FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the 1st day of September, 1999, by
and among American Enterprise Life Insurance Company ("Insurer"), a life
insurance company organized under the laws of the State of Indiana, American
Express Financial Advisors Inc. a Delaware corporation ("Contract Distributor"),
LAZARD ASSET MANAGEMENT ("XXX"), a division of Lazard Freres & Co. LLC, a New
York limited liability company ("LF & Co."), and LAZARD RETIREMENT SERIES, INC.
("Fund"), a Maryland corporation (collectively, the "Parties").
ARTICLE 1.
DEFINITIONS
The following terms used in this Agreement shall have the meanings set
out below:
1.1. "Act" shall mean the Investment Company Act of 1940, as amended.
1.2. "Board" shall mean the Fund's Board of Directors having the
responsibility for management and control of Fund.
1.3. "Business Day" shall mean any day for which Fund calculates net
asset value per share as described in a Portfolio Prospectus.
1.4. "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5. "Commission" shall mean the Securities and Exchange Commission.
1.6. "Contract" shall mean a variable annuity or variable life insurance
contract that uses a Portfolio or Fund as an underlying investment
medium and that is named on Schedule I hereto, as the Parties may
amend in writing from time to time by mutual agreement ("Schedule
1").
1.7. "Contract Prospectus" shall mean the prospectus and, if applicable,
statement of additional information, as currently in effect with the
Commission, with respect to the Contracts, including any supplements
or amendments thereto. All references to "Contract Prospectuses"
shall be deemed to also include all offering documents and other
materials relating to any Contract that is not registered under the
Securities Act of 1933, as amended ("1933 Act").
1.8. "Contractholder" shall mean any person that is a party to a Contract
with a Participating Company. Individuals who participate under a
group Contract are "Participants."
1.9. "Disinterested Board Members" shall mean those members of the
Board that are not deemed to be "interested persons" of Fund, as
defined by the Act.
1.10. "General Account" shall mean the general account of Insurer.
1.11 "Participating Company" shall mean any insurance company, including
Insurer, that offers variable annuity and/or variable life insurance
contracts to the public and that has entered into an agreement with
Fund for the purpose of making Fund shares available to serve as the
underlying investment medium for Contracts.
1.12 "Portfolio" shall mean each series of Fund named on Schedule 1
1.13. "Portfolio Prospectus" shall mean the prospectus and statement of
additional information, as currently in effect with the Commission,
with respect to the Portfolios, including any supplements or
amendments thereto.
1.14. "Separate Account" shall mean a separate account duly established by
Insurer in accordance with the laws of the State of Indiana and named
on Schedule 1.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1. Insurer represents and warrants that:
(a) it is an insurance company duly organized and in good standing
under Indiana law;
(b) it has legally and validly established and shall maintain each
Separate Account pursuant to the insurance laws and
regulations of the State of Indiana;
(c) it has registered or shall register and shall maintain the
registration of each Separate Account as a unit investment
trust under the Act, to the extent required by the Act, to
serve as a segregated investment account for the Contracts;
(d) each Separate Account is and at all times shall be eligible to
invest in shares of Fund without such investment disqualifying
Fund as an investment medium for insurance company separate
accounts supporting variable annuity contracts and/or variable
life insurance contracts;
(e) each Separate Account is and at all times shall be a
"segregated asset account," and interests in each Separate
Account that are offered to the public shall be issued
exclusively through the purchase of a Contract that is and at
all times shall be a "variable contract" within the meaning of
such terms under Section 817 of the Code and the regulations
thereunder. Insurer agrees to notify Fund and XXX immediately
upon having a reasonable basis for believing that such
requirements have ceased to be met or that they might not be
met in the future;
(f) the Contracts are intended to be treated as life insurance
endowment or annuity contracts under applicable provisions of
the Code, and it shall make every effort to maintain such
treatment and shall notify Fund immediately upon having a
reasonable basis for believing that the Contracts have ceased
to be so treated or that they might not be so treated in the
future; and
(g) all of its employees and agents who deal with the money and/or
securities of Fund are and at all times shall be covered by a
blanket fidelity bond or similar coverage in an amount not less
than the coverage required to be maintained by Rule l7g-1 of
the 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.
2.2. Insurer and Distributor represent and warrant that (a) units of interest in
each Separate Account available through the purchase of Contracts are or
shall be registered under the 1933 Act, to the extent required thereby; (b)
the Contracts shall be issued and sold in compliance in all material
respects with all applicable federal and state laws; and (c) the sale of
the Contracts shall comply in all material respects with applicable state
insurance law requirements. Insurer agrees to inform Fund promptly of any
investment restrictions imposed by state insurance law and applicable to
Fund of which it becomes aware.
