PARTICIPATION AGREEMENT
AMONG
SECURITY BENEFIT LIFE INSURANCE COMPANY,
SECURITY DISTRIBUTORS, INC.
THE ROYCE FUND,
AND
ROYCE & ASSOCIATES, LLC
THIS AGREEMENT, dated as of the 30 day of November, 2006, by and among
Security Benefit Life Insurance Company, (the "Company"), a stock life insurance
company organized under the laws of the State of Kansas, on its own behalf and
on behalf of each segregated asset account of the Company set forth on Schedule
A hereto, as may be amended from time to time (each an "Account"), Security
Distributors, Inc. ("SDI"), a registered broker-dealer organized under the laws
of Kansas, The Royce Fund (the "Fund"), a Delaware business trust, and Royce &
Associates, LLC (the "Adviser"), a Delaware limited liability company.
WHEREAS, the shares of beneficial interest of the Fund are divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (each a "Portfolio"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act") and shares of
the Portfolios are registered under the Securities Act of 1933, as amended (the
"1933 Act"); and
WHEREAS, the Adviser, which serves as investment adviser to the Fund, is
duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended; and
WHEREAS, the Company has issued or will issue certain variable annuity
contracts supported wholly or partially by the Account (the "Contracts"), and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, duly established by the Company to set aside and invest assets
attributable to the aforesaid Contracts; and
WHEREAS, the Adviser wishes to compensate the Company for the efforts of
the Company and/or its agents in providing written and oral information and
services regarding the Fund to Contract owners; and
WHEREAS, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios"), on behalf of the Account to fund the
aforesaid Contracts; and
A-1
WHEREAS, SDI is duly registered as a broker/dealer under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), is a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") and is the
underwriter for the Contracts;
WHEREAS, SDI will provide certain distribution services to the Fund;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
SDI, the Fund and the Adviser agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. Subject to Article IX hereof, the Fund agrees to make available to the
Company for purchase on behalf of the Account, shares of the Designated
Portfolios, such purchases to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, (i) the Portfolios
(other than those listed on Schedule A) in existence now or that may be
established in the future will be made available to the Company only as the Fund
may so provide, and (ii) the Board of Trustees of the Fund (the "Board") may
suspend or terminate the offering of shares of any Designated Portfolio or class
thereof, if such action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Board acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
suspension or termination is necessary and in the best interests of the
shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on behalf of the
Account, such redemptions to be effected at net asset value in accordance with
Section 1.3 of this Agreement. Notwithstanding the foregoing, the Fund may delay
redemption of Fund shares of any Designated Portfolio to the extent permitted by
the 1940 Act, and any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund for the
limited purpose of receiving and accepting purchase and redemption requests on
behalf of the Account (but not with respect to any Fund shares that may be held
in the general account of the Company) for shares of those Designated Portfolios
made available hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts and other transactions relating to the
Contracts or the Account. Receipt and acceptance of any such request (or
relevant transactional information therefor) on any day the New York Stock
Exchange is open for trading and on which a Designated Portfolio calculates its
net asset value (a "Business Day") pursuant to the rules of the Securities and
Exchange Commission ("SEC"), by the Company as such limited agent of the Fund
prior to the time that the Fund ordinarily calculates its net asset value as
described from time to time in the Fund's prospectus shall constitute receipt
and acceptance by the Designated Portfolio on that same Business Day, provided
that the Fund receives notice of such request by 9:30 a.m. Eastern Time on the
next following Business Day.
