PARTICIPATION AGREEMENT
EXHIBIT 8(i)(i)
THIS AGREEMENT made as of the 13th day of June 1997 by and among ROYCE CAPITAL FUND
(the “Trust”), a Delaware business trust, ROYCE & ASSOCIATES, INC. (“Royce” or the “Adviser”), a
New York corporation and IL ANNUITY AND INSURANCE COMPANY (the “Company”), a life insurance company
organized under the laws of the State of Massachusetts.
WHEREAS, the Trust is registered with the Securities and Exchange Commission (“SEC”) under the
Investment Company Act of 1940, as amended (the “‘40 Act”), as an open-end, diversified management
investment company; and
WHEREAS, the Trust is organized as a series fund comprised of several Funds (“Funds”), and
those currently available are listed on Appendix A hereto as such Appendix may be amended from time
to time; and
WHEREAS, the Trust was organized to act as the funding vehicle for certain variable life
insurance and/or variable annuity contracts (“Variable Contracts”) offered by life insurance
companies through separate accounts (“Separate Accounts”) of such life insurance companies
(“Participating Insurance Companies”) and also offers its shares to certain qualified pension and
retirement plans (“Qualified Plans”); and
WHEREAS, the Trust has received an order from the SEC, granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the ‘40 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Funds of the Trust to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and Qualified Plans (“Exemptive Order”); and
WHEREAS, Royce is registered under the Investment Advisers Act of 1940, as amended, and serves
as investment adviser to the Trust; and
WHEREAS, the Company has established or will establish one or more separate accounts
(“Separate Accounts”) to offer Variable Contracts and is desirous of having the Trust as one of the
underlying funding vehicles for such Variable Contracts, as set forth in Appendix B hereto; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, the Company
intends to purchase shares of the Trust to fund the aforementioned Variable Contracts, and the
Trust is authorized to sell such shares to the Company at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company and the Trust agree as
follows:
Article I. SALE OF TRUST SHARES
1.1 The Trust agrees to make available to the Separate Accounts of the Company
shares of the selected Funds as listed on Appendix B as such Appendix may be amended from
time to time (“Available Funds”) for investment of purchase payments of Variable Contracts
allocated to the designated Separate Accounts as provided in the Trust’s Registration Statement.
1.2 The Trust agrees to sell to the Company those shares of the selected Funds of the Trust
which the Company orders, executing such orders on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the order for the shares of the Trust. For
purposes of this Section 1.2, the Company shall be the designee of the Trust for receipt of such
orders from the designated Separate Account and receipt by such designee shall constitute receipt
by the Trust; provided that the Company receives the order by 4:00 p.m. Eastern time and the Trust
receives notice from the Company by telephone or facsimile (or by such other means as the Trust and
the Company may agree in writing) of such order by 9:00 a.m. Eastern time on the next following
Business Day. “Business Day” shall mean any day on which the New York Stock Exchange is open for
trading and on which the Trust calculates its net asset value pursuant to the rules of the SEC.
1.3 The Trust agrees to redeem on the Company’s request, any full or fractional shares of the
Trust held by the Company, executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for redemption, in accordance
with the provisions of this Agreement and the Trust’s Registration Statement. For purposes of this
Section 1.3, the Company shall be the designee of the Trust for receipt of requests for redemption
from the designated Separate Account and receipt by such designee shall constitute receipt by the
Trust; provided that the Company receives the request for redemption by 4:00 p.m. Eastern time and
the Trust receives notice from the Company by telephone or facsimile (or by such other means as the
Trust and the Company may agree in writing) of such request for redemption by 9:00 a.m. Eastern
time on the next following Business Day. The Trust reserves the right to suspend the right of
redemption or postpone the date of payment or satisfaction upon redemption consistent with Section
22(e) of the `40 Act and any rules, regulations or orders thereunder, and in accordance with any
procedures and policies described in the current prospectus of the Fund(s).
1.4 The Trust shall furnish, on or before the ex-dividend date, notice to the Company of any
income dividends or capital gain distributions payable on the shares of any Fund of the Trust. The
Company hereby elects to receive all such income dividends and capital gain distributions as are
payable on a Fund’s shares in additional shares of the Fund. The Trust shall notify the Company or
its designee of the number of shares so issued as payment of such dividends and distributions.