2.3. Distributor represents and warrants that it is and at all times shall
be: (a) registered with the Commission as a broker-dealer, (b) a
member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"); and (c) a Delaware corporation duly
organized, validly existing, and in good standing under the laws of
the State of Delaware, with full power, authority, and legal right to
execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
2.4. Fund represents and warrants that:
(a) it is and shall remain registered with the Commission as an
open-end, management investment company under the Act to the
extent required thereby;
(b) its shares are registered under the 1933 Act to the
extent required thereby;
(c) it possesses, and shall maintain, all legal and regulatory
licenses, approvals, consents and/or exemptions required for
it to operate and offer its shares as an underlying
investment medium for the Contracts;
(d) each Portfolio is qualified as a regulated investment
company under Subchapter M of the Code, it shall make every
effort to maintain such qualification, and it shall notify
Insurer immediately upon having a reasonable basis for
believing that any Portfolio invested in by the Separate
Account has ceased to so qualify or that it might not so
qualify in the future;
(e) each Portfolio's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h)
of the Code and the regulations thereunder, to the extent
applicable. In the event of a breach of this representation
and warranty by Fund, it will take all reasonable steps to
(i) notify Insurer of such breach; and (ii) adequately
diversify Fund so as to achieve compliance within the grace
period afforded by Treasury Regulation 1.817-5. ; and
(f) all of its directors, officers, employees, investment
advisers, and other individuals/entities who deal with the
money and/or securities of Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar
coverage for the benefit of Fund in an amount not less than
that required by Rule 17g-1 under the Act. The aforesaid
bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company and
(g) its investment objectives, policies and restrictions comply
with applicable state securities laws as they may apply to
Fund and it will register and qualify the shares of the
Portfolios for sale in accordance with the laws of the various
states to the extent deemed advisable by Fund. Fund makes no
representation as to whether any aspect of its operations
(including, but not limited to, fees and expenses and
investment policies, objectives and restrictions) complies
with the insurance laws and regulations of any state. Fund and
XXX agree that they will furnish the information reasonably
required by state insurance laws so that the Insurer can
obtain the authority needed to issue the Contracts in the
various states.
2.5. XXX represents and warrants that LF & Co., the principal underwriter of
each Portfolio's shares, that it is and at all times shall be: (a)
registered with the Commission as a broker-dealer, (b) a member in good
standing of the NASD; and (c) a New York limited liability company duly
organized, validly existing, and in good standing under the laws of the
State of New York, with full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement. XXX further represents and warrants that it shall sell the
shares of the Portfolios to Insurer in compliance in all material respects
with all applicable federal and state securities laws.
ARTICLE lll.
FUND SHARES
3.1. Fund agrees to make the shares of each Portfolio available for
purchase by Insurer and each Separate Account at net asset value and
without sales charge, subject to the terms and conditions of this
Agreement. Fund may refuse to sell the shares of any Portfolio to
any person, or suspend or terminate the offering of the shares of
any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the
Board, acting in good faith and in light of its fiduciary duties
under federal and any applicable state laws, necessary and in the
best interests of the shareholders of such Portfolio.
3.2. Fund agrees that it shall sell shares of the Portfolios. only to
persons eligible to invest in the Portfolios in accordance with
Section 817(h) of the Code and the regulations thereunder, to the
extent such Section and regulations are applicable.
3.3. Except as noted in this Article III, Fund and Insurer agree that
orders and related payments to purchase and redeem Portfolio shares
shall be processed in the manner set out in Schedule 2 hereto, as the
Parties may amend in writing from time to time by mutual agreement.
3.4. Fund shall confirm in writing each purchase or redemption order made
by Insurer. Transfer of Portfolio shares shall be by book entry only.
No share certificates shall be issued to Insurer. Shares ordered from
Fund shall be recorded in an appropriate title for Insurer, on behalf
of each Separate or General Account.
3.5. Fund shall promptly notify Insurer (on the same day by wire or
telephone, followed by written confirmation) of the amount of
dividend and capital gain, if any, per share of each Portfolio to
which Insurer is entitled. Insurer hereby elects to reinvest all
dividends and capital gains of any Portfolio in additional shares of
that Portfolio at the applicable net asset value, until Insurer
otherwise notifies Fund in writing. Insurer reserves the right to
revoke this election and to receive all such income dividends and
capital gain distributions in cash.
ARTICLE IV.
STATEMENTS AND REPORTS
4.1. Fund shall provide Insurer with monthly statements of account by the
fifteenth (15th) Business Day of the following month.
4.2. At least annually, Fund or its designee shall provide Insurer, free of
charge, with as many Portfolio Prospectuses as Insurer may reasonably
request for distribution by Insurer to existing Contractholders and
Participants that have invested in that Portfolio. Fund or its designee
shall provide Insurer, at Insurer's expense, with as many Portfolio
Prospectuses as Insurer may reasonably request for distribution by Insurer
to prospective purchasers of Contracts. If requested by Insurer in lieu
thereof, Fund or its designee shall provide such documentation (including a
"camera ready" copy of each Portfolio Prospectus as set in type or, at the
request of Insurer, as a diskette in the form sent to the financial printer
or other medium agreed to by the parties) and other assistance as is
reasonably necessary in order for the Parties once a year (or more
frequently if the Portfolio Prospectuses are supplemented or amended) to
have the Portfolio Prospectuses printed.
4.3. Fund shall provide Insurer with copies of each Portfolio's notices,
periodic reports and other printed materials (which the Portfolio
customarily provides to its shareholders) in quantities as Insurer may
reasonably request for distribution by Insurer to each Contractholder
and Participant that has invested in that Portfolio. Fund, at its
expense, either shall
(a) distribute its proxy materials directly to the appropriate
Contract owners, or
(b) provide Insurer or its mailing agent with copies of its proxy
materials in such quantity as Insurer will reasonably require
and Insurer will distribute the materials to existing Contract
owners and will xxxx Fund for the reasonable cost of such
distribution. Fund will bear the cost of tabulation of proxy
votes.
