Trustees of the Trust (the "Board"),
acting in good faith and in light of its duties under federal and any
applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Funds.
1.10 Issuance and transfer of Fund shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Separate Accounts. Shares ordered from a Fund will be recorded in appropriate
book entry titles for the Separate Accounts.
1.11 The Company agrees and acknowledges that the Trust's
adviser, Royce & Associates, Inc., is the sole owner of the name and xxxx
"Xxxxx" and that all use of any designation comprised in whole or part of Royce
(a "Xxxxx Xxxx") under this Agreement shall inure to the benefit of Royce.
Except as provided in Sections 3.4 and 4.1, the Company shall not use any Xxxxx
Xxxx on its own behalf or on behalf of the Separate Accounts or Variable
Contracts in any registration statement, advertisement, sales literature or
other materials relating to the Separate Accounts or Variable Contracts without
the prior written consent of Royce. Upon termination of this Agreement for any
reason, the Company shall cease all use of any Xxxxx Xxxx as soon as reasonably
practicable.
1.12 The Trust and the Adviser agree and acknowledge that
the Company has applied for trademark protection of the marks "Visionary,"
"Visionary Variable Annuity" and "Visionary Choice Variable Annuity"
(collectively the "Visionary Marks) and that the Company believes it will be
granted exclusive rights to the Visionary Marks in the field of insurance
underwriting. The Trust and Adviser further agree and acknowledge that all use
of any designation comprised in whole or in part of the Visionary Marks under
this Agreement shall inure to the benefit of the Company. Except as provided
in Sections 3.5 and 4.2, neither the Trust nor the Adviser shall use any
Visionary Marks on behalf of itself or any affiliate in any registration
statement, advertisement, sales literature or other materials without the prior
written consent of the Company. Upon termination of this Agreement for any
reason, the Trust and the Adviser shall cease all use of any Visionary Marks as
soon as reasonably practicable.
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Article II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that it is an
insurance company duly organized and in good standing under the laws of
Massachusetts and that it has legally and validly established each Separate
Account as a segregated asset account under such laws.
2.2 The Company represents and warrants that it has
registered or, prior to any issuance or sale of the Variable Contracts, will
register each Separate Account as a unit investment trust ("UIT") in accordance
with the provisions of the '40 Act and cause each Separate Account to remain so
registered to serve as a segregated asset account for the Variable Contracts,
unless an exemption from registration is available.
2.3 The Company represents and warrants that the Variable
Contracts will be registered under the Securities Act of 1933 (the "'33 Act")
unless an exemption from registration is available prior to any issuance or
sale of the Variable Contracts and that the Variable Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws and further that the sale of the Variable Contracts shall comply in
all material respects with state insurance law suitability requirements.
2.4 Subject to Section 2.6 hereof, the Company represents
and warrants that the Variable Contracts are currently and at the time of
issuance will be treated as life insurance, endowment or annuity contracts
under applicable provisions of the Code, that it will maintain such treatment
and that it will notify the Trust immediately upon having a reasonable basis
for believing that the Variable Contracts have ceased to be so treated or that
they might not be so treated in the future.
2.5 The Trust and the Adviser represent and warrant that
the Fund shares offered and sold pursuant to this Agreement will be registered
under the '33 Act and sold in accordance with all applicable federal and state
laws, and the Trust shall be registered under the '40 Act prior to and at the
time of any issuance or sale of such shares. The Trust, subject to Section 1.9
above, shall amend its registration statement under the '33 Act and the '40 Act
from time to time as required in order to effect the continuous offering of its
shares. The Trust shall arrange for the sale of its shares in accordance with
the laws of the various states only if and to the extent deemed advisable by
the Trust.
2.6 The Trust and the Adviser represent and warrant that
each Fund will comply with the diversification requirements set forth in
Section 817(h) of the Code, and the rules and regulations thereunder, including
without limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Fund has ceased to
comply or might not so comply and will immediately take all reasonable steps to
adequately diversify the Fund to achieve compliance.
