PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 1st day of September,
1999, by and among ROYCE CAPITAL FUND, an open-end management investment company
organized as a Delaware business trust (the "Fund"), ROYCE & ASSOCIATES, INC., a
corporation organized under the laws of New York (the "Adviser"), and AMERICAN
ENTERPRISE LIFE INSURANCE COMPANY, an Indiana life insurance company (the
"Company"), on its own behalf and on behalf of each separate account of the
Company named in Schedule 1 to this Agreement, as may be amended from time to
time, (each account referred to as the "Account").
WHEREAS, the Fund was established for the purpose of serving as the investment
vehicle for insurance company separate accounts supporting variable annuity
contracts and variable life insurance policies to be offered by insurance
companies that have entered into participation agreements with the Fund and the
Adviser (the "Participating Insurance Companies"), and
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets; and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (the "SEC") granting Participating Insurance Companies and their
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a), and
15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to
the extent necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated Participating Insurance Companies and certain
qualified pension and retirement plans outside of the separate account context
(the "Exemptive Order"); and
WHEREAS, the Company has registered or will register certain variable annuity
contracts and/or variable life insurance polices (the "Contracts") under the
1933 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the portfolios named in Schedule 2 to
this Agreement, as may be amended from time to time, (the "Portfolios") on
behalf of the Account to fund the Contracts; and
WHEREAS, under the terms and conditions set forth in this Agreement, the Adviser
desires to make shares of the Fund available as investment options under the
Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the parties agree as
follows:
ARTICLE I. Sale and Redemption of Fund Shares
1.1. The Fund will sell to the Company those shares of the Portfolios that
each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt and acceptance by the Fund (or
its agent). Shares of a particular Portfolio of the Fund will be
ordered in such quantities and at such times as determined by the
Company to be necessary to meet the requirements of the Contracts. The
Board of Trustees of the Fund (the "Fund Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Fund Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary
in the best interests of the shareholders of such Portfolio.
1.2. The Fund will redeem any full or fractional shares of any Portfolio
when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Fund (or its agent) of the
request for redemption, as established in accordance with the
provisions of the then current prospectus of the Fund.
1.3. For purposes of Sections 1.1 and 1.2, the Fund hereby appoints the
Company as its agent for the limited purpose of receiving and accepting
purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company will constitute
receipt by the Fund provided that: (a) such orders are received by the
Company in good order prior to the time the net asset value of each
Portfolio is priced in accordance with its prospectus; and (b) The Fund
receives notice of such orders by 10:00 a.m. Central Time on the next
following Business Day. "Business Day" will mean any day on which the
New York Stock Exchange is open for trading and on which the Fund
calculates its net asset value pursuant to the rules of the SEC.
1.4. The Company will pay for a purchase order on the same Business Day as
the Fund receives notice of the purchase order in accordance with
Section 1.3. Notwithstanding the above, if the Fund receives notice of
the purchase order on a federal bank holiday, the Company will pay for
the purchase order on the next Business Day. The Fund will pay for a
redemption order on the same Business Day as the Fund receives notice
of the redemption order in accordance with Section 1.3 (or on the next
Business Day if such redemption order notice is received on a federal
bank holiday) and in the manner established from time to time by the
Fund, except that the Fund reserves the right to suspend payment
consistent with Section 22(e) of the Investment Company Act of 1940, as
amended (the "1940 Act") and any rules thereunder. In any event, absent
extraordinary circumstances specified in Section 22(e) of the 1940 Act,
the Fund will make such payment within five (5) calendar days after the
date the redemption order is placed in order to enable the Company to
pay redemption proceeds within the time specified in Section 22(e) of
the 1940 Act or such shorter period of time as may be required by law.
All payments will be made in federal funds transmitted by wire or other
method agreed to by the parties.
1.5. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account.
Purchase and redemption orders for Fund shares will be recorded in an
appropriate title for each Account or the appropriate subaccount of
each Account.