4.4. Fund shall provide to Insurer at least one complete copy of all
registration statements, Portfolio Prospectuses, 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 Fund or its shares,
contemporaneously with the filing of such document with the Commission
or other regulatory authorities.
4.5. Insurer shall provide to Fund at least one copy of all registration
statements, Contract Prospectuses, 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 Contracts or a Separate Account,
contemporaneously with the filing of such document with the
Commission or the NASD.
ARTICLE V.
EXPENSES
5.1. Except as otherwise specifically provided herein, each Party will
bear all expenses incident to its performance under this Agreement.
ARTICLE VI.
EXEMPTIVE RELIEF
6.1. Insurer acknowledges that it has reviewed a copy of Fund's mixed and shared
funding exemptive order ("Order") and, in particular, has reviewed the
conditions to the relief set forth in the related notice ("Notice"). As
required by the conditions set forth in the Notice, Insurer shall report
any potential or existing conflicts of which it is aware promptly to the
Board. In addition, Insurer shall be responsible for assisting the Board in
carrying out its responsibilities under the Order by providing the Board
with all information reasonably necessary for the Board to consider any
issues raised, including, without limitation, information whenever Contract
voting instructions are
disregarded. Insurer, at least annually, shall submit to the Board such
reports, materials, or data as the Board may reasonably request so that
the Board may carry out fully the obligations imposed upon it by the
Order. Insurer agrees to carry out such responsibilities with a view to
the interests of existing Contractholders.
6.2. If a majority of the Board, or a majority of Disinterested Board Members,
determines that a material irreconcilable conflict exists with regard to
Contractholder investments in Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that Insurer is a
Participating Insurance Company for whom the conflict is relevant, Insurer
shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include, but
shall not be limited to:
(a) Withdrawing the assets allocable to some or all Separate
Accounts from Fund or any Portfolio and reinvesting such
assets in a different investment medium, or submitting the
question of whether such segregation should be implemented to
a vote of all affected Contractholders and, as appropriate,
segregating the assets of any appropriate group (i.e.
variable annuity or variable life insurance contract owners)
that votes in favor of such segregation; and/or
(b) Establishing a new registered management investment company
or managed separate account.
6.3. If a material irreconcilable conflict arises as a result of a decision by
Insurer to disregard Contractholder voting instructions and that decision
represents a minority position or would preclude a majority vote by all
Contractholders having an interest in Fund, Insurer may be required, at the
Board's election, to withdraw the investments of its Separate Accounts in
Fund provided, however, that such withdrawal shall be limited to the extent
required by the foregoing irreconcilable material conflict as determined by
a majority of the disinterested directors of the Board. No charge or
penalty shall be imposed as a result of such withdrawal.
6.4. For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether any proposed action adequately remedies any
material irreconcilable conflict. In no event shall Fund or XXX or any
other investment adviser of Fund be required to bear the expense of
establishing a new funding medium for any Contract. Insurer shall not be
required by this Article to establish a new funding medium for any Contract
if an offer to do so has been declined by vote of a majority of the
Contractholders materially and adversely affected by the material
irreconcilable conflict.
6.5. No action by Insurer taken or omitted, and no action by the Separate
Account or Fund taken or omitted as a result of any act or failure to act
by Insurer pursuant to this Article VI shall relieve Insurer of its
obligations under or otherwise affect the operation of Article V.
ARTICLE V11.
VOTING OF FUND SHARES
7.1. Insurer shall provide pass-through voting privileges to all Contractholders
or Participants as long as and to the extent that the Commission continues
to interpret the Act as requiring pass-through voting privileges for
Contractholders or Participants. Accordingly, Insurer, where applicable,
shall vote shares of a Portfolio held in each Separate Account in a manner
consistent with voting instructions timely received from its
Contractholders or Participants. Insurer shall be responsible for assuring
that the Separate Account calculates voting privileges in a manner
consistent with other Participating Companies. Insurer shall vote shares
for which it has not received timely voting instructions, as well as shares
it owns, in the same proportion as it votes those shares for which it has
received voting instructions.
7.2. If and to the extent Rule 6e-2 and Rule 6e-3(T) under the Act are amended,
or if Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules thereunder with respect to mixed and shared funding
on terms and conditions materially different from any exemptions granted in
the Order, then Fund, and/or the Participating 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.
ARTICLE VIII.
MARKETING
8.1. Fund or LF & Co. shall periodically furnish Insurer with Portfolio
Prospectuses and sales literature or other promotional materials for each
Portfolio, in quantities as Insurer may reasonably request for distribution
to prospective purchasers of Contract. Expenses for the printing and
distribution of such documents shall be borne by Insurer.
8.2. Insurer shall designate certain persons or entities that shall have the
requisite licenses to solicit applications for the sale of Contracts.
Insurer shall make reasonable efforts to market the Contracts and shall
comply with all applicable federal and state laws in connection therewith.