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2.7 The Trust and the Adviser represent and warrant that
each Fund invested in by the Separate Account intends to elect to be treated as
a "regulated investment company" under Subchapter M of the Code, and to qualify
for such treatment for each taxable year and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
2.8 The Adviser represents and warrants that it is duly
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 The Trust shall prepare and be responsible for filing
with the SEC and any state regulators requiring such filing all shareholder
reports, notices, proxy materials (or similar materials such as voting
instruction solicitation materials), prospectuses and statements of additional
information of the Trust. The Trust shall bear the costs of registration of
shares of the Funds, preparation and filing of the documents listed in this
Section 3.1 and all taxes and filing fees to which an issuer is subject on the
issuance and transfer of its shares.
3.2 At least annually, the Trust or its designee shall
provide the Company, free of charge, with as many copies of the current
prospectus for the shares of the Available Funds as the Company may reasonably
request for distribution to existing Variable Contract owners whose Variable
Contracts are funded by such shares. The Trust or its designee shall provide
the Company, at the Company's expense, with as many copies of the current
prospectus for the shares of the Available Funds as the Company may reasonably
request for distribution to prospective purchasers of Variable Contracts. If
requested by the Company in lieu thereof, the Trust or its designee shall
provide such documentation (including a "camera ready" copy of the new
prospectus as set in type or, at the request of the Company, as a diskette in
the form sent to the financial printer) and other assistance as is reasonably
necessary in order for the parties hereto once a year (or more frequently if
the prospectus for the shares is supplemented or amended) to have the
prospectus for the Variable Contracts and the prospectus for the Available
Funds printed together in one document. The expenses of such printing will be
apportioned between (a) the Company and (b) the Available Funds in proportion
to the number of pages of the Variable Contract and Available Funds'
prospectus, taking account of other relevant factors affecting the expense of
printing, such as covers, columns, graphs and charts; the Available Funds to
bear the cost of printing the shares' prospectus portion of such document for
distribution only to owners of existing Variable Contracts funded by the
Available Funds and the Company to bear the expense of printing the portion of
such documents relating to the Separate Account; provided, however, the Company
shall bear all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Variable
Contracts not funded by the shares. In the event that the Company requests
that the Trust or its designee provide the Available Funds' prospectus in a
"camera ready" or diskette format, the Trust shall be responsible for providing
the prospectus in the format in which it is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (e.g.,
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typesetting expenses), and the Company shall bear the expense of adjusting or
changing the format to conform with any of its prospectuses.
3.3 The obligations of the Trust and the Company with
respect to the Available Funds' and Variable Contracts' prospectuses set forth
in Section 3.2 shall apply in the same manner to the Trust's and Variable
Contracts' statements of additional information; provided that such statements
of additional information need only be duplicated unless the Trust and the
Company agree that such documents should be printed.
3.4 The Trust, at its expense, shall provide the Company
with copies of its proxy statements, reports to shareholders and other
communications (except for prospectuses and statements of additional
information, which are covered in Section 3.2) to Variable contract owners in
such quantity as the Company shall reasonably require for distribution to
existing Variable Contract owners.
3.5 The Trust will provide the Company 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 any of the above that relate to the Funds promptly
after the filing of each such document with the SEC or other regulatory
authority. The Company will provide the Trust 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 any of the above that relate to a Separate Account
promptly after the filing of each such document with the SEC or other
regulatory authority.
Article IV. SALES MATERIALS
4.1 The Company will furnish, or will cause to be
furnished, to the Trust, each piece of sales literature or other promotional
material in which the Trust or its investment adviser is named, at least
fifteen (15) Business Days prior to its intended use. No such material will be
used if the Trust objects to its use in writing within ten (10) Business Days
after receipt of such material.