(b) The Company shall pay for shares of each Designated Portfolio on the
same Business Day that it notifies the Fund of a purchase request for such
shares. Payment for Designated Portfolio shares shall be made in federal funds
transmitted to the Fund or other designated person by wire to be received by
3:00 p.m. Eastern Time on the Business Day the Fund is notified of the purchase
request for Designated Portfolio shares (unless the Fund determines and so
advises the Company that sufficient proceeds are available from redemption of
shares of other Designated Portfolios
effected pursuant to redemption requests tendered by the Company on behalf of
the Account, or unless the Fund otherwise determines and so advises the Company
to delay the date of payment, to the extent the Fund may do so under the 1940
Act). If federal funds are not received on time, such funds will be invested,
and Designated Portfolio shares purchased thereby will be issued, as soon as
practicable and the Company shall promptly, upon the Fund's request, reimburse
the Fund for any charges, costs, fees, interest or other expenses incurred by
the Fund in connection with any advances to, or borrowing 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. Upon receipt
of federal funds so wired, such funds shall cease to be the responsibility of
the Company and shall become the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the Account or the
Company shall be made by the Fund in federal funds transmitted by wire to the
Company or any other designated person by 3 p.m. Eastern Time on the same
Business Day the Fund is properly notified of the redemption order of such
shares (unless redemption proceeds are to be applied to the purchase of shares
of other Designated Portfolios in accordance with Section 1.3(b) of this
Agreement), except that the Fund reserves the right to delay payment of
redemption proceeds to the extent permitted under Section 22(e) of the 1940 Act
and any rules thereunder, and in accordance with the procedures and policies of
the Fund as described in the then-current prospectus.
(d) Any purchase or redemption request for Designated Portfolio shares held
or to be held in the Company's general account shall be effected at the net
asset value per share next determined after the Fund's receipt and acceptance of
such request, provided that, in the case of a purchase request, payment for Fund
shares so requested is received by the Fund in federal funds prior to close of
business for determination of such value, as defined from time to time in the
Fund's prospectus.
1.4. The Fund shall use its best efforts to make the net asset value per
share for each Designated Portfolio available to the Company by 6:30 p.m.
Eastern Time each Business Day, and in any event, as soon as reasonably
practicable after the net asset value per share for such Designated Portfolio is
calculated, and shall calculate such net asset value in accordance with the
Fund's prospectus. If the Fund provides the Company with materially incorrect
share net asset value information, the Company on behalf of the Account, shall
be entitled to an adjustment to the number of shares purchased or redeemed to
reflect the correct share net asset value. Any material error in the calculation
of the net asset value per share, dividend or capital gain information shall be
reported promptly to the Company upon discovery. In the event that any such
material error is the result of the gross negligence of the Fund, or its
designated agent for calculating the net asset value, any administrative or
other costs or losses incurred for correcting underlying Contract owner accounts
shall be at the Adviser's expense. If such material error results in overpayment
to the Account, the Company will use its best efforts to collect such
overpayment. If, after such efforts, the Company is not able to recover all such
overpayment, the Company will cooperate with the attempts of the Fund and/or the
Adviser to recover the overpayment.
1.5. The Fund shall use its best efforts to furnish notice (by wire or
telephone followed by written confirmation) to the Company of any income
dividends or capital gain distributions payable on any Designated Portfolio
shares by the record date, by 6:30 p.m. Eastern Time on the ex-dividend date.
The Company, on its behalf and on behalf of the Account, hereby elects to
receive all such dividends and distributions as are payable on any Designated
Portfolio shares in the form of additional shares of that Designated Portfolio.
The Company reserves the right, on its behalf and on behalf of the Account, to
revoke this election and to receive all such dividends and capital gain
distributions in cash. The Fund shall notify the Company promptly of the number
of Designated Portfolio shares so issued as payment of such dividends and
distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry only.
Share certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares shall be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies and the cash value of the Contracts may be invested in other
investment companies.
(b) The Company shall not, without prior notice to the Adviser (unless
otherwise required by applicable law), take any action to operate the Account as
a management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the Adviser (unless
otherwise required by applicable law), induce Contract owners to change or
modify the Fund or change the Fund's investment adviser.
(d) The Company shall not, without prior notice to the Fund, induce
Contract owners to vote on any matter submitted for consideration by the
shareholders of the Fund in a manner other than as recommended by the Board.