8.3. Insurer shall furnish, or shall cause to be furnished, to Fund, each piece
of sales literature or other promotional material in which Fund, XXX, XX &
Co., Fund's administrator is named, at least fifteen (15) Business Days
prior to its use. No such material shall be used unless Fund or its
designee approves such material. Such approval (if given) or any
disapproval must be in writing. Fund shall use all reasonable efforts to
respond within ten (10) days of receipt of such material.
8.4. Insurer shall not give any information or make any representations or
statements on behalf of Fund, XXX, XX & Co., or concerning Fund or any
Portfolio in connection with the sale of the Contracts other than the
information or representations contained in the registration statement or a
Portfolio Prospectus, as the same may be amended or supplemented from time
to time, or in reports or proxy statements for each Portfolio, or in sales
literature or other promotional material approved by Fund. Nothing in this
Section 8.4 shall be construed as preventing Insurer or its employees or
agents from giving advice on investment in the Fund.
8.5. Fund shall furnish, or shall cause to be furnished, to Insurer, each piece
of the Fund's sales literature or other promotional material in which
Insurer or a Separate Account is named, at least fifteen (15) Business Days
prior to its use. No such material shall be used unless Insurer approves
such material. Such approval (if given) or any disapproval - must be in
writing. Insurer shall use all reasonable efforts to respond within ten
days of receipt of such material.
8.6. Fund shall not, in connection with the sale of Portfolio shares, give any
information or make any representations or statements on behalf of Insurer
or concerning Insurer, a Separate Account, or the Contracts other than the
information or representations contained in a registration statement for
the Contracts or the Contract Prospectus, as the same may be amended or
supplemented from time to time, or in published reports for each Separate
Account that are in the public domain or approved by Insurer for
distribution to Contractholders or Participants, or in sales literature or
other promotional material approved by Insurer.
8.7. 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 or other public media, e.g. on-line networks such as the Internet
or other electronic messages), 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, prospectuses, statements of
additional information, shareholder reports and proxy materials, and any
other material constituting sales literature or advertising under the rules
of the National Association of Securities Dealers, Inc. ("NASD"), the Act
or the 0000 Xxx.
8.8 Fund and XXX hereby consent to Insurer's use of the name Lazard or its logo
in connection with marketing the Contracts, subject to the terms of
Sections 8.3 and 8.4 of this Agreement. Such consent shall terminate with
the termination of this Agreement.
ARTICLE IX.
INDEMNIFICATION
9.1. Insurer and Distributor each agree to indemnify and hold harmless Fund,
XXX, any sub-investment adviser of a Portfolio, and their affiliates, and
each person, if any, who controls or is associated with any of the
foregoing entities or persons within the meaning of the 1933 Act each of
their respective directors, trustees, general members, officers, employees,
agents and (collectively, the "Indemnified Parties" for purposes of this
Section), against any and all losses, claims, damages or liabilities joint
or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted) (collectively,
"Losses") for which the Indemnified Parties may become subject, under the
1933 Act or otherwise, insofar as such Losses (or actions in respect to
thereof):
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact (collectively
"materially untrue statement") contained in any registration
statement, Contract Prospectus, Contract, or sales literature
or other promotional material relating to a Separate Account
or the Contracts (collectively, "Account documents"), 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
(collectively "material omission");
(b) arise out of or are based upon any materially untrue statement
or material omission made in any registration statement,
Portfolio Prospectus, or sales literature or other promotional
material relating to Fund or a Portfolio (collectively,
"Portfolio documents"), provided such statement or omission
was made in reliance upon and in conformity with information
provided in writing to Fund by or on behalf of Insurer
specifically for use therein;
(c) arise out of or as a result of statements or representations
(other than statements or representations contained in any
Portfolio document on which Insurer or Distributor have
reasonably relied) or wrongful conduct of Insurer,
Distributor, their respective agents, and persons under their
respective control, with respect to the sale and distribution
of Contracts or Portfolio shares;
(d) arise out of any material breach of any representation and/or
warranty made by Insurer or Distributor in this Agreement, or
arise out of or result from any other material breach of this
Agreement by Insurer or Distributor; or
(e) arise out of Insurer's incorrect calculation and/or untimely
reporting of net purchase or redemption orders.
Insurer and Distributor shall reimburse any Indemnified Party in
connection with investigating or defending any Loss (or actions in
respect to thereof); provided, however, that with respect to clause
(a) above neither Insurer nor Distributor shall be liable in any such
case to the extent that any Loss arises out of or is based upon any
materially untrue statement or material omission made in any Account
documents, which statement or omission was made in reliance upon and
in conformity with written information furnished to Insurer by or on
behalf of Fund specifically for use therein. This indemnity agreement
shall be in addition to any liability that Insurer or Distributor may
otherwise have. In no event shall Insurer be liable for any
consequential, incidental, special or indirect damages resulting to
Fund or XXX hereunder.