1.5 The Trust shall make the net asset value per share for the selected Fund(s) available to
the Company on a daily basis as soon as reasonably practicable after the net asset value per share
is calculated but shall use its best efforts to make such net asset value available by 6:30 p.m.
Eastern time. If the Trust provides the Company with materially incorrect share net asset value
information through no fault of the Company, the Company on behalf of the Separate Accounts, shall
be entitled to an adjustment to the number of shares purchased or redeemed to reflect the correct
share net asset value, and the Trust shall reimburse the Company for any charges, costs, fees, or
other expenses incurred by the Company as a result of such incorrect information. Any material
error in the calculation of net asset value per share, dividend or capital gain information shall
be reported promptly upon discovery to the Company. Neither the Trust,
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the Funds, the Funds’ investment adviser, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information is based on
incorrect information furnished by the Company to the Trust or the Funds’ investment adviser.
1.6 At the end of each Business Day, the Company shall use the information described in
Section 1.5 to calculate Separate Account unit values for the day. Using these unit values, the
Company shall process each such Business Day’s Separate Account transactions based on requests and
premiums received by it by the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) to determine the net dollar amount of the Trust shares which
shall be purchased or redeemed at that day’s closing net asset value per share. The net purchase or
redemption orders so determined shall be transmitted to the Trust by the Company by 9:00 a.m.
Eastern time on the Business Day next following the Company’s receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If the Company’s order requests the net purchase of Trust shares, the Company shall pay
for such purchase by wiring federal funds to the Trust or its designated custodial account on the
day the order is transmitted by the Company. If payment in federal funds is not received or is
received by the Trust after 4:00 p.m. Eastern time on such day, the Company shall promptly, upon
request by the Trust, reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowings or overdrafts by, the Fund,
or any similar expenses incurred by the Fund, as a result of portfolio transactions effected by the
Fund based upon such purchase request. If the Company’s order requests a net redemption resulting
in a payment of redemption proceeds to the Company, the Trust shall use its best efforts to wire
the redemption proceeds to the Company by the next Business Day. In any event, proceeds shall be
wired to the Company within three Business Days or such longer period permitted by the ‘40 Act or
the rules, orders or regulations thereunder, and the Trust shall use its best efforts to notify the
person designated in writing by the Company as the recipient for such notice of such delay by 3:00
p.m. Eastern time the same Business Day that the Company transmits the redemption order to the
Trust. If the Company’s order requests the application of redemption proceeds from the redemption
of shares to the purchase of shares of another Fund set forth on Appendix B hereto, the Trust shall
so apply such proceeds the same Business Day that the Company transmits such orders to the Trust.
1.8 The Trust agrees that all shares of the Funds of the Trust will be sold only to
Participating Insurance Companies which have agreed to participate in the Trust to fund their
Separate Accounts and/or to Qualified Plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended (“Code”), and Treasury Regulation 1.817-5.
Shares of the Funds of the Trust will not be sold directly to the general public.
1.9 The Trust may refuse to sell shares of any Fund to any person, or suspend or terminate the
offering of the shares of any Fund if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Board of Trustees of the Trust (the
“Board”), acting in good faith and in light of its duties under federal and any applicable state
laws, deemed necessary, desirable or appropriate and in the best interests of the shareholders of
such Funds.
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1.10 Issuance and transfer of Fund shares will be by book entry only. Stock certificates will
not be issued to the Company or the Separate Accounts. Shares ordered from a Fund will be recorded
in appropriate book entry titles for the Separate Accounts.
1.11 The Company agrees and acknowledges that the Trust’s adviser, Royce & Associates, Inc.,
is the sole owner of the name and xxxx “Xxxxx” and that all use of any designation comprised in
whole or part of Royce (a “Xxxxx Xxxx”) under this Agreement shall inure to the benefit of Royce.
Except as provided in Sections 3.4 and 4.1, the Company shall not use any Xxxxx Xxxx on its own
behalf or on behalf of the Separate Accounts or Variable Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Separate Accounts or Variable
Contracts without the prior written consent of Royce. Upon termination of this Agreement for any
reason, the Company shall cease all use of any Xxxxx Xxxx as soon as reasonably practicable.