1.6. The Fund will furnish same day notice (by wire or telephone, followed
by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on each
Portfolio's shares. The Company hereby elects to receive all such
dividends and distributions as are payable on the Portfolio shares in
the form of additional shares of that Portfolio. The Fund will notify
the Company of the number of shares so issued as payment of such
dividends and distributions.
1.7. The Fund will make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and will
use its best efforts to make such net asset value per share available
by 5:30 p.m. Central Time, but in no event later than 6:00 p.m. Central
Time each Business Day. The Fund will notify the Company as soon as
possible if it is determined that the net asset value per share will be
available after 6:00 p.m. Central Time on any Business Day, and the
Fund and the Company will mutually agree upon a final deadline for
timely receipt of the net asset value on such Business Day.
1.8. Any material errors in the calculation of net asset value, dividends or
capital gain information will be reported immediately upon discovery to
the Company. An error will be deemed "material" based on the Fund's
interpretation of the SEC's position and policy with regard to
materiality, as it may be modified from time to time. If the Company is
provided with materially incorrect net asset value information, the
Company, on behalf of the Account, will be entitled to an adjustment to
the number of shares purchased or redeemed to reflect the correct net
asset value per share. Neither the Fund, the Adviser nor any of their
affiliates will be liable for any information provided to the Company
pursuant to this Agreement which information is based on incorrect
information supplied by or on behalf of the Company to the Fund or the
Adviser.
1.9. The Fund agrees that its shares will be sold only to Participating
Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the
Exemptive Order. No shares of any Portfolio will be sold directly to
the general public. The Company agrees that Fund shares will be used
only for the purposes of funding the Contracts and Accounts listed in
Schedule 1, as amended from time to time.
1.10. The Fund agrees that all Participating Insurance Companies will have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 3.4
and Article IV of this Agreement.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that:
(a) it is an insurance company duly organized and in good standing
under applicable law;
(b) it has legally and validly established or will legally and
validly establish each Account as a separate account under
applicable state law;
(c) it has registered or will register to the extent necessary
each Account as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a segregated investment
account for the Contracts;
(d) it has filed or will file to the extent necessary the
Contracts' registration statements under the Securities Act of
1933 (the "1933 Act") and these registration statements will
be declared effective by the SEC prior to the sale of any
Contracts;
(e) the Contracts will be filed and qualified and/or approved for
sale, as applicable, under the insurance laws and regulations
of the states in which the Contracts will be offered prior to
the sale of Contracts in such states; and
(f) it will amend the registration statement under the 1933 Act
for the Contracts and the registration statement under the
1940 Act for the Account from time to time as required in
order to effect the continuous offering of the Contracts or as
may otherwise be required by applicable law, but in any event
it will maintain a current effective Contracts' and Account's
registration statement for so long as the Contracts are
outstanding unless the Company has supplied the Fund with an
SEC no-action letter, opinion of counsel or other evidence
satisfactory to the Fund's counsel to the effect that
maintaining such registration statement on a current basis is
no longer required.
2.2. The Company represents and warrants that the Contracts are intended to
be treated as annuity or life insurance contracts under applicable
provisions of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), and that it will make every effort to
maintain such treatment and that it will notify the Fund and the
Adviser immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Fund represents and warrants that:
(a) it is duly organized and validly existing under applicable
state law;
(b) it has registered with the SEC as an open-end management
investment company under the 1940 Act;
(c) Fund shares of the Portfolios offered and sold pursuant to
this Agreement will be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law;
(d) it is and will remain registered under the 1940 Act for as
long as such shares of the Portfolios are sold;
(e) it will amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares;
(f) it is currently qualified as a Regulated Investment Company
under Subchapter M of the Internal Revenue Code, it will make
every effort to maintain such qualification (under Subchapter
M or any successor or similar provision) and it will notify
the Company 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; and
(g) its investment objectives, policies and restrictions comply
with applicable state securities laws as they may apply to the
Fund and it will register and qualify the shares of the
Portfolios for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Fund.