4.2 The Trust will furnish, or will cause to be furnished,
to the Company, each piece of sales literature or other promotional material in
which the Company or its Separate Accounts or the Variable Contracts are named,
at least fifteen (15) Business Days prior to its intended use. No such
material will be used if the Company objects to its use in writing within ten
(10) Business Days after receipt of such material.
4.3 The Trust and its affiliates and agents shall not give
any information or make any representations on behalf of the Company or
concerning the Company, the Separate Accounts or the Variable Contracts issued
by the Company, other than the information or representations contained in a
registration statement or prospectus for such Variable Contracts, as such
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registration statement and prospectus may be amended or supplemented from time
to time, or in reports of the Separate Accounts or reports prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the written permission of the Company.
4.4 The Company and its affiliates and agents shall not
give any information or make any representations on behalf of the Trust or the
Adviser or concerning the Trust or the Adviser other than the information or
representations contained in a registration statement or prospectus for the
Trust, 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 the Trust or its designee, except with the written
permission of the Trust.
4.5 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, the
internet or other public media), sales literature (such as any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts or 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, 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. rules, the '40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that the Trust has received an
Exemptive Order from the SEC granting relief from various provisions of the '40
Act and the rules thereunder to the extent necessary to permit the Trust shares
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans. The Exemptive Order requires the Trust and each
Participating Insurance Company to comply with conditions and undertakings as
provided in this Section 5. The Trust will not enter into a participation
agreement with any other Participating Insurance Company unless it imposes the
same conditions and undertakings as are imposed on the Company hereby.
5.2 The Board will monitor the Trust for the existence of
any irreconcilable material conflict between and among the interests of
Variable Contract owners of all separate accounts and of plan participants of
Qualified Plans investing in the Trust, and determine what action, if any,
should be taken in response to such conflicts. An irreconcilable material
conflict may arise for a variety of reasons, which may include: (a) an action
by any state insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling or any similar action by insurance, tax or
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securities regulatory authorities; (c) an administrative or judicial decision
in any relevant proceeding; (d) the manner in which the investments of the
Trust are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance Contract owners; (f) a decision by
a Participating Insurance Company to disregard the voting instructions of
Variable Contract owners; and (g) if applicable, a decision by a Qualified Plan
to disregard the voting instructions of plan participants.
5.3 The Company will report any potential or existing
conflicts to the Board. The Company will be responsible for assisting the
Board in carrying out its duties in this regard by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
The responsibility includes, but is not limited to, an obligation by the
Company to inform the Board whenever it has determined to disregard Variable
Contract owner voting instructions. These responsibilities of the Company will
be carried out with a view only to the interests of the Variable Contract
owners.
5.4 If a majority of the Board or majority of its
disinterested trustees, determines that a material irreconcilable conflict
exists, affecting the Company, the Company, at its expense and to the extent
reasonably practicable (as determined by a majority of the Board's
disinterested trustees), will take any steps necessary to remedy or eliminate
the irreconcilable material conflict, including: (a) withdrawing the assets
allocable to some or all of the Separate Accounts from the Trust or any Fund
thereof and reinvesting those assets in a different investment medium, which
may include another Fund of the Trust, or another investment company; (b)
submitting the question as to whether such segregation should be implemented to
a vote of all affected Variable Contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., variable annuity or
variable life insurance Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Variable Contract owners the option of making such a change; and (c)
establishing a new registered management investment company or managed separate
account. If an irreconcilable material conflict arises because of the
Company's decision to disregard Variable Contract owner voting instructions,
and that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the election of the Trust to withdraw the
Separate Account's investment in the Trust, and no charge or penalty will be
imposed as a result of such withdrawal. To the extent permitted by applicable
law, the Company shall bear the responsibility of taking remedial action in the
event of Board determination of the existence of a material irreconcilable
conflict and the cost of such remedial action and this responsibility shall be
carried out with a view only to the interests of the Variable Contract owners.
For purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust or its investment adviser (or any other investment adviser of the
Trust) be required to establish a new funding medium for any Variable Contract.
Further, the Company shall not be required by this Section 5.4 to establish a
new funding
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medium for any Variable Contracts if any offer to do so has been declined by a
vote of a majority of Variable Contract owners materially and adversely
affected by the irreconcilable conflict.
5.5 The Board's determination of the existence of an
irreconcilable material conflict and its implications shall be made known
promptly and in writing to the Company.
5.6 No less than annually, the Company shall submit to the
Board such reports, materials or data as the Board may reasonably request so
that the Board may fully carry out its obligations. Such reports, materials
and data shall be submitted more frequently if deemed appropriate by the Board.
Article VI. VOTING
6.1 The Company will provide pass-through voting privileges
to all Variable Contract owners so long as the SEC continues to interpret the
'40 Act as requiring pass-through voting privileges for Variable Contract
owners. Accordingly, the Company, where applicable, will vote shares of the
Funds held in its Separate Accounts in a manner consistent with voting
instructions timely received from its Variable Contract owners. However, the
Company reserves the right to disregard the voting instructions of the Variable
Contract owners to the extent such action is permitted by Rule 6e-2 or Rule
6e-3(T) of the '40 Act. The Company will be responsible for assuring that each
of its Separate Accounts that participates in the Trust calculates voting
privileges in a manner consistent with other Participating Insurance Companies.
The Company will vote shares for which it has not received timely voting
instructions, as well as shares it owns, in the same proportion as its votes
those shares for which it has received voting instructions. The Trust will
notify the Company of the Trust's intention to file proxy solicitation
materials with the SEC prior to such filing.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are
amended, or if Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the '40 Act or the rules thereunder with respect to mixed and
shared funding on terms and conditions materially different from any exemptions
granted in the Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be necessary
to comply with Rule 6e-2 and Rule 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such Rules are applicable.
6.3 The Trust will comply with all provisions of the '40
Act requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the '40 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees
and with whatever rule the SEC may promulgate with respect thereto.
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Article VII. INDEMNIFICATION
7.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless the Trust, and each of its Trustees, principals,
officers, employees, agents and affiliates, including the Adviser
(collectively, the "Indemnified Parties" for purposes of this Article VII)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company, which consent shall
not be unreasonably withheld) 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 Trust's shares or the
Variable Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in a registration statement or prospectus for the
Variable Contracts or contained in the Variable
Contracts or in sales literature generated or approved
by the Company on behalf of the Variable Contracts or
Separate Accounts (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 Trust for use in the registration
statement or prospectus for the Variable Contracts or
in the Variable Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts or
the Trust shares; or
(b) arise out of or as a result of any statement or
representation (other than statements or
representations contained in the registration
statement, prospectus or sales literature of the Trust
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 Variable Contracts or the Trust
shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus or sales literature
of the Trust 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 the
Trust by or on behalf of the Company; or
(d) arise as a result of any failure by the Company to
provide substantially the services and furnish the
materials under the terms of this Agreement; or
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(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company.
7.2 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.
7.3 The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Company of
any such claim shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against an Indemnified Party, the Company shall be entitled to
participate at its own expense in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.4 Indemnification by the Trust. The Trust agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Trust, which consent shall not be unreasonably withheld)
or litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Trust's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Trust (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
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13
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 Trust by or on behalf
of the Company for use in the registration statement or
prospectus for the Trust or in sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts or
the Trust shares; or
(b) 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
Variable Contracts not supplied by the Trust or persons
under its control) or wrongful conduct of the Trust or
persons under its control, with respect to the sale or
distribution of the Variable Contracts or the Trust
shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus, or sales literature
covering the Variable Contracts, 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 the Company for inclusion therein by or on
behalf of the Trust; or
(d) arise as a result of (i) a failure by the Trust to
provide substantially the services and furnish the
materials under the terms of this Agreement; or (ii) a
failure by a Fund(s) invested in by the Separate
Account to comply with the diversification requirements
of Section 817(h) of the Code; or (iii) a failure by a
Fund(s) invested in by the Separate Account to qualify
as a "regulated investment company" under Subchapter M
of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Trust.