1.12 The Trust and the Adviser agree and acknowledge that the Company has applied for
trademark protection of the marks “Visionary,” “Visionary Variable Annuity” and “Visionary Choice
Variable Annuity” (collectively the “Visionary Marks) and that the Company believes it
will be granted exclusive rights to the Visionary Marks in the field of insurance underwriting. The
Trust and Adviser further agree and acknowledge that all use of any designation comprised in whole
or in part of the Visionary Marks under this Agreement shall inure to the benefit of the Company.
Except as provided in Sections 3.5 and 4.2, neither the Trust nor the Adviser shall use any
Visionary Marks on behalf of itself or any affiliate in any registration statement, advertisement,
sales literature or other materials without the prior written consent of the Company. Upon
termination of this Agreement for any reason, the Trust and the Adviser shall cease all use of any
Visionary Marks as soon as reasonably practicable.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that it is an insurance company duly organized and in
good standing under the laws of Massachusetts and that it has legally and validly established each
Separate Account as a segregated asset account under such laws.
2.2 The Company represents and warrants that it has registered or, prior to any issuance or
sale of the Variable Contracts, will register each Separate Account as a unit investment trust
(“UIT”) in accordance with the provisions of the ‘40 Act and cause each Separate Account to remain
so registered to serve as a segregated asset account for the Variable Contracts, unless an
exemption from registration is available.
2.3 The Company represents and warrants that the Variable Contracts will be registered under
the Securities Act of 1933 (the “‘33 Act”) unless an exemption from registration is available prior
to any issuance or sale of the Variable Contracts and that the Variable Contracts will be issued
and sold in compliance in all material respects with all applicable federal and state laws and
further that the sale of the Variable Contracts shall comply in all material respects with state
insurance law suitability requirements.
2.4 Subject to Section 2.6 hereof, the Company represents and warrants that the Variable
Contracts are currently and at the time of issuance will be treated as life insurance,
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endowment or annuity contracts under applicable provisions of the Code, that it will maintain
such treatment and that it will notify the Trust immediately upon having a reasonable basis for
believing that the Variable Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5 The Trust and the Adviser represent and warrant that the Fund shares offered and sold
pursuant to this Agreement will be registered under the ‘33 Act and sold in accordance with all
applicable federal and state laws, and the Trust shall be registered under the ‘40 Act prior to and
at the time of any issuance or sale of such shares. The Trust, subject to Section 1.9 above, shall
amend its registration statement under the ‘33 Act and the ‘40 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust shall arrange for the sale of its
shares in accordance with the laws of the various states only if and to the extent deemed advisable
by the Trust.
2.6 The Trust and the Adviser represent and warrant that each Fund will comply with the
diversification requirements set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5, and will notify the Company
immediately upon having a reasonable basis for believing any Fund has ceased to comply or might not
so comply and will immediately take all reasonable steps to adequately diversify the Fund to
achieve compliance.
2.7 The Trust and the Adviser represent and warrant that each Fund invested in by the Separate
Account intends to elect to be treated as a “regulated investment company” under Subchapter M of
the Code, and to qualify for such treatment for each taxable year and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so qualify or might not
so qualify in the future.
2.8 The Adviser represents and warrants that it is duly registered as an investment adviser
under the Investment Advisers Act of 1940, as amended.
Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 The Trust shall prepare and be responsible for filing with the SEC and any state
regulators requiring such filing all shareholder reports, notices, proxy materials (or similar
materials such as voting instruction solicitation materials), prospectuses and statements of
additional information of the Trust. The Trust shall bear the costs of registration of shares of
the Funds, preparation and filing of the documents listed in this Section 3.1 and all taxes and
filing fees to which an issuer is subject on the issuance and transfer of its shares.