The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and
expenses and investment policies, objectives and restrictions)
complies with the insurance laws and regulations of any state.
The Fund and the Adviser agree that they will furnish, upon
the Company's request, the information required by state
insurance laws so that the Company can obtain the authority
needed to issue the Contracts in the various states.
2.4. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or
otherwise, although it reserves the right to make such payments in the
future. To the extent that the Fund decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have its Fund
Board, a majority of whom are not "interested" persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.5. The Fund and the Adviser represent and warrant that they will use their
best efforts to comply at all times with Section 817(h) of the Internal
Revenue Code and Treasury Regulation 1.817-5, as amended from time to
time, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or
other modifications to such Section or Regulation. In the event of a
breach of this representation and warranty by the Fund and/or the
Adviser, they will take all reasonable steps:
(a) to notify the Company of such breach; and
(b) to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Treasury Regulation
1.817-5.
2.6. The Adviser represents and warrants that:
(a) it is and will remain duly registered under all applicable
federal and state securities laws; and
(b) it will perform its obligations for the Fund in accordance
with applicable state and federal securities laws and that it
will notify the Company promptly if for any reason it is
unable to perform its obligations under this Agreement.
2.7. Each party represents and warrants that, as applicable, all of its
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of
the Fund are and will continue to be at all times covered by a blanket
fidelity bond or similar coverage in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act
or related provisions as may be promulgated from time to time. The
aforesaid bond includes coverage for larceny and embezzlement and is
issued by a reputable bonding company.
ARTICLE III. Obligations of the Parties
3.1. The Fund will 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 Fund. The Fund will bear the costs of
registration and qualification of its shares, preparation and filing of
documents listed in this Section 3.1 and all taxes to which an issuer
is subject on the issuance and transfer of its shares.
3.2. At the option of the Company, the Fund will either: (a) provide the
Company with as many copies of the Fund's current prospectus, statement
of additional information, annual report, semi-annual report and other
shareholder communications, including any amendments or supplements to
any of the foregoing, as the Company will reasonably request; or (b)
provide the Company with a camera-ready copy, computer disk or other
medium agreed to by the parties of such documents in a form suitable
for printing. The Fund will bear the cost of typesetting and printing
such documents and of distributing such documents to existing Contract
owners. The Company will bear the cost of distributing such documents
to prospective Contract owners and applicants as required.
3.3. The Fund, at its expense, either will:
(a) distribute its proxy materials directly to the appropriate
Contract owners; or
(b) provide the Company or its mailing agent with copies of its
proxy materials in such quantity as the Company will
reasonably require and the Company will distribute the
materials to existing Contract owners and will xxxx the Fund
for the reasonable cost of such distribution. The Fund will
bear the cost of tabulation of proxy votes.
3.4. If and to the extent required by law the Company will:
(a) provide for the solicitation of voting instructions
from Contract owners;
(b) vote the shares of the Portfolios held in the Account
in accordance with instructions received from
Contract owners; and
(c) vote shares of the Portfolios held in the Account for
which no timely instructions have been received, in
the same proportion as shares of such Portfolio for
which instructions have been received from the
Company's Contract owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable
contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent
permitted by law.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular, the Fund either will provide
for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or, as the Fund currently
intends, to comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC's interpretation
of the requirements of Section 16(a) with respect to periodic elections
of directors and with whatever rules the SEC may promulgate with
respect thereto.
3.6 The Company will prepare and be responsible for filing with the SEC and
any state regulators requiring such filing all shareholder reports,
notices, prospectuses and statements of additional information of the
Contracts. The Company will bear the cost of registration and
qualification of the Contracts and preparation and filing of documents
listed in this Section 3.6. The Company also will bear the cost of
typesetting, printing and distributing the documents listed in this
Section 3.6 to existing and prospective Contract owners.