1.8 The parties may agree, in lieu of the procedures set forth above in
this Article 1, to place and settle trades for Fund shares through a clearing
corporation. In the event that such a clearing corporation is used, the parties
agree to abide by the rules of the clearing corporation.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts (a) are, or
prior to issuance will be, registered under the 1933 Act, or (b) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act. The Company further represents and warrants
that the Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state securities and
insurance laws. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established the Account as a segregated asset account
under Kansas insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the 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, or alternatively (b) has not
registered the Account in proper reliance upon an exclusion from registration
under the 1940 Act. The Company further represents and warrants that shares of
the designated portfolios are permissible investments for the Account.
2.2. The Fund represents and warrants that Designated Portfolio shares sold
pursuant to this Agreement shall be registered under the 1933 Act, shall be duly
authorized for issuance and sold in compliance with applicable state and federal
securities laws and that the Fund is and shall remain registered under the 0000
Xxx. The Fund shall amend the registration statement for its shares under the
1933 Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.3. The Fund represents and warrants that it is lawfully organized and
validly existing under the laws of the State of Delaware and that it does and
will comply in all material respects with the 1940 Act, including, without
limitation, Rule 38a-1 under the 1940 Act.
2.4. The Adviser represents and warrants that it is registered as an
investment adviser with the SEC and that it does and will comply in all material
respects with the Investment Advisers Act of 1940, including, without
limitation, Rule 206(4)-7 under the Investment Advisers Act.
2.5. The Fund and the Adviser represent and warrant that all of their
trustees/directors, officers, employees, and other individuals or entities
dealing with the money and/or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.6. The Company represents and warrants that all of its directors,
officers, employees, and other individuals/entities employed or controlled by
the Company dealing with the money and/or securities of the Account are covered
by a blanket fidelity bond or similar coverage for the benefit of the Account,
in an amount not less than $5 million. The aforesaid bond includes coverage for
larceny and embezzlement and is issued by a reputable bonding company.
2.7 The Company represents and warrants that it will adhere to the Fund's
policy intended to discourage shareholders from trading that could be
detrimental to long-term shareholders of the Fund (the "Policy"), as set forth
in the Fund's current prospectus. The aforesaid includes, among other things,
the monitoring of shareholder/participant trading activity and the restriction
of shareholder/participant trading privileges at the sub-account level if
warranted by the Policy. The Fund will notify Company of any material revisions
to the Policy.
2.8 The Company represents and warrants that it will adhere to all
anti-money laundering rules and regulations, applicable to the Company, in
fulfilling its obligations under this agreement.
2.9 SDI represents and warrants that (a) it is a broker-dealer registered
with the Securities and Exchange Commission ("SEC") under the 1934 Act and is
compliance with the conditions and qualifications set forth in the Conduct Rules
of the NASD and (b) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Kansas.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. The Fund, or its designee, shall provide the Company with as many
printed copies of the current prospectus, current Statement of Additional
Information ("SAI"), supplements, proxy statements, and annual or semi-annual
reports of each Designated Portfolio (for distribution to Contract owners with
value allocated to such Designated Portfolios) as the Company may reasonably
request to deliver to existing Contract owners. If requested by the Company in
lieu thereof, the Fund shall provide such documents (including a "camera-ready"
copy of such documents as set in type, a diskette in the form sent to the
financial printer, or an electronic copy of the documents in a format suitable
for posting on the Company's website, all as the Company may reasonably request)
and such other assistance as is reasonably necessary in order for the Company to
have prospectuses, SAIs, supplements and annual or semi-annual reports for the
Contracts and the Fund printed together in a single document or posted on the
Company's web-site or printed individually by the Company if it so chooses. The
expenses associated with printing and providing such documentation shall be as
set forth in Article V.
3.2. The Fund's prospectus shall state that the current SAI for the Fund is
available.
3.3. The Fund shall provide the Company with information regarding the
Fund's expenses, which information may include a table of fees and related
narrative disclosure for use in any
prospectus or other descriptive document relating to a Contract. The Company
agrees that it will use such information substantially in the form provided. The
Company shall provide prior written notice of any proposed modification of such
information, which notice will describe the manner in which the Company proposes
to modify the information, and agrees that it may not modify such information in
any way without the prior consent of the Fund, which consent shall not be
unreasonably withheld.