3.2 At least annually, the Trust or its designee shall provide the Company, free of charge,
with as many copies of the current prospectus for the shares of the Available Funds as the Company
may reasonably request for distribution to existing Variable Contract owners whose Variable
Contracts are funded by such shares. The Trust or its designee shall provide the Company, at the
Company’s expense, with as many copies of the current prospectus for the shares of the Available
Funds as the Company may reasonably request for distribution to prospective purchasers of Variable
Contracts. If requested by the Company in lieu thereof, the Trust or its designee shall provide
such documentation (including a “camera ready” copy of the
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new prospectus as set in type or, at the request of the Company, as a diskette in the form
sent to the financial printer) and other assistance as is reasonably necessary in order for the
parties hereto once a year (or more frequently if the prospectus for the shares is supplemented or
amended) to have the prospectus for the Variable Contracts and the prospectus for the Available
Funds printed together in one document. The expenses of such printing will be apportioned between
(a) the Company and (b) the Available Funds in proportion to the number of pages of the Variable
Contract and Available Funds’ prospectus, taking account of other relevant factors
affecting the expense of printing, such as covers, columns, graphs and charts; the Available Funds
to bear the cost of printing the shares’ prospectus portion of such document for distribution only
to owners of existing Variable Contracts funded by the Available Funds and the Company to bear the
expense of printing the portion of such documents relating to the Separate Account; provided,
however, the Company shall bear all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Variable Contracts not funded by
the shares. In the event that the Company requests that the Trust or its designee provide the
Available Funds’ prospectus in a “camera ready” or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it is accustomed to formatting prospectuses and
shall bear the expense of providing the prospectus in such format (e.g., typesetting expenses), and
the Company shall bear the expense of adjusting or changing the format to conform with any of its
prospectuses.
3.3 The obligations of the Trust and the Company with respect to the Available Funds’ and
Variable Contracts’ prospectuses set forth in Section 3.2 shall apply in the same manner to the
Trust’s and Variable Contracts’ statements of additional information; provided that such statements
of additional information need only be duplicated unless the Trust and the Company agree that such
documents should be printed.
3.4 The Trust, at its expense, shall provide the Company with copies of its proxy statements,
reports to shareholders and other communications (except for prospectuses and statements of
additional information, which are covered in Section 3.2) to Variable contract owners in such
quantity as the Company shall reasonably require for distribution to existing Variable Contract
owners.
3.5 The Trust will provide the Company with at least one complete copy of all prospectuses,
statements of additional information, annual and semi-annual reports, proxy statements, exemptive
applications and all amendments or supplements to any of the above that relate to the Funds
promptly after the filing of each such document with the SEC or other regulatory authority. The
Company will provide the Trust with at least one complete copy of all prospectuses, statements of
additional information, annual and semi-annual reports, proxy statements, exemptive applications
and all amendments or supplements to any of the above that relate to a Separate Account promptly
after the filing of each such document with the SEC or other regulatory authority.
Article IV. SALES MATERIALS
4.1 The Company will furnish, or will cause to be furnished, to the Trust, each piece of sales
literature or other promotional material in which the Trust or its investment adviser is named, at
least fifteen (15) Business Days prior to its intended use. No such material will be used
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if the Trust objects to its use in writing within ten (10) Business Days after receipt of such
material.
4.2 The Trust will furnish, or will cause to be furnished, to the Company, each piece of sales
literature or other promotional material in which the Company or its Separate Accounts or the
Variable Contracts are named, at least fifteen (15) Business Days prior to its intended use. No
such material will be used if the Company objects to its use in writing within ten (10) Business
Days after receipt of such material.
4.3 The Trust and its affiliates and agents shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Separate Accounts or the
Variable Contracts issued by the Company, other than the information or representations contained
in a registration statement or prospectus for such Variable Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in reports of the
Separate Accounts or reports prepared for distribution to owners of such Variable Contracts, or in
sales literature or other promotional material approved by the Company or its designee, except with
the written permission of the Company.
4.4 The Company and its affiliates and agents shall not give any information or make any
representations on behalf of the Trust or the Adviser or concerning the Trust or the Adviser other
than the information or representations contained in a registration statement or prospectus for the
Trust, as such registration statement and prospectus may be amended or supplemented from time to
time, or in sales literature or other promotional material approved by the Trust or its designee,
except with the written permission of the Trust.
4.5 For purposes of this Agreement, the phrase “sales literature or other promotional
material” or words of similar import include, without limitation, advertisements (such as material
published, or designed for use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards, motion pictures, the internet
or other public media), sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts or reprints or excerpts of any other advertisement,
sales literature or published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder reports and proxy
materials and any other material constituting sales literature or advertising under National
Association of Securities Dealers, Inc. rules, the ‘40 Act or the ‘33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that the Trust has received an Exemptive Order from the SEC
granting relief from various provisions of the ‘40 Act and the rules thereunder to the extent
necessary to permit the Trust shares to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans. The Exemptive Order requires the Trust and each Participating Insurance
Company to comply with conditions and undertakings as provided in this Section 5. The Trust
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will not enter into a participation agreement with any other Participating Insurance Company
unless it imposes the same conditions and undertakings as are imposed on the Company hereby.