9.2. Fund and XXX each agree to indemnify and hold harmless Insurer and
Distributor and each person, if any, who controls Insurer or
Distributor within the meaning of the 1933 Act and each of their
respective directors, trustees, officers, partners, employees, or
agents (collectively, "Indemnified Parties" for purposes of this
Section) and against any Losses to which they or any Indemnified
Party may become subject, under the 1933 Act or otherwise, insofar as
such Losses (or actions in respect thereof):
(a) arise out of or are based upon any materially untrue statement or
any material omission made in any Portfolio document;
(b) arise out of or are based upon any materially untrue statement or
any material omission made in any Account document provided such
statement or omission was made in reliance upon and in conformity
with information provided in writing to Insurer by or on behalf
of Fund specifically for use therein;
(c) arise out of or as a result of statements or representations
(other than statements or representations contained in any
Account document on which Fund or XXX have reasonably relied) or
wrongful conduct of Fund, XXX, their respective agents, and
persons under their respective control, with respect to the sale
of Portfolio Shares; or
(d) arise out of any material breach of any representation and/or
warranty made by Fund or XXX in this Agreement, or arise out of
or result from any other material breach of this Agreement by
Fund or XXX.
Fund and XXX shall reimburse any legal or other expenses reasonably
incurred by any Indemnified Party in connection with investigating or
defending any such Loss; provided, however, that with respect to
clause (a) above neither Fund nor XXX shall be liable in any such
case to the extent that any such Loss arises out of or is based upon
a materially untrue statement or material omission made in any
Portfolio document, which statement or omission was made in reliance
upon and in conformity with written information furnished to Fund by
or on behalf of Insurer specifically for use therein. This indemnity
agreement shall be in addition to any liability that Fund or XXX may
otherwise have. In no event will either Fund or XXX be liable for any
consequential, special or indirect damages resulting to Insurer.
9.3. Fund and XXX shall indemnify and hold Insurer harmless against any Loss
that Insurer may incur, suffer or be required to pay due to Fund's
incorrect calculation of the daily net asset value, dividend rate or
capital gain distribution rate of a Portfolio or incorrect or untimely
reporting of the same; provided, however, that Fund shall have no
obligation to indemnify and hold harmless Insurer if the incorrect
calculation or incorrect or untimely reporting was the result of incorrect
or untimely information furnished by or on behalf of Insurer or otherwise
as a result of or relating to Insurer's breach of this Agreement. In no
event shall Fund be liable for any consequential, incidental, special or
indirect damages resulting to Insurer hereunder.
9.4. Notwithstanding anything herein to the contrary, in no event shall Fund or
XXX be liable to any individual or entity, including without limitation,
Insurer, or any Participating Insurance Company or any Contractholder, with
respect to any Losses that arise out of or result from:
(a) a breach of any representation, warranty, and/or covenant
made by Insurer hereunder or by any Participating Insurance
Company under an agreement containing substantially similar
representations, warranties and covenants;
(b) the failure by Insurer or any Participating Insurance Company
to maintain its separate account (which invests in any
Portfolio) as a legally and validly established segregated
asset account under applicable state law and as a duly
registered unit investment trust under the provisions of the
Act (unless exempt therefrom); or
(c) the failure by Insurer or any Participating Insurance
Company to maintain its variable annuity and/or variable
life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable
provisions of the Code.
9.5. Further, neither Fund nor XXX shall have any liability for any failure or
alleged failure to comply with the diversification requirements of Section
817(h) of the Code or the regulations thereunder if Insurer fails to comply
with any of the following clauses, and such failure is shown to have
materially contributed to the liability:
(a) In the event the Internal Revenue Service ("IRS") asserts in
writing in connection with any governmental audit or review
of Insurer or, to Insurer's knowledge, of any
Contractholder, that any Portfolio has failed or allegedly
failed to comply with the diversification requirements of
Section 817(h) of the Code or the regulations thereunder or
Insurer otherwise becomes aware of any facts that could give
rise to any claim against Fund or its affiliates as a result
of such a failure or alleged failure,
(i) Insurer shall promptly notify Fund of such assertion or potential
claim subject to the confidentiality provisions of Section 13.5 as to
any Contract holder;
(ii) Insurer shall consult with Fund as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) Insurer shall use its best efforts to minimize any liability of
Fund or its affiliates resulting from such failure, including, without
limitation, demonstrating, pursuant to Treasury Regulations Section
1.817-5(a)(2), to the Commissioner of the IRS that such failure was
inadvertent;
(iv) Insurer shall permit Fund, its affiliates and their legal and
accounting advisors to participate in any conferences, settlement
discussions or other administrative or judicial proceeding or contests
(including judicial appeals thereof) with the IRS, any Contractholder
or any other claimant regarding any claims that could give rise to
liability to Fund or its affiliates as a result of such a failure or
alleged failure provided, however, that Insurer shall retain control of
the conduct of such conferences, discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by Insurer to the IRS, any
Contractholder or any other claimant in connection with any of the
foregoing proceedings or contests (including, without limitation, any
such materials to be submitted to the IRS pursuant to Treasury
Regulations Section 1.817-5(a)(2)), shall be provided by Insurer to
Fund (together with any supporting information or analysis) subject to
the confidentiality provisions of Section 13.5 at least ten (10)
Business Days prior to the day on which such proposed materials are to
be submitted and shall not be submitted by Insurer to any such person
without the express written consent of Fund which shall not be
unreasonably withheld;
(vi) Insurer shall provide Fund or its affiliates and their accounting
and legal advisors with such cooperation as Fund shall reasonably
request (including, without limitation, by permitting Fund and its
accounting and legal advisors to review the relevant books and records
of Insurer) in order to facilitate review by Fund or its advisors of
any written submissions provided to it pursuant to the preceding clause
or its assessment of the validity or amount of any claim against its
arising from such a failure or alleged failure; and
(vii) Insurer shall not with respect to any claim of the IRS or any
Contractholder that would give rise to a claim against Fund or its
affiliates compromise or settle any claim, accept any adjustment on
audit, or forego any allowable judicial appeals, without the express
written consent of Fund or its affiliates, which shall not be
unreasonably withheld, provided that Insurer shall not be required to
appeal any adverse judicial decision unless Fund or its affiliates
shall have provided an opinion of independent counsel to the effect
that a reasonable basis
exists for taking such appeal and provided further that the
costs of any such appeal shall be borne equally by the
parties thereto. Should Fund or its affiliates refuse to give
written consent to any compromise of settlement of any claim
or liability hereunder, Insurer may, in its discretion,
authorize Fund or its affiliates to act in the name of
Insurer in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals thereof, and in
that event Fund or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that
it is authorized to control.