3.4. So long as, and to the extent the SEC continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners, or
to the extent otherwise required by law, the Company shall, at the Company's
option, follow one of the two methods described below to provide pass-through
voting privileges to contract owners:
(a) Provide a list of Contract owners with value allocated to a Designated
Portfolio as of the record date to the Fund or its agent in order to permit the
Fund to send solicitation material and gather voting instructions from Contract
owners on behalf of the Company. The Company shall also provide such other
information to the Fund as is reasonably necessary in order for the Fund to
properly tabulate votes for Fund initiated proxies. In the event that the
Company chooses this option, the Fund shall be responsible for properly "echo
voting" shares of a Designated Portfolio for which no voting instructions have
been received.
(b) Solicit voting instructions from Contract holders itself and vote
shares of the Designated Portfolio in accordance with instructions received from
Contract holders. The Company shall vote the shares of the Designated Portfolios
for which no instructions have been received in the same proportion as shares of
the Designated Portfolio for which instructions have been received.
3.5. The Company reserves the right to vote Fund shares held in its general
account in its own right, to the extent permitted by applicable laws.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or its designee, each piece of sales literature or other promotional material
that the Company develops and in which the Fund (or a Designated Portfolio
thereof) or the Adviser is named. No such material shall be used until approved
by the Fund or its designee, and the Fund will use its best efforts for it or
its designee to review such sales literature or promotional material within five
(5) Business Days after receipt of such material. The Fund or its designee
reserves the right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Fund (or a Designated
Portfolio thereof) or the Adviser is named, and no such material shall be used
if the Fund or its designee so objects.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund or the Adviser in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee, except with the written permission of the Fund or its
designee.
4.3. The Fund and the Adviser, or their designee, shall furnish, or cause
to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops and in which the Company, and/or the
Account, is named. No such material shall be used until approved by the Company,
and the Company will use its best efforts to review such sales literature or
promotional material within five (5) Business Days after receipt of such
material. The Company reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Company and/or its Account is named, and no
such material shall be used if the Company so objects.
4.4. The Fund shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Account, or the Contracts
other than the information or representations contained in a registration
statement, prospectus (which shall include an offering memorandum, if any, if
the Contracts issued by the Company or interests therein are not registered
under the 1933 Act), or SAI for the Contracts, as such registration statement,
prospectus, or SAI may be amended or supplemented from time to time, or in
published reports for the Account which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company, except with the permission of the
Company.
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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 Designated Portfolios or their shares, promptly after the filing
of such document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, 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 the Account, promptly after the filing of
such document(s) with the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Adviser any complaints received from the Contract
owners pertaining to the Fund or a Designated Portfolio.
4.7. The Fund will provide the Company with as much notice as is reasonably
practicable of any proxy solicitation for any Designated Portfolio, and of any
material change in the Fund's registration statement, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to facilitate the
solicitation of proxies from Contract owners, or to make changes to its
prospectus or registration statement, in an orderly manner. The Fund will make
reasonable efforts to attempt to have changes affecting Contract prospectuses
become effective simultaneously with the annual updates for such prospectuses.
ARTICLE V. Fees and Expenses
5.1. The Fund shall pay fees to SDI under this Agreement, as set forth in
Schedule B attached hereto.
5.2. The Adviser shall pay or cause to be paid an administrative fee (in
addition to the applicable payment to SDI listed in 5.1 above) to the Company
for services provided to the Contract owners invested in the Designated
Portfolios as outlined in Schedule B attached hereto.
5.3. All expenses incident to performance by the Fund under this Agreement
shall be paid by the Fund. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
applicable state laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares, preparation and
filing of the Fund's prospectus and registration statement, proxy materials and
reports, setting the prospectus in type, setting in type and printing the proxy
materials and reports to shareholders (including the costs of printing a
prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all taxes on the issuance or transfer
of the Fund's shares.