3.7. The Company will furnish, or will cause to be furnished, to the Fund or
the Adviser, each piece of sales literature or other promotional
material in which the Fund or the Adviser is named, at least ten (10)
Business Days prior to its use. No such material will be used if the
Fund or the Adviser reasonably objects to such use within five (5)
Business Days after receipt of such material.
3.8. The Company will not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement, prospectus or
statement of additional information for Fund shares, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in published reports for
the Fund which are in the public domain or approved by the Fund or the
Adviser for distribution, or in sales literature or other material
provided by the Fund or by the Adviser, except with permission of the
Fund or the Adviser. The Fund and the Adviser agree to respond to any
request for approval on a prompt and timely basis. Nothing in this
Section 3.8 will be construed as preventing the Company or its
employees or agents from giving advice on investment in the Fund.
3.9. The Fund or the Adviser will furnish, or will cause to be furnished, to
the Company or its designee, each piece of sales literature or other
promotional material in which the Company or its separate account is
named, at least ten (10) Business Days prior to its use. No such
material will be used if the Company reasonably objects to such use
within five (5) Business Days after receipt of such material.
3.10. The Fund and the Adviser will not give any information or make any
representations or statements on behalf of the Company or concerning
the Company, each Account, or the Contracts other than the information
or representations contained in a registration statement, prospectus or
statement of additional information for the Contracts, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
published reports for each Account or the Contracts which are in the
public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other material provided by the
Company, except with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
3.11. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the Fund or its shares, contemporaneously with the filing of such
document with the SEC or the NASD.
3.12. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any
of the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC or the
NASD.
3.13. For purposes of this Article III, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper,
magazine, or other periodical), radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or
other public media, (e.g., on-line networks such as the Internet or
other electronic messages), sales literature (i.e., any written
communication distributed or made generally available to customers or
the ----- public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed
or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the NASD
rules, the 1933 Act or the 0000 Xxx.
3.14. The Fund and the Adviser hereby consent to the Company's use of the
name Royce Capital Fund in connection with marketing the Contracts,
subject to the terms of Sections 3.7 and 3.8 of this Agreement. Such
consent will terminate with the termination of this Agreement.
3.15 The Adviser will be responsible for calculating the performance
information for the Fund. The Company will be responsible for
calculating the performance information for the Contracts. The Adviser
will be liable to the Company for any material mistakes it makes in
calculating the performance information for the Fund which cause losses
to the Company. The Company will be liable to the Adviser for any
material mistakes it makes in calculating the performance information
for the Contracts which cause losses to the Adviser. Each party will be
liable for any material mistakes it makes in reproducing the
performance information for Contracts or the Fund, as appropriate. The
Fund and the Adviser agree to provide the Company with performance
information for the Fund on a timely basis to enable the Company to
calculate performance information for the Contracts in accordance with
applicable state and federal law.
ARTICLE IV. Potential Conflicts
4.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (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, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e)
a difference in voting instructions given by Participating Insurance
Companies or by variable annuity and variable life insurance contract
owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Fund Board will promptly inform
the Company if it determines that an irreconcilable material conflict
exists and the implications thereof. A majority of the Fund Board will
consist of persons who are not "interested" persons of the Fund.
4.2. The Company will report any potential or existing conflicts of which it
is aware to the Fund Board. The Company agrees to assist the Fund Board
in carrying out its responsibilities, as delineated in the Exemptive
Order, by providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform
the Fund Board whenever Contract owner voting instructions are to be
disregarded. The Fund Board will record in its minutes, or other
appropriate records, all reports received by it and all action with
regard to a conflict.