5.2 The Board will monitor the Trust for the existence of any irreconcilable material conflict
between and among the interests of Variable Contract owners of all separate accounts and of plan
participants of Qualified Plans investing in the Trust, and determine what action, if any, should
be taken in response to such conflicts. An irreconcilable material conflict may arise for a variety
of reasons, which may include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax or securities laws or regulations, or a public
ruling, private letter ruling or any similar action by insurance, tax or securities regulatory
authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of the Trust are being managed; (e) a difference in voting instructions
given by variable annuity and variable life insurance Contract owners; (f) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable Contract owners;
and (g) if applicable, a decision by a Qualified Plan to disregard the voting instructions of plan
participants.
5.3 The Company will report any potential or existing conflicts to the Board. The Company will
be responsible for assisting the Board in carrying out its duties in this regard by providing the
Board with all information reasonably necessary for the Board to consider any issues raised. The
responsibility includes, but is not limited to, an obligation by the Company to inform the Board
whenever it has determined to disregard Variable Contract owner voting instructions. These
responsibilities of the Company will be carried out with a view only to the interests of the
Variable Contract owners.
5.4 If a majority of the Board or majority of its disinterested trustees, determines that a
material irreconcilable conflict exists, affecting the Company, the Company, at its expense and to
the extent reasonably practicable (as determined by a majority of the Board’s disinterested
trustees), will take any steps necessary to remedy or eliminate the irreconcilable material
conflict, including: (a) withdrawing the assets allocable to some or all of the Separate Accounts
from the Trust or any Fund thereof and reinvesting those assets in a different investment medium,
which may include another Fund of the Trust, or another investment company; (b) submitting the
question as to whether such segregation should be implemented to a vote of all affected Variable
Contract owners and, as appropriate, segregating the assets of any appropriate group (i.e.,
variable annuity or variable life insurance Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected Variable Contract
owners the option of making such a change; and (c) establishing a new registered management
investment company or managed separate account. If an irreconcilable material conflict arises
because of the Company’s decision to disregard Variable Contract owner voting instructions, and
that decision represents a minority position or would preclude a majority vote, the Company may be
required, at the election of the Trust to withdraw the Separate Account’s investment in the Trust,
and no charge or penalty will be imposed as a result of such withdrawal. To the extent permitted by
applicable law, the Company shall bear the responsibility of taking remedial action in the event of
Board determination of the existence of a material irreconcilable conflict and the cost of such
remedial action and this responsibility shall be carried out with a view only to the interests of
the Variable Contract owners.
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For purposes of this Section 5.4, a majority of the disinterested members of the Board shall
determine whether or not any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Trust or its investment adviser (or any other investment adviser
of the Trust) be required to establish a new funding medium for any Variable Contract. Further, the
Company shall not be required by this Section 5.4 to establish a new funding medium for any
Variable Contracts if any offer to do so has been declined by a vote of a majority of Variable
Contract owners materially and adversely affected by the irreconcilable conflict.
5.5 The Board’s determination of the existence of an irreconcilable material conflict and its
implications shall be made known promptly and in writing to the Company.
5.6 No less than annually, the Company shall submit to the Board such reports, materials or
data as the Board may reasonably request so that the Board may fully carry out its obligations.
Such reports, materials and data shall be submitted more frequently if deemed appropriate by the
Board.
Article VI. VOTING
6.1 The Company will provide pass-through voting privileges to all Variable Contract owners so
long as the SEC continues to interpret the ‘40 Act as requiring pass-through voting privileges for
Variable Contract owners. Accordingly, the Company, where applicable, will vote shares of the Funds
held in its Separate Accounts in a manner consistent with voting instructions timely received from
its Variable Contract owners. However, the Company reserves the right to disregard the voting
instructions of the Variable Contract owners to the extent such action is permitted by Rule 6e-2 or
Rule 6e-3(T) of the x00 Xxx. The Company will be responsible for assuring that each of its Separate
Accounts that participates in the Trust calculates voting privileges in a manner consistent with
other Participating Insurance Companies. The Company will vote shares for which it has not received
timely voting instructions, as well as shares it owns, in the same proportion as its votes those
shares for which it has received voting instructions. The Trust will notify the Company of the
Trust’s intention to file proxy solicitation materials with the SEC prior to such filing.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule 6e-3 is adopted,
to provide exemptive relief from any provision of the ‘40 Act or the rules thereunder with respect
to mixed and shared funding on terms and conditions materially different from any exemptions
granted in the Exemptive Order, then the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule 6e-2 and Rule 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such Rules are applicable.