5.4. The Fund will pay or cause to be paid the expenses associated with
printing, mailing, distributing, solicitation and tabulation of proxy materials
to Contract owners with respect to proxies related to the Fund, consistent with
applicable provisions of the 1940 Act. The Fund shall also bear the expense of
printing and postage with respect to Fund prospectuses, annual and semi-annual
reports and all other Fund reports delivered to existing Contract owners with
value allocated to one or more Designated Portfolios (regardless of whether such
documents are printed by the Fund or the Company).
5.5. The Company shall bear the expense of distributing all prospectuses
and reports to shareholders (whether for existing Contract owners or prospective
Contract owners). The Company shall bear the expense of printing copies of the
prospectus for the Contracts for use with prospective Contract owners. The
Company shall bear the expenses incident to (including the costs of printing)
sales literature and other promotional material that the Company develops and in
which the Fund (or a Designated Portfolio thereof) is named.
5.6. Notwithstanding the termination of this Agreement, the Fund will
continue to pay SDI the fee set forth, and in accordance with, Section 5.1 so
long as net assets of the Accounts remain in a Designated Portfolio, provided
such continued payment is permitted in accordance with applicable law and
regulation and the applicable Rule 12b-1 Plan is not terminated. There will be
no fees paid under this Agreement relating to shares purchased after the
termination of the Agreement.
5.7. Notwithstanding the termination of this Agreement, the Fund will
continue to pay the Company the fee set forth, and in accordance with, Section
5.2 so long as net assets of the Accounts remain in a Designated Portfolio,
provided such continued payment is permitted in accordance with applicable law
and regulation. There will be no fees paid under this Agreement relating to
shares purchased after the termination of the Agreement.
ARTICLE VI. Qualification
The Fund represents and warrants that it is or will be qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Internal Revenue Code,") and that it will maintain such
qualification (under Subchapter M or any successor or similar provisions) and
that 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.
ARTICLE VII. Indemnification
7.1. Indemnification by the Company
7.1(a). The Company agrees to indemnify and hold harmless each of the Fund
and the Adviser and each of its trustees/directors and officers, and each
person, if any, who controls the Fund or Adviser within the meaning of Section
15 of the 1933 Act or who is under common control with the Fund or the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statements of any material fact contained in the registration
statement, prospectus (which shall include a written description of a
Contract that is not registered under the 1933 Act), or SAI for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by or on behalf
of the Fund or the Adviser for use in the registration statement,
prospectus or SAI 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
(ii) arise out of or as a result of statements or representations by
or on behalf of the Company (other than statements or representations
contained in the registration statement, prospectus, SAI, or sales
literature of the Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or its agents or persons under
the Company's authorization or control, with respect to the sale or
distribution of the Contracts, or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, SAI, or
sales literature of the Fund or any amendment thereof or supplement thereto
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of this
Agreement; or
(v) arise out of or result from any material breach of any
representation 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;
as limited by and in accordance with the provisions of Sections 7.1(b) and
7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
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 its obligations or duties under this Agreement.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against 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 reasonably satisfactory to the party named in the action. After notice
from the Company to such party of the Company's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
7.2. Indemnification by the Adviser
7.2(a). The Adviser agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Adviser) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or SAI or sales literature of the Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in conformity
with information furnished to the Adviser or Fund by or on behalf of the
Company for use in the registration statement, prospectus or SAI for the
Fund or in sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations by
or on behalf of the Fund or the Adviser (other than statements or
representations contained in the registration statement, prospectus, SAI or
sales literature for the Contracts not supplied by the Fund or the Adviser)
or wrongful conduct of the Adviser or the Fund with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, SAI or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by
or on behalf of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund or the Adviser to
provide the services and furnish the materials under the terms of this
Agreement (including a failure of the Fund, whether unintentional or in
good faith or otherwise, to comply with the
diversification and other qualification requirements specified in Article
VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by or on behalf of the Adviser or the
Fund in this Agreement or arise out of or result from any other material
breach of this Agreement by or on behalf of the Adviser or the Fund;
as limited by and in accordance with the provisions of Sections 7.2(b) and
7.2(c) hereof.