4.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested trustees, that an irreconcilable material conflict
exists, the Company and other Participating Insurance Companies will,
at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever
steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (a) withdrawing the assets allocable to
some or all of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another portfolio of the Fund, or submitting the
question whether such segregation should be implemented to a vote of
all affected contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., variable annuity contract owners
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 contract owners the option of
making such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions, and such
disregard of voting instructions could conflict with the majority of
contract owner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the
affected subaccount of the Account's investment in the Fund and
terminate this Agreement with respect to such subaccount; provided,
however, that such withdrawal and termination will be limited to the
extent required by the foregoing irreconcilable material conflict as
determined by a majority of the disinterested trustees of the Fund
Board. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place within
six (6) months after the Fund gives written notice to the Company that
this provision is being implemented. Until the end of such six-month
period the Adviser and Fund will, to the extent permitted by law and
any exemptive relief previously granted to the Fund, continue to accept
and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state insurance regulators, then the Company will
withdraw the affected subaccount of the Account's investment in the
Fund and terminate this Agreement with respect to such subaccount;
provided, however, that such withdrawal and termination will be limited
to the extent required by the foregoing irreconcilable material
conflict as determined by a majority of the disinterested trustees of
the Fund Board. No charge or penalty will be imposed as a result of
such withdrawal. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice to the
Company that this provision is being implemented. Until the end of such
six-month period the Adviser and Fund will, to the extent permitted by
law and any exemptive relief previously granted to the Fund, continue
to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
4.6. For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested members of the Fund Board will determine whether
any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. The Company will not be required by
this Article IV to establish a new funding medium for the Contracts if
an offer to do so has been declined by vote of a majority of Contract
owners affected by the irreconcilable material conflict.
4.7. The Company will at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so
that the Fund Board may fully carry out the duties imposed upon it as
delineated in the Exemptive Order, and said reports, materials and data
will be submitted more frequently if deemed appropriate by the Fund
Board.
4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of
the 1940 Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Exemptive Order) on terms and
conditions materially different from those contained in the Exemptive
Order, then: (a) the Fund and/or the Participating Insurance Companies,
as appropriate, will take such steps as may be necessary to comply with
Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 4.1, 4.2,
4.3, 4.4, and 4.5 of this Agreement will continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE V. Indemnification
5.1. Indemnification By The Company
(a) The Company agrees to indemnify and hold harmless the Fund,
the Adviser, and each person, if any, who controls or is
associated with the Fund or the Adviser within the meaning of
such terms under the federal securities laws (but not any
Participating Insurance Companies) and any director, trustee,
officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this
Section 5.1) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement
with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements:
(1) arise out of or are based on any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the
Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will 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
Adviser or the Fund for use in the registration
statement, prospectus or statement of additional
information 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
(2) arise out of or are based on any untrue statement or
alleged untrue statement of a material fact contained
in the Fund registration statement, prospectus,
statement of additional information or sales
literature or other promotional material of the Fund
(or any amendment or supplement to any of the
foregoing), or the omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances in which
they were made, if such statement or omission was
made in reliance upon and in conformity with
information furnished to the Fund or Adviser in
writing by or on behalf of the Company or persons
under its control; or
(3) arise out of or are based on any wrongful conduct of,
or violation of applicable federal or state law by,
the Company or persons under its control or subject
to its authorization, with respect to the purchase of
Fund shares or the sale, marketing or distribution of
the Contracts; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under
the terms of this Agreement; or
(5) arise out of 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 or persons under its control or subject to
its authorization;
except to the extent provided in Sections 5.1(b) and 5.3
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under Section
5.1(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties promptly will notify the Company of
the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection
with the issuance or sale of the Fund shares or the Contracts
or the operation of the Fund.