6.3 The Trust will comply with all provisions of the `40 Act requiring voting by shareholders,
and in particular the Trust will either provide for annual meetings or comply with Section 16(c) of
the `40 Act (although the Trust is not one of the trusts described in Section 16(c) of that Act) as
well as Sections 16(a) and, if and when applicable, 16(b). Further, the Trust will act in
accordance with the SEC’s interpretation of the requirements of Section 16(a) with respect
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to periodic elections of trustees and with whatever rule the SEC may promulgate with respect
thereto.
Article VII. INDEMNIFICATION
7.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless
the Trust, and each of its Trustees, principals, officers, employees, agents and affiliates,
including the Adviser (collectively, the “Indemnified Parties” for purposes of this Article VII)
against any and all losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company, which consent shall not be unreasonably withheld) or litigation
(including legal and other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements are related to the sale or
acquisition of the Trust’s shares or the Variable Contracts and:
(a) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a registration statement or prospectus for the Variable Contracts or contained in the Variable Contracts or in sales literature generated or approved by the Company on behalf of the Variable Contracts or Separate Accounts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company by or on behalf of the Trust for use in the registration statement or prospectus for the Variable Contracts or in the Variable Contracts or sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or the Trust shares; or | ||
(b) | arise out of or as a result of any statement or representation (other than statements or representations contained in the registration statement, prospectus or sales literature of the Trust not supplied by the Company, or persons under its control) or wrongful conduct of the Company or persons under its control, with respect to the sale or distribution of the Variable Contracts or the Trust shares; or | ||
(c) | arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus or sales literature of the Trust or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company; or | ||
(d) | arise as a result of any failure by the Company to provide substantially the services and furnish the materials under the terms of this Agreement; or |
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(e) | arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company. |
7.2 The Company shall not be liable under this indemnification provision with respect to any
losses, claims, damages, liabilities or litigation incurred or assessed against an Indemnified
Party as such may arise from such Indemnified Party’s willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party’s duties or by reason of such Indemnified
Party’s reckless disregard of obligations or duties under this Agreement.
7.3 The Company shall not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have notified the
Company in writing within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any designated agent), but
failure to notify the Company of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought against an
Indemnified Party, the Company shall be entitled to participate at its own expense in the defense
of such action. The Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to such party of the
Company’s election to assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs of investigation.
7.4 Indemnification by the Trust. The Trust agrees to indemnify and hold harmless the
Company and each of its directors, officers, employees, and agents and each person, if any, who
controls the Company within the meaning of Section 15 of the ‘33 Act (collectively, the
“Indemnified Parties” for the purposes of this Article VII) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written consent of the Trust,
which consent shall not be unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or acquisition of the Trust’s
shares or the Variable Contracts and:
(a) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Trust (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Trust by or on behalf of the Company for use in the |
11
registration statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or the Trust shares; or | |||
(b) | arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by the Trust or persons under its control) or wrongful conduct of the Trust or persons under its control, with respect to the sale or distribution of the Variable Contracts or the Trust shares; or | ||
(c) | arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus, or sales literature covering the Variable Contracts, or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company for inclusion therein by or on behalf of the Trust; or | ||
(d) | arise as a result of (i) a failure by the Trust to provide substantially the services and furnish the materials under the terms of this Agreement; or (ii) a failure by a Fund(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code; or (iii) a failure by a Fund(s) invested in by the Separate Account to qualify as a “regulated investment company” under Subchapter M of the Code; or | ||
(e) | arise out of or result from any material breach of any representation and/or warranty made by the Trust in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust. |
7.5 The Trust shall not be liable under this indemnification provision with respect to any
losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s
reckless disregard of obligations and duties under this Agreement.
7.6 The Trust shall not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have notified the Trust
in writing within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any designated agent), but
failure to notify the Trust of any such claim shall not relieve the Trust from any liability which
it may have to the Indemnified Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is brought against the Indemnified
Parties, the Trust shall be entitled to participate at its own expense in the defense thereof. The
Trust also shall be entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Trust to such party of the
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election by the Trust to assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs of investigation.