7.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
7.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Adviser will 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 reasonably satisfactory to the party
named in the action. After notice from the Adviser to such party of the
Adviser's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Adviser will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
7.3. Indemnification by the Fund
7.3(a). The Fund agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation (including legal and other expenses)
to which the Indemnified Parties may be required to pay or may become subject
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, expenses, damages, liabilities or expenses (or actions in
respect thereof) or settlements, are related to the operations of the Fund and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or SAI or sales literature of the Fund (or any
amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Adviser or Fund by or
on behalf of the Company for use in the registration statement, prospectus
or SAI for the Fund or in sales literature (or any amendment or supplement)
or otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations by
or on behalf of the Fund or the Adviser (other than statements or
representations contained in the registration statement, prospectus, SAI or
sales literature for the Contracts not supplied by the Fund or the Adviser)
or wrongful conduct of the Adviser or the Fund with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement, prospectus, SAI or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by
or on behalf of the Adviser or the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by or on behalf of the Fund in this
Agreement or arise out of or result from any other material breach of this
Agreement by or on behalf of the Fund;
as limited by and in accordance with the provisions of Sections 7.3(b) and
7.3(c) hereof. The parties acknowledge that the Fund's indemnification
obligations under this Section 7.3 are subject to applicable law. The Company
agrees that, in the event an obligation to indemnify exists pursuant to Section
7.3 as well as Section 7.2 hereof, it will seek satisfaction under the
indemnification provisions of Section 7.2 before seeking indemnification under
this Section 7.3.
7.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Company or the Account, whichever is applicable.
7.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against
the Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel reasonably satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
7.3(d). The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceeding against it or any of its respective officers or
directors in connection with the Agreement, the issuance or sale of the
Contracts, the operation of the Account, or the sale or acquisition of shares of
the Fund.
7.4 Indemnification by SDI
7.4(a). SDI agrees to indemnify and hold harmless each of the Fund and the
Adviser and each of its trustees/directors and officers, and each person, if
any, who controls the Fund or Adviser within the meaning of Section 15 of the
1933 Act or who is under common control with the Fund or the Adviser
(collectively, the "Indemnified Parties" for purposes of this Section 7.4)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of SDI) 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:
(i) arise as a result of any material failure by SDI to provide the
services and furnish the materials under the terms of this Agreement; or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by SDI in this Agreement or arise out
of or result from any other material breach of this Agreement by SDI;
as limited by and in accordance with the provisions of Sections 7.4(b) and
7.4(c) hereof.
7.4(b). SDI 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 its obligations or duties under this Agreement.
7.4(c). SDI 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 SDI 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 SDI of any such claim shall not relieve SDI 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, SDI shall be
entitled to participate, at its own expense, in the defense of such action. SDI
also shall be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the party named in the action. After notice from SDI to such
party of SDI's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any
additional counsel retained by it, and SDI will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
7.1(d). The Indemnified Parties will promptly notify SDI of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Contracts or the operation of the
Fund.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Kansas,
without regard to the conflict of laws provisions thereof.
8.2. This Agreement shall be subject to the provisions of the 1933 and 1940
Acts as well as the Exchange Act of 1934, and the rules and regulations and
rulings thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant, and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall continue in full force and effect until the first
to occur of:
(a) termination by any party, for any reason with respect to some or all
Designated Portfolios, by six (6) months advance written notice
delivered to the other parties; or
(b) termination by the Company by written notice to the other parties
based upon the Company's determination that shares of the Fund are not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the other parties in
the event any of the Designated 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 the
Company; or
(d) termination by the Fund or Adviser by written notice to the Company in
the event that formal administrative proceedings are instituted
against the Company by the NASD, the SEC, the Insurance Commissioner
or like official 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 operation of any Account, or the purchase of the
Designated Portfolios' shares; provided, however, that the Fund or
Adviser determines in its sole judgment exercised in good faith, that
any such administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its obligations
under this Agreement; or
(e) termination by the Company by written notice to the other parties in
the event that formal administrative proceedings are instituted
against the Fund or Adviser by the SEC or any state securities
department or any other regulatory body;
provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Fund or Adviser
to perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the other parties in
the event that any Designated Portfolio ceases to qualify as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, or if the Company reasonably believes that any
such Portfolio may fail to so qualify or comply; or
(g) termination by either the Fund or the Adviser by written notice to the
other parties, if either one or both the Fund and the Adviser,
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company has suffered a material adverse change in
its business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(h) termination by the Company by written notice to the other parties, if
the Company shall determine, in its sole judgment exercised in good
faith, that the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(i) termination by the Company upon any substitution of the shares of
another investment company or series thereof for shares of a
Designated Portfolio of the Fund in accordance with the terms of the
Contracts, provided that the Company has given at least 45 days prior
written notice to the Fund and Adviser of the date of substitution.