5.2. Indemnification By The Adviser
(a) The Adviser agrees to indemnify and hold harmless the Company
and each person, if any, who controls or is associated with
the Company within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the
"Indemnified Parties" for purposes of this Section 5.2)
against any and all losses, claims, expenses, damages,
liabilities (including amounts paid in settlement with the
written consent of the Adviser) or litigation (including
reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based on any untrue statement or
alleged untrue statement of any material fact
contained in the registration statement, prospectus
or statement of additional information for the Fund
or sales literature or other promotional material of
the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based on the
omission or alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Adviser or Fund by or on behalf of
the Company for use in the registration statement,
prospectus or statement of additional information for
the Fund or in sales literature of the Fund (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or are based on any untrue statement or
alleged untrue statement of a material fact contained
in the Contract registration statement, prospectus or
statement of additional information or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), 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 in light of the circumstances
in which they were made, if such statement or
omission was made in reliance upon and in conformity
with information furnished to the Company in writing
by or on behalf of the Adviser or persons under its
control; or
(3) arise out of or are based on any wrongful conduct of,
or violation of applicable federal and state law by,
the Adviser or the Fund or persons under their
respective control or subject to their authorization
with respect to the sale of Fund shares; or
(4) arise as a result of any failure by the Fund, the
Adviser or persons under their respective control or
subject to their authorization to provide the
services and furnish the materials under the terms of
this Agreement including, but not limited to, a
failure, whether unintentional or in good faith or
otherwise, to comply with the diversification
requirements and procedures related thereto specified
in Section 2.5 of this Agreement or any material
errors in or untimely calculation or reporting of the
daily net asset value per share or dividend or
capital gain distribution rate (referred to in this
Section 5.2(a)(4) as an "error"); provided, that the
foregoing will not apply where such error is the
result of incorrect information supplied by or on
behalf of the Company to the Fund or the Adviser, and
will be limited to (i) reasonable administrative
costs necessary to correct such error, and (ii)
amounts which the Company has paid out of its own
resources to make Contract owners whole as a result
of such error; or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the
Adviser or the Fund in this Agreement, or arise out
of or result from any other material breach of this
Agreement by the Adviser or the Fund or persons under
their respective control or subject to their
authorization;
except to the extent provided in Sections 5.2(b) and 5.3
hereof.
(b) No party will be entitled to indemnification under Section
5.2(a) if such loss, claim, damage, liability or litigation is
due to the willful misfeasance, bad faith, or gross negligence
in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of
its obligations or duties under this Agreement by the party
seeking indemnification.
(c) The Indemnified Parties will promptly notify the Adviser and
the Fund of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them
in connection with the issuance or sale of the Contracts or
the operation of the Account.
(d) It is understood that these indemnities shall have no effect
on any other agreements or arrangements between the Fund
and/or its series and the Adviser.
5.3. Indemnification Procedure
Any person obligated to provide indemnification under this Article V
("Indemnifying Party" for the purpose of this Section 5.3) will not be
liable under the indemnification provisions of this Article V with
respect to any claim made against a party entitled to indemnification
under this Article V ("Indemnified Party" for the purpose of this
Section 5.3) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the
summons or other first legal process giving information of the nature
of the claim will have been served upon such Indemnified Party (or
after such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party of any
such claim will not relieve the Indemnifying Party from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of the indemnification provision of
this Article V, except to the extent that the failure to notify results
in the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give
such notice. In case any such action is brought against the Indemnified
Party, the Indemnifying Party will be entitled to participate, at its
own expense, in the defense thereof. The Indemnifying Party also will
be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Indemnifying Party
to the Indemnified Party of the Indemnifying Party's election to assume
the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and the Indemnifying
Party 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, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the retention of
such counsel; or (b) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party and representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. The Indemnifying Party will not be
liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there is a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify
the Indemnified Party from and against any loss or liability by reason
of such settlement or judgment. A successor by law of the parties to
this Agreement will be entitled to the benefits of the indemnification
contained in this Article V. The indemnification provisions contained
in this Article V will survive any termination of this Agreement.
5.4 Limitation of Liability
Except as expressly stated herein, as between the parties, in no event
will any party to this Agreement be responsible to any other party for
any incidental, indirect, consequential, punitive or exemplary damages
of any kind arising from this Agreement, including without limitation,
lost revenues, loss of profits or loss of business.