Promptly after receipt by an indemnified party under this
Article of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under this Article,
notify the indemnifying party of the commencement thereof.
The failure to so notify the indemnifying party shall not
relieve the indemnifying party from any liability under this
Article IX, except to the extent that the omission results in
a failure of actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the
failure to give such notice. In case any such action is
brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the
indemnifying party shall be
entitled to participate therein, at its own expense, and, to
the extent that it may wish, assume the defense thereof, with
counsel satisfactory to such indemnified party, and to the
extent that the indemnifying party has given notice to such
effect to the indemnified party and is performing its
obligations under this Article, the indemnifying party shall
not be liable for any legal or other expenses subsequently
incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of
investigation. Notwithstanding the foregoing, in any such
proceeding, any indemnified party shall have the right to
retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party
unless (a) the indemnifying party and the indemnified party
shall have mutually agreed to the retention of such counsel
or (b) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying
party shall not be liable for any settlement of any
proceeding effected without its written consent.
A successor by law of any Party to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX,
which shall survive any termination of this Agreement.
9.7. Any controversy or claim arising out of or relating to this Agreement, or
the breach thereof, will be settled by arbitration administered by the
American Arbitration Association in accordance with its Commercial
Arbitration Rules and Title 9 of the U.S. Code. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. The number of arbitrators will be three, one of whom will be
appointed by Insurer or an affiliate; and the third of whom will be
selected by mutual agreement, if possible, within 30 days of the selection
of the second arbitrator and thereafter by the administering authority. The
place of arbitration will be Minneapolis, Minnesota. The arbitrators will
have no authority to award punitive damages or any other damages not
measured by the prevailing party's actual damages, and may not, in any
event, make any ruling, finding or award that does not conform to the terms
and conditions of this Agreement. Any party may make an application to the
arbitrators seeking injunctive relief to maintain the status quo until such
time as the arbitration award is rendered or the controversy is otherwise
resolved. Any party may apply to any court having jurisdiction hereof and
seek injunctive relief in order to maintain the status quo until such time
as the arbitration award is rendered or the controversy is otherwise
resolved.
ARTICLE X.
COMMENCEMENT AND TERMINATION
10.1. This Agreement shall be effective as of the date hereof and
shall continue in force until terminated in accordance with the
provisions herein.
10.2 This Agreement shall terminate without penalty as to one or more
Portfolios:
(a) At the option of Insurer, Distributor, Fund, or XXX at any time from
the date hereof upon 90 days' notice, unless a shorter time is agreed
to by the Parties;
(b) At the option of Insurer if it determines that shares of any Portfolio
are not reasonably available to meet the requirements of the
Contracts. Insurer shall furnish prompt notice of election to
terminate and termination shall be effective ten days after receipt of
notice unless Fund makes available a sufficient number of shares to
meet the requirements of the Contracts within such ten day period;
(c) At the option of Insurer or Fund, upon the institution of formal
proceedings against the other or their respective affiliates by the
Commission, the NASD or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the Insurer's or
Fund's reasonable judgment, exercised in good faith, materially impair the
other's ability to meet and perform its obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by Insurer or
Fund, as the case may be, with termination to be effective upon receipt of
notice;
(d) At the option of Insurer or Fund, if either shall determine, in its sole
judgment reasonably exercised in good faith, that the other has suffered a
material adverse change in its business or financial condition or is the
subject of material adverse publicity and such material adverse change or
material adverse publicity is likely to have a material adverse impact upon
the business and operation of the Insurer, Fund or XXX, as the case may be.
Insurer or Fund shall notify the other in writing of any such determination
and its intent to terminate this Agreement, which termination shall be
effective on the sixtieth (60th) day following the giving of such notice,
provided the determination of Insurer or Fund, as the case may be,
continues to apply on that date.