9.2. Notwithstanding any termination of this Agreement, the Fund and the
Adviser shall, at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"), unless the
Company seeks an order pursuant to Section 26(b) of the 1940 Act to permit the
substitution of other securities for the shares of the Designated Portfolios.
Specifically, the owners of the Existing Contracts may be permitted to
reallocate investments in the Fund, redeem investments in the Fund and/or invest
in the Fund upon the making of additional purchase payments under the Existing
Contracts (subject to any such election by the Company).
9.3. Notwithstanding any termination of this Agreement, each party's
obligation under Article VII to indemnify the other parties shall survive.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified
mail 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 Company: Security Benefit Life Insurance Company
Attention General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to SDI: Security Distributors, Inc.
Attention: General Counsel
One Security Benefit Place
Topeka, Kansas 66636 - 0001
If to the Fund: The Royce Fund
Attention: Secretary
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to Adviser: Royce & Associates, LLC
Attention: General Counsel
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ARTICLE XI. Miscellaneous
11.1. All persons dealing with the Fund must look solely to the property of
the respective Designated Portfolios listed on Schedule A hereto as though each
such Designated Portfolio had separately contracted with the Company and the
Adviser for the enforcement of any claims against the Fund. The parties agree
that neither the Board, officers, agents or shareholders of the Fund assume any
personal liability or responsibility for obligations entered into by or on
behalf of the Fund.
11.2. Subject to the requirements of legal process and regulatory
authority, the Fund and the Adviser shall treat as confidential the names and
addresses of the owners of the Contracts. Each party shall treat as confidential
all information reasonably identified as confidential in writing by any other
party hereto and, except as permitted by this Agreement, shall not disclose,
disseminate or utilize such information without the express written consent of
the affected party until such time as such information has come into the public
domain.
11.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Kansas Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable insurance
operations of the Company are being conducted in a manner consistent with the
Kansas insurance laws and regulations and any other applicable law or
regulations.
11.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
11.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
11.9. One or more series or portfolios of the Fund may exist or be
established (each a "New Fund"), not then represented on Schedule A hereto. Each
such New Fund shall become subject to the provisions of the Agreement to the
same extent as the existing Funds as reflected on Schedule A, except to the
extent that such provisions may be modified with respect to each additional New
Fund in writing by the parties at the time of the addition of the New Fund, and
each such New Fund shall be added to Schedule A.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative.