5.5 Arbitration
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, will be settled by arbitration administered by
the American Arbitration Association in accordance with its Commercial
Arbitration Rules and Title 9 of the U.S. Code. Judgment on the award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The number of arbitrators will be three, one of
whom will be appointed by the Company or an affiliate; one of whom will
be appointed by the Fund and/or the Adviser or an affiliate; and the
third of whom will be selected by mutual agreement, if possible, within
30 days of the selection of the second arbitrator and thereafter by the
administering authority. The place of arbitration will be Minneapolis,
Minnesota. The arbitrators will have no authority to award punitive
damages or any other damages not measured by the prevailing party's
actual damages, and may not, in any event, make any ruling, finding or
award that does not conform to the terms and conditions of this
Agreement. Any party may make an application to the arbitrators seeking
injunctive relief to maintain the status quo until such time as the
arbitration award is rendered or the controversy is otherwise resolved.
Any party may apply to any court having jurisdiction hereof and seek
injunctive relief in order to maintain the status quo until such time
as the arbitration award is rendered or the controversy is otherwise
resolved.
ARTICLE VI. Applicable Law
6.1. This Agreement will be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of Minnesota.
6.2. This Agreement will be subject to the provisions of the 1933 Act, the
Securities Exchange Act of 1934 and the 1940 Act, and the rules and
regulations and rulings thereunder, including such exemptions from
those statutes, rules and regulations as the SEC may grant (including,
but not limited to, the Exemptive Order) and the terms hereof will be
interpreted and construed in accordance therewith.
ARTICLE VII. Termination
7.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Portfolios, upon sixty (60)
days' advance written notice to the other parties or, if
later, upon receipt of any required exemptive relief or orders
from the SEC, unless otherwise agreed in a separate written
agreement among the parties;
(b) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio if shares of the Portfolio are not reasonably
available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio in the event any of the Portfolio's shares are not
registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts
issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of the Fund's written
notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the administration of the
Contracts, the operation of the Account, or the purchase of
the Fund shares, provided that the Fund determines in its sole
judgment, exercised in good faith, that any such proceeding
would have a material adverse effect on the Company's ability
to perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of the Company's
written notice by the other parties, upon institution of
formal proceedings against the Fund or the Adviser by the
NASD, the SEC, or any state securities or insurance department
or any other regulatory body, regarding the Fund's or the
Adviser's duties under this Agreement or related to the sale
of Fund shares or the administration of the Fund, provided
that the Company determines in its sole judgment, exercised in
good faith, that any such proceeding would have a material
adverse effect on the Fund's or the Adviser's ability to
perform its obligations under this Agreement; or
(f) at the option of the Company, upon receipt of the Company's
written notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M
of the Internal Revenue Code, or under any successor or
similar provision, or if the Company reasonably and in good
faith believes that the Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the Company's
written notice by the other parties, with respect to any
Portfolio if the Fund fails to meet the diversification
requirements specified in Article II hereof or if the Company
reasonably and in good faith believes the Fund may fail to
meet such requirements; or
(h) at the option of any party to this Agreement, upon written
notice to the other parties, upon another party's material
breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company determines in its
sole judgment exercised in good faith, that the Fund or the
Adviser has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity
which is likely to have a material adverse impact upon the
business and operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other parties
of written notice of the election to terminate; or
(j) at the option of the Fund, if the Fund determines in its sole
judgment exercised in good faith, that the Company has
suffered a material adverse change in its business, operations
or financial condition since the date of this Agreement or is
the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and
operations of the Fund, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of any
necessary regulatory approvals and/or the vote of the Contract
owners having an interest in the Account (or any subaccount)
to substitute the shares of another investment company for the
corresponding Portfolio shares of the Fund in accordance with
the terms of the Contracts for which those Portfolio shares
had been selected to serve as the underlying investment media.
The Company will give sixty (60) days' prior written notice to
the Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of: (i) all
contract owners of variable insurance products of all separate
accounts; or (ii) the interests of the Participating Insurance
Companies investing in the Fund as set forth in Article IV of
this Agreement; or
(m) at the option of the Fund in the event any of the Contracts
are not issued or sold in accordance with applicable federal
and/or state law. Termination will be effective immediately
upon such occurrence without notice.