(e) Upon termination of the Investment Management Agreement between Fund, on
behalf of its Portfolios, and XXX or its successors unless Insurer
specifically approves the selection of a new investment adviser for the
Portfolios. Fund shall promptly furnish notice of such termination to
Insurer;
(f) In the event Portfolio shares are not registered, issued or sold in
accordance with applicable federal law, or such law precludes the use of
such shares as the underlying investment medium of Contracts issued or to
be issued by Insurer. Termination shall be effective immediately upon such
occurrence without notice;
(g) At the option of Fund upon a determination by the Board in good faith that
it is no longer advisable and in the best interests of shareholders for
Fund to continue to operate pursuant to this Agreement. Termination shall
be effective upon notice by Fund to Insurer of such termination;
(h) At the option of Fund if the Contracts cease to qualify as annuity
contracts or life insurance policies, as applicable, under the Code, or if
Fund reasonably believes that the Contracts may fail to so qualify.
Termination shall be effective immediately upon such occurrence or
reasonable belief without notice;
(i) At the option of any Party, upon another's breach of any material provision
this Agreement, which breach has not been cured to the satisfaction of the
non breaching Parties within ten days after written notice of such breach
is delivered to the breaching Party;
(j) At the option of Fund, if the 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;
(k) Upon assignment of this Agreement, unless made with the written consent of
the non-assigning Parties.
Any such termination pursuant to this Article X shall not affect the
operation of Articles V or IX of this Agreement. The Parties agree that any
termination pursuant to Article VI shall be governed by that Article.
10.3.Notwithstanding any termination of this Agreement pursuant to Section 10.2
hereof, Fund and XXX shall continue to make available additional Portfolio
shares pursuant to the terms and conditions of this Agreement as provided
below, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, the owners of the Existing Contracts or
Insurer, whichever shall have legal authority to do so, shall be permitted
to reallocate investments among the Portfolios, redeem investments in the
Portfolios and/or invest in the Portfolios upon the making of additional
purchase payments under the Existing Contracts. The provisions of this
Agreement shall remain in effect and thereafter either Fund or Insurer may
terminate the Agreement, as so continued pursuant to this Section 10.3,
upon prior written notice to the other Parties, such notice to be for a
period that is reasonable under the circumstances but, if given by Fund,
need not be for more than six months.
00.0.Xx the event of any termination of this Agreement pursuant to Section 10.2
hereof, the Parties agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose
of ensuring that a Separate Account owns no shares of a Portfolio beyond
six months from the date of termination. Such steps may include, without
limitation, substituting other mutual fund shares for those of the affected
Portfolio.
ARTICLE XI.
AMENDMENTS
11.1. Any changes in the terms of this Agreement shall be made by agreement
in writing by the Parties hereto.
ARTICLE X11.
NOTICE
12.1. Each notice required by this Agreement shall be given by certified
mail, return receipt requested or other method agreed to by the
parties, to the appropriate Parties at the following addresses:
Insurer: American Enterprise Life Insurance Company
00 Xxxxx 0xx Xxxxxx
Xxxxxxxxxxx, XXX 00000
Attention: Xxxxx X. Xxxxx
President
Distributor: American Express Financial Advisors, Inc.
000 Xxxxx 00
Xxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Corporate Senior Vice President
With copies to: Law Department (Unit 52)
000 Xxxxx 00
Xxxxxxxxxxx, XX 00000
Fund: Lazard Retirement Series, Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
XXX: Lazard Asset Management
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
with copies to: Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
ARTICLE XIII.
MISCELLANEOUS
13.1. This Agreement has been executed on behalf of the Parties by the
undersigned duly authorized officers in their capacities as officers of
Insurer, Distributor, XXX, and Fund.
13.2. If any provision of this Agreement is held or made invalid by a court
decision, statute, rule, or otherwise, the remainder of this Agreement
will not be affected thereby.
13.3. 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, that the Parties are entitled to
under federal and state laws.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the
same instrument.
00.0.Xxxx and XXX acknowledge that the identities of the customers of Insurer
or any of its affiliates (collectively the "Protected Parties" for purposes
of this Section 13.5), information maintained regarding those customers,
and all computer programs and procedures or other information developed or
used by the Protected Parties or any of their employees or agents in
connection with Insurer's performance of its duties under this Agreement
are the valuable property of the Protected Parties, Fund and XXX agree that
if they come into possession of any list or compilation of the identities
of or other information about the Protected Parties' customers, or any
other information or property of the Protected Parties, other than such
information as may be independently developed or compiled by Fund or XXX.
Fund and XXX will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or
other property except: (a) with Insurer's prior written consent; or (b) as
required by law or judicial process. Fund and XXX acknowledge that any
breach of the agreements in this Section 13.5 would result in immediate and
irreparable harm to the Protected Parties for which there would be no
adequate remedy at law and agree that in the event of such a breach, the
Protected Parties will be entitled to equitable relief by way or temporary
and permanent injunctions, as well as such other relief as any court of
competent jurisdiction deems appropriate.
ARTICLE XIV.
LAW
14.1. This Agreement shall be construed in accordance with the internal laws
of the State of New York, without giving effect to principles of
conflict of laws.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to
be duly executed and attested as of the date first above written.
American Enterprise Life Insurance Company
By:
Attest:
American Express Financial Advisors Inc.
By:
Attest:
Lazard Retirement Series, Inc.