Security Benefit Life
Insurance Company By its authorized officer
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Xxxxxx X. Xxxxx
Title: Sr VP - CFO
Date: 11-28-06
Security Distributors, Inc. By its authorized officer
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx
Title: Pres
Date: 11-28-06
The Royce Fund By its authorized officer
By: /s/ Xxxx Xxxxxxxxx
-------------------------
Xxxx Xxxxxxxxx
Title: VP
Date: 11-30-06
Royce & Associates, LLC By its authorized officer
By: /s/ Xxxx Xxxxxxxxx
-------------------------
Xxxx Xxxxxxxxx
Title: COO
Date: 11-30-06
October 17, 2006
SCHEDULE A
ACCOUNT(S) DESIGNATED PORTFOLIO(S)
SBL Variable Annuity Account XIV Royce Opportunity Fund - Service Class
SBL Variable Annuity Account XXX Xxxxx Value Fund - Service Class
SCHEDULE B - LIST OF FUNDS AND CORRESPONDING FEES
------------------------------ ------------------------- ------------------------------- ------------------------- -----------------
DESIGNATED PORTFOLIO SHARE CLASS ADMINISTRATIVE FEE 12B-1 FEE TOTAL
------------------------------ ------------------------- ------------------------------- ------------------------- -----------------
Royce Opportunity Fund Service 0.10% 0.25% 0.35%
------------------------------ ------------------------- ------------------------------- ------------------------- -----------------
Royce Value Fund Service 0.10% 0.25% 0.35%
------------------------------ ------------------------- ------------------------------- ------------------------- -----------------
The Company and/or its agents agree to provide services ("Services") to existing
owners of Variable Contracts including, but not limited to: teleservicing
support in connection with the Portfolios; facilitation of the tabulation of
Variable Contract owners' votes in the event of a shareholder vote; maintenance
of Variable Contract records reflecting Shares purchased and redeemed and Share
balances, and the conveyance of that information to the Fund or its agents as
may be reasonably requested; provision of support services, including providing
information about the Fund and the Designated Portfolios and answering questions
concerning the Fund and the Designated Portfolios, including questions
respecting Variable Contract owners' interests in one or more Designated
Portfolios; provision and administration of Variable Contract features for the
benefit of Variable Contract owners in connection with the Designated
Portfolios, which may include fund transfers, dollar cost averaging, asset
allocation, portfolio rebalancing, earnings sweep, and pre-authorized deposits
and withdrawals; and provision of other services as may be agreed upon from time
to time, consistent with applicable law and regulation.
In consideration of the Services, each Designated Portfolio agrees to pay
to the Company an administrative fee with respect to that Designated Portfolio
at an annual rate equal to the amount set forth in the table above based on the
average daily value of the Shares held in the Accounts. Each Designated
Portfolio will be obligated to pay that portion of the fee designated by it as
representing administrative fees which it would otherwise pay if Variable
Contract Owners were direct shareholders of a Portfolio. The Company shall
compute the aggregate fee for each quarter ("Period") which shall be computed
separately for each Designated Portfolio as follows: a) the average daily net
asset value of Designated Portfolio assets held in the Account multiplied by the
Administrative Fee [or 12b-1 Fee], b) divided by 365 and c) multiplied by the
days in the Period. Payment of fees as compensation for any activity or service
provided pursuant to this agreement shall be paid quarterly in arrears and shall
not duplicate payments for the same activity or service under any other
agreement or plan applicable to a Designated Portfolio.
In consideration of distribution services provided by SDI, the Fund agrees to
pay SDI a fee with respect to a Designated Portfolio at an annual rate equal to
the amount set forth in the table above based on the average daily value of the
Shares held in the Accounts. Such payments will be calculated daily and paid
quarterly in arrears in accordance with the terms of a plan of distribution
under the Investment Company Act of 1940 ("12b-1 Plan").
Administrative and distribution fees shall be calculated separately for each
Designated Portfolio. For purposes of computing payments to the Company, the
average daily value of Shares will be based on the net asset value reported by
the Adviser or its designee to the Company. Company shall notify the Fund in
writing of the amounts due and payable hereunder, and shall provide such
documentation supporting its calculation as may be reasonably requested by the
Fund. Unless the Fund objects in writing, the Adviser
and the Fund shall pay such fees to Company within 30 days after receiving
notice from the Company of the amount due and payable.
The Adviser, or its designee, will pay any portion of the fees not paid by the
Designated Portfolios. In this regard, Company and SDI acknowledge that
Adviser's payments to Company and SDI may be funded in whole, or in part, by
payments received by Royce Fund Services, Inc. ("RFS") the distributor of the
Designated Portfolios, and a wholly-owned subsidiary of the Adviser, from a
Designated Portfolio under a 12b-1 Plan; if this is the case, Company and SDI
will provide such information to the Adviser as is reasonably necessary for RFS
to comply with its obligations under the 12b-1 Plan, including, but not limited
to, obligations to make disclosure to the board of trustees of the Designated
Portfolios.