7.2. Notwithstanding any termination of this Agreement, the Fund and the
Adviser will, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of
this Agreement, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the
Existing Contracts will be permitted to reallocate investments in the
Portfolios (as in effect on such date), redeem investments in the
Portfolios and/or invest in the Portfolios upon the making of
additional purchase payments under the Existing Contracts. The parties
agree that this Section 7.2 will not apply to any terminations under
Article IV and the effect of such Article IV terminations will be
governed by Article IV of this Agreement.
7.3. The provisions of Article V will survive the termination of this
Agreement and as long as shares of the Fund are held under Existing
Contracts in accordance with Section 7.2, the provisions of this
Agreement will survive the termination of this Agreement with respect
to those Existing Contracts.
ARTICLE VIII. Notices
Any notice will be deemed duly given when sent by registered or
certified mail (or other method agreed to by the parties) to each 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 parties.
If to the Company:
American Enterprise Life Insurance Company
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: President
With a Copy to:
Law Department (Unit 52)
American Enterprise Life Insurance Company
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XX 00000
If to the Fund:
Xxxx X. Xxxxxxxxx
Vice President
Royce Capital Fund
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
If to the Adviser:
Xxxx X. Xxxxxxx
Associate General Counsel
Royce & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
ARTICLE IX. Miscellaneous
9.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither
the directors, trustees, officers, partners, employees, agents or
shareholders assume any personal liability for obligations entered into
on behalf of the Fund.
9.2. The Fund and the Adviser acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively the
"Protected Parties" for purposes of this Section 9.2), information
maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Protected
Parties or any of their employees or agents in connection with the
Company's performance of its duties under this Agreement are the
valuable property of the Protected Parties. The Fund and the Adviser
agree that if they come into possession of any list or compilation of
the identities of or other information about the Protected Parties'
customers, or any other information or property of the Protected
Parties, other than such information as may be independently developed
or compiled by the Fund or the Adviser from information supplied to
them by the Protected Parties' customers who also maintain accounts
directly with the Fund or the Adviser, the Fund and the Adviser will
hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property
except: (a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Fund and the Adviser
acknowledge that any breach of the agreements in this Section 9.2 would
result in immediate and irreparable harm to the Protected Parties for
which there would be no adequate remedy at law and agree that in the
event of such a breach, the Protected Parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well
as such other relief as any court of competent jurisdiction deems
appropriate.
9.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
9.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the
same instrument.
9.5. If any provision of this Agreement will be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Agreement will not be affected thereby.
9.6. This Agreement will not be assigned by any party hereto without the
prior written consent of all the parties.
9.7. Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including without limitation
the SEC, the NASD and state insurance regulators) and will permit each
other and 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.
9.8. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or board action, as
applicable, by such party and when so executed and delivered this
Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
9.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts,
the Accounts or the Portfolios of the Fund or other applicable terms of
this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative as of the
date specified above.
ROYCE CAPITAL FUND ROYCE & ASSOCIATES, INC.
By: /s/ Xxxx X. Xxxxxxxxx By: /s/ Xxx X'Xxxxx
---------------------- --------------------
Name: Xxxx X. Xxxxxxxxx Name: Xxx X'Xxxxx
Title: Vice President Title: Vice President
AMERICAN ENTERPRISE LIFE ATTEST:
INSURANCE COMPANY
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxx Xxxxx Xxxxxxx
----------------------- --------------------
Xxxxx X. Xxxxx Xxxx Xxxxx Xxxxxxx
President Assistant Secretary
Schedule 1
PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
The following Accounts of American Enterprise Life Insurance Company are
permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:
American Enterprise Variable Annuity Account
American Enterprise Variable Life Account
Schedule 2
PARTICIPATION AGREEMENT
By and Among
ROYCE CAPITAL FUND
And
ROYCE & ASSOCIATES, INC.
And
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
The Accounts shown on Schedule 1 may invest in the following Portfolios:
Royce Micro-Cap Portfolio
Royce Premier Portfolio