7.5 The Trust 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.
7.6 The Trust 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
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the Trust 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 Trust of any such claim shall not relieve the Trust 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 Trust shall be entitled
to participate at its own expense in the defense thereof. The Trust also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Trust to such party of the
election by the Trust to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Trust 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.
7.7 Indemnification by the Adviser. The Adviser agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Adviser, which consent shall not be unreasonably
withheld) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of the Trust's shares or the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement or prospectus or sales
literature of the Trust (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 Trust or Adviser by
or on behalf of the Company for use in the registration
statement or prospectus for the Trust or in sales
literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Variable Contracts or the Trust shares; or
(b) 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
Variable Contracts not supplied by the Trust or Adviser
or persons under their control) or wrongful conduct of
the Trust or the Adviser or
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persons under their control, with respect to the sale
or distribution of the Variable Contracts or the Trust
shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
registration statement, prospectus or sales literature
covering the Variable Contracts, 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 the Company for inclusion therein by or on
behalf of the Trust; or
(d) arise as a result of (i) a failure by the Trust or the
Adviser to provide substantially the services and
furnish the materials under the terms of this
Agreement, or (ii) a failure by a Fund(s) invested in
by the Separate Account to comply with the
diversification requirements of Section 817(h) of the
Code; or (iii) a failure by a Fund(s) invested in by
the Separate Account to qualify as a "regulated
investment company" under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Trust or the
Adviser in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Trust or the Adviser.
7.8 The Adviser shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement.
7.9 The Adviser shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Adviser in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Adviser of
any such claim shall not relieve the Adviser from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Adviser shall be entitled to
participate at its own expense in the defense thereof. The Adviser also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Adviser to such party of the
election by the Adviser to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Adviser will not be
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16
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.
7.10 It is understood that these indemnities shall have no
effect on any other agreement or arrangement between the Trust and/or its
series and the Adviser.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof
and shall continue in force until terminated in accordance with the provisions
herein.
8.2 This Agreement shall terminate in accordance with the
following provisions:
(a) At the option of the Company or the Trust at any time
from the date hereof upon 180 days' notice, unless a
shorter time is agreed to by the parties;
(b) At the option of the Company, if the Trust shares are
not reasonably available to meet the requirements of
the Variable Contracts as determined by the Company.
Prompt notice of election to terminate shall be
furnished by the Company, said termination to be
effective ten days after receipt of notice unless the
Trust makes available a sufficient number of shares to
reasonably meet the requirements of the Variable
Contracts within said ten-day period;
(c) At the option of the Company, upon the institution of
formal proceedings against the Trust by the SEC, the
National Association of Securities Dealers, Inc. or any
other regulatory body, the expected or anticipated
ruling, judgment or outcome of which would, in the
Company's reasonable judgment, materially impair the
Trust's ability to meet and perform the Trust's
obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by the
Company, with said termination to be effective upon
receipt of notice;
(d) At the option of the Adviser or the Trust, upon the
institution of formal proceedings against the Company
by the SEC, the National Association of Securities
Dealers, Inc. or any other regulatory body, the
expected or anticipated ruling, judgment or outcome of
which would, in the Adviser or the Trust's reasonable
judgment, materially impair the Company's ability to
meet and perform its obligations and duties hereunder.