By:
Attest:
Lazard Asset Management, LLC
a division of Lazard Freres & Co., LLC
By:
Attest:
SCHEDULE 1
Portfolios
Lazard Retirement Equity Portfolio
Lazard Retirement International Equity Portfolio
Separate Accounts and Contracts
American Enterprise Variable Annuity Account
Contract Form # 43431 and state variations thereof
American Enterprise Variable Life Account
Contract Form # 37022 and state variations thereof
SCHEDULE 2
PORTFOLIO SHARE ORDER PROCESSING
Timely Pricing and Orders
1. Each Business Day, Fund shall use its best efforts to make each Portfolio's
closing net asset value per share ("NAV") on that Day available to Insurer
by 6:30 p.m. New York time, but in no event later than 7:00 p.m. New York
time. Fund shall notify Insurer as soon as possible if it is determined
that the net asset value per share will be available after 7:00 p.m. New
York time on any Business Day, and Fund and Insurer shall mutually
2. At the end of each Business Day, Insurer shall use the information
described above to calculate each Separate Account's unit values for that
Day. Using this unit value, Insurer shall process that Day's Contract and
Separate Account transactions to determine the net dollar amount of each
Portfolio's shares to be purchased or redeemed.
3. Insurer shall use its best efforts to transmit net purchase or redemption
orders to Fund or its designee by 9:30 a.m. New York time, but in no event
later than 10:00 a.m. New York time on the Business Day next following
Insurer's receipt of the information relating to such orders in accordance
with paragraph I above; provided, however, that Fund shall provide
additional time to Insurer in the event Fund is unable to meet the 6:30
p.m. deadline stated above. Such additional time shall be equal to the
additional time that Fund takes to make the net asset values available to
Insurer. In addition, to the extent practicable, Insurer shall use its best
efforts to notify Fund in advance of any unusually large purchase or
redemption orders.
Timely Payments
4. Insurer shall initiate the wire to pay for any net purchase order in
Federal Funds to Fund or its designated custodial account by 12:00 noon New
York time on the same Business Day it transmits the order to Fund pursuant
to paragraph 3 above.
5. Fund shall pay for any net redemption order by wiring the redemption
proceeds to Insurer, on the same Business Day as Fund receives notice of
the redemption order or, upon notice to Insurer, such longer period as
permitted by the Act or the rules, orders or regulations thereunder. In the
case of any net redemption order valued at or greater than $1 million, Fund
shall wire such amount to Insurer within five days of the order. In the
case of any net redemption order requesting the application of proceeds
from the redemption of one Portfolio's shares to the purchase of another
Portfolio's shares, Fund shall so apply such proceeds the same Business Day
that Insurer transmits such order to Fund.
Applicable Price
6. Fund shall execute purchase and redemption orders for a Portfolio's shares
that relate to Contract transactions at that Portfolio's NAV next
determined after Fund or its designated agent receives the order. For this
purpose, Fund hereby appoints Insurer as its agent for the limited purpose
of receiving orders for the purchase and redemption of shares of each
Portfolio for each Separate Account; provided that Fund receives both the
notice of the order in accordance with paragraph 3 above and any related
purchase payments in acccordance with paragraph 4 above.
7. Fund shall execute purchase and redemption orders for a Portfolio's shares
that relate to Insurer's General Account, or that do not relate to Contract
transactions, at that Portfolio's NAV next determined after Fund (not
Insurer) receives the order and any related purchase payments in accordance
with paragraph 4 above.
8. Fund shall execute purchase and redemption orders for a Portfolio Shares
that relate to Contracts funded by registered and unregistered Separate
Accounts in the same manner, but only to the extent that Insurer represents
and warrants that it is legally or contractually obligated to treat such
orders in the same manner. Each order for Portfolio shares placed by
Insurer that is attributable, in whole or in part, to Contracts funded by
an unregistered Separate Account, shall be deemed to constitute such
representation and warranty by Insurer unless the order specifically states
to the contrary. Otherwise, Fund shall treat orders attributable to
unregistered Separate Account Contracts in the same manner as orders for
Insurer's General Account. For these purposes, a registered Separate
Account is one that is registered under the Act; an unregistered Separate
Account is one that is not.
9. Fund shall execute purchase or redemption orders for a Portfolio's shares
that do not satisfy the conditions specified in paragraphs 3 and 4 above,
as applicable, at the Portfolio's NAV next determined after such conditions
have been satisfied and in accordance with paragraphs 6 or 7, whichever
applies.
10. If Fund does not receive payment in Federal Funds for any net purchase
order in accordance with paragraph 4 above, Insurer shall promptly, upon
Fund's request, reimburse Fund for any charges, costs, fees, interest or
other expenses incurred by Fund in connection with any advances to, or
borrowings or overdrafts by, Fund, or any similar expenses incurred by
Fund, as a result of portfolio transactions effected by Fund based upon
such purchase request.
11. If Fund provides Insurer with materially incorrect net asset value per
share information through no fault of Insurer, Insurer, on behalf of the
Separate Account, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct net asset value per
share in accordance with Fund's current policies for correcting pricing
errors. Any material error in the calculation of net asset value per share,
dividend or capital gain information shall be reported promptly upon
discovery to Insurer.