7.7 Indemnification by the Adviser. The Adviser agrees to indemnify and hold harmless
the Company and each of its directors, officers, employees, and agents and each person, if any, who
controls the Company within the meaning of Section 15 of the `33 Act (collectively, the
“Indemnified Parties” for the purposes of this Article VII) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written consent of the Adviser,
which consent shall not be unreasonably withheld) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or acquisition of the Trust’s
shares or the Variable Contracts and:
(a) | arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement or prospectus or sales literature of the Trust (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that this Agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Trust or Adviser by or on behalf of the Company for use in the registration statement or prospectus for the Trust or in sales literature (or any amendment or supplement) or otherwise for use in connection with the sale of the Variable Contracts or the Trust shares; or | ||
(b) | arise out of or as a result of statements or representations (other than statements or representations contained in the registration statement, prospectus or sales literature for the Variable Contracts not supplied by the Trust or Adviser or persons under their control) or wrongful conduct of the Trust or the Adviser or persons under their control, with respect to the sale or distribution of the Variable Contracts or the Trust shares; or | ||
(c) | arise out of any untrue statement or alleged untrue statement of a material fact contained in a registration statement, prospectus or sales literature covering the Variable Contracts, or any amendment thereof or supplement thereto or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to the Company for inclusion therein by or on behalf of the Trust; or |
13
(d) | arise as a result of (i) a failure by the Trust or the Adviser to provide substantially the services and furnish the materials under the terms of this Agreement, or (ii) a failure by a Fund(s) invested in by the Separate Account to comply with the diversification requirements of Section 817(h) of the Code; or (iii) a failure by a Fund(s) invested in by the Separate Account to qualify as a “regulated investment company” under Subchapter M of the Code; or | ||
(e) | arise out of or result from any material breach of any representation and/or warranty made by the Trust or the Adviser in this Agreement or arise out of or result from any other material breach of this Agreement by the Trust or the Adviser. |
7.8 The Adviser shall not be liable under this indemnification provision with respect to any
losses, claims, damages, liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party’s willful misfeasance, bad faith, or gross negligence
in the performance of such Indemnified Party’s duties or by reason of such Indemnified Party’s
reckless disregard of obligations and duties under this Agreement.
7.9 The Adviser shall not be liable under this indemnification provision with respect to any
claim made against an Indemnified Party unless such Indemnified Party shall have notified the
Adviser in writing within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any designated agent), but
failure to notify the Adviser of any such claim shall not relieve the Adviser from any liability
which it may have to the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought against the
Indemnified Parties, the Adviser shall be entitled to participate at its own expense in the defense
thereof. The Adviser also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Adviser to such party of the
election by the Adviser to assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Adviser will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs of investigation.
7.10 It is understood that these indemnities shall have no effect on any other agreement or
arrangement between the Trust and/or its series and the Adviser.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall continue in force until
terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following provisions:
(a) | At the option of the Company or the Trust at any time from the date hereof upon 180 days’ notice, unless a shorter time is agreed to by the parties; |
14
(b) | At the option of the Company, if the Trust shares are not reasonably available to meet the requirements of the Variable Contracts as determined by the Company. Prompt notice of election to terminate shall be furnished by the Company, said termination to be effective ten days after receipt of notice unless the Trust makes available a sufficient number of shares to reasonably meet the requirements of the Variable Contracts within said ten-day period; | ||
(c) | At the option of the Company, upon the institution of formal proceedings against the Trust by the SEC, the National Association of Securities Dealers, Inc. or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in the Company’s reasonable judgment, materially impair the Trust’s ability to meet and perform the Trust’s obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by the Company, with said termination to be effective upon receipt of notice; | ||
(d) | At the option of the Adviser or the Trust, upon the institution of formal proceedings against the Company by the SEC, the National Association of Securities Dealers, Inc. or any other regulatory body, the expected or anticipated ruling, judgment or outcome of which would, in the Adviser or the Trust’s reasonable judgment, materially impair the Company’s ability to meet and perform its obligations and duties hereunder. Prompt notice of election to terminate shall be furnished by the Adviser or the Trust, with said termination to be effective upon receipt of notice; | ||