Prompt notice of election to terminate shall be
furnished by the Adviser or the Trust, with said
termination to be effective upon receipt of notice;
(e) In the event the Trust'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
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underlying investment medium of Variable Contracts
issued or to be issued by the Company. Termination
shall be effective upon such occurrence without notice;
(f) At the option of the Adviser or the Trust, if the
Variable Contracts cease to qualify as annuity
contracts or life insurance contracts, as applicable,
under the Code, or if the Trust reasonably believes
that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice
by the Company;
(g) At the option of the Company, upon the Trust's breach
of any material provision of this Agreement, which
breach has not been cured to the satisfaction of the
Company within ten days after written notice of such
breach is delivered to the Trust;
(h) At the option of the Adviser or the Trust, upon the
Company's breach of any material provision of this
Agreement, which breach has not been cured to the
satisfaction of the Adviser or the Trust within ten
days after written notice of such breach is delivered
to the Company;
(i) At the option of the Adviser or the Trust, if the
Variable Contracts are not registered, issued or sold
in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such
occurrence without notice;
(j) In the event this Agreement is assigned without the
prior written consent of the Company and the Trust,
termination shall be effective immediately upon such
occurrence without notice. This Agreement may be
assigned by the Adviser only after prior written notice
to the Company
8.3 Notwithstanding any termination of this Agreement
pursuant to Section 8.2 hereof, the Trust at the option of the Company will
continue to make available additional Trust shares, as provided below, pursuant
to the terms and conditions of this Agreement, for all Variable 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 or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the payment of
additional premiums under the Existing Contracts.
8.4 Notwithstanding any termination of this Agreement
pursuant to Section 8.2 hereof, all rights and obligations arising under
Article VII of this Agreement shall survive.
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Article IX. NOTICES
ANY NOTICE HEREUNDER SHALL BE GIVEN 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.
IF TO THE TRUST OR THE ADVISER:
ROYCE CAPITAL FUND OR ROYCE & ASSOCIATES, INC.
0000 XXXXXX XX XXX XXXXXXXX
XXX XXXX, XXX XXXX 00000
ATTN: XXXXXX X. XXXXXXX, ESQ.
IF TO THE COMPANY:
IL ANNUITY AND INSURANCE CO.
0000 X. XXXXXXXX XXXXXX
XXXXXXXXXXX, XX 00000
ATTENTION: XXXXXXXX XXXXXXXX, ESQ.
NOTICE SHALL BE DEEMED GIVEN ON THE DATE OF RECEIPT BY THE ADDRESSEES,
AS EVIDENCED BY THE RETURN RECEIPT.
Article X. MISCELLANEOUS
10.1 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.
10.2 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
10.3 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.
10.4 This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of New
York. It shall also be subject to the provisions of the federal securities
laws and the rules and regulations thereunder and to any orders of the SEC
granting exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither
the shareholders of shares of any Fund nor the Trustees or officers of the
Trust or any Fund shall be personally liable hereunder. No Fund shall be
liable for the liabilities of any other Fund. All persons dealing with
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the Trust or a Fund must look solely to the property of the Trust or that Fund,
respectively, for enforcement of any claims against the Trust or that Fund. It
is also understood that each of the Funds shall be deemed to be entering into a
separate Agreement with the Company, so that it is as if each of the Funds had
signed a separate Agreement with the Company and that a single document is
being signed simply to facilitate the execution and administration of the
Agreement.
10.6 Each party shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the National Association of Securities Dealers, Inc. 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.
10.7 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.
10.8 No provision of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by the Trust and the Company.
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Fund Participation Agreement as of the date
and year first above written.
ROYCE CAPITAL FUND
By: /s/ XXXXXXX X. XXXXX
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
ROYCE & ASSOCIATES, INC.
By: /s/ XXXXXXX X. XXXXX
--------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
IL ANNUITY AND INSURANCE COMPANY
By: /s/ XXXXXXX X. XXXXXX
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
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APPENDIX A
The Trust and its Funds
Royce Capital Fund:
Royce Premier Portfolio
Royce Total Return Portfolio
Royce Micro-Cap Portfolio
21
APPENDIX B
Separate Accounts Selected Funds
----------------- --------------
IL Annuity and Insurance Company Royce Micro-Cap Portfolio
Separate Account I