(e) | In the event the Trust’s shares are not registered, issued or sold in accordance with applicable state or federal law, or such law precludes the use of such shares as the underlying investment medium of Variable Contracts issued or to be issued by the Company. Termination shall be effective upon such occurrence without notice; | ||
(f) | At the option of the Adviser or the Trust, if the Variable Contracts cease to qualify as annuity contracts or life insurance contracts, as applicable, under the Code, or if the Trust reasonably believes that the Variable Contracts may fail to so qualify. Termination shall be effective upon receipt of notice by the Company; | ||
(g) | At the option of the Company, upon the Trust’s breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of the Company within ten days after written notice of such breach is delivered to the Trust; | ||
(h) | At the option of the Adviser or the Trust, upon the Company’s breach of any material provision of this Agreement, which breach has not been cured to the satisfaction of the Adviser or the Trust within ten days after written notice of such breach is delivered to the Company; |
15
(i) | At the option of the Adviser or the Trust, if the Variable Contracts are not registered, issued or sold in accordance with applicable federal and/or state law. Termination shall be effective immediately upon such occurrence without notice; | ||
(j) | In the event this Agreement is assigned without the prior written consent of the Company and the Trust, termination shall be effective immediately upon such occurrence without notice. This Agreement may be assigned by the Adviser only after prior written notice to the Company |
8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2 hereof, the
Trust at the option of the Company will continue to make available additional Trust shares, as
provided below, pursuant to the terms and conditions of this Agreement, for all Variable Contracts
in effect on the effective date of termination of this Agreement (hereinafter referred to as
“Existing Contracts”). Specifically, without limitation, the owners of the Existing Contracts or
the Company, whichever shall have legal authority to do so, shall be permitted to reallocate
investments in the Trust, redeem investments in the Trust and/or invest in the Trust upon the
payment of additional premiums under the Existing Contracts.
8.4 Notwithstanding any termination of this Agreement pursuant to Section 8.2 hereof, all
rights and obligations arising under Article VII of this Agreement shall survive.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return receipt requested
to the other party at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Trust or the Adviser:
Royce Capital Fund or Royce & Associates, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to the Company:
IL Annuity and Insurance Co.
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx XxXxxxxx, Esq.
0000 X. Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx XxXxxxxx, Esq.
Notice shall be deemed given on the date of receipt by the addressees, as evidenced by the
return receipt.
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Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of reference only and in no
way define or delineate any of the provisions hereof or otherwise affect their construction or
effect.
10.2 This Agreement may be executed simultaneously in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof interpreted under and in
accordance with the laws of the State of New York. It shall also be subject to the provisions of
the federal securities laws and the rules and regulations thereunder and to any orders of the SEC
granting exemptive relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the shareholders of shares of any
Fund nor the Trustees or officers of the Trust or any Fund shall be personally liable hereunder. No
Fund shall be liable for the liabilities of any other Fund. All persons dealing with the Trust or a
Fund must look solely to the property of the Trust or that Fund, respectively, for enforcement of
any claims against the Trust or that Fund. It is also understood that each of the Funds shall be
deemed to be entering into a separate Agreement with the Company, so that it is as if each of the
Funds had signed a separate Agreement with the Company and that a single document is being signed
simply to facilitate the execution and administration of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate governmental
authorities (including without limitation the SEC, the National Association of Securities Dealers,
Inc. and state insurance regulators) and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are cumulative and are
in addition to any and all rights, remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
10.8 No provision of this Agreement may be amended or modified in any manner except by a
written agreement properly authorized and executed by the Trust and the Company.
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IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this
Fund Participation Agreement as of the date and year first above written.
ROYCE CAPITAL FUND | ||||||
By: Name: |
/s/ Xxxxxxx X. Xxxxx
|
|||||
Title: | President | |||||
ROYCE & ASSOCIATES, INC. | ||||||
By: Name: |
/s/ Xxxxxxx X. Xxxxx
|
|||||
Title: | President | |||||
IL ANNUITY AND INSURANCE COMPANY | ||||||
By: Name: |
/s/ Xxxxxxx X. Xxxxxx
|
|||||
Title: | President |
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APPENDIX A
The Trust and its Funds
Royce Capital Fund:
Royce Premier Portfolio
Royce Total Return Portfolio
Royce Micro-Cap Portfolio
Royce Total Return Portfolio
Royce Micro-Cap Portfolio
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APPENDIX B
Separate Accounts | Selected Funds | |
IL Annuity and Insurance Company
|
Royce Micro-Cap Portfolio | |
Separate Account I |
20