January 1st, 2008 Integrity Life Insurance Company Attn: Kevin L. Howard Cincinnati, OH 45202 RE: ADMINISTRATIVE SERVICES Dear Mr. Howard: This letter sets forth the agreement between Integrity Life Insurance Company (the "Company") and PADCO Advisors...
January 1st, 2008
Integrity Life Insurance Company
Attn: Xxxxx X. Xxxxxx
000 Xxxxxxxx
Cincinnati, OH 45202
RE: ADMINISTRATIVE SERVICES
Dear Xx. Xxxxxx:
This letter sets forth the agreement between Integrity Life Insurance Company
(the "Company") and PADCO Advisors II, Inc. ("PADCO"), advisor to the Rydex
Variable Trust (the "Trust"), concerning certain administrative services to be
provided by the Company with respect to certain series of the Trust, each of
which is identified in the Participation Agreement (defined below).
1. Administrative Services and Expenses. The Company has entered or will enter
into a Participation Agreement with, among others, Rydex Distributors, Inc.
(distributor for the Trust) and the Trust, as may be amended from time to
time (the "Participation Agreement") pursuant to which the Company
purchases shares of the Trust for the separate accounts identified in the
Participation Agreement (the "Accounts"). Administrative services for the
Accounts which invest in the Trust and for purchasers of the variable
annuity and/or variable life insurance contracts (the "Contracts") issued
through the Accounts are the responsibility of the Company. Administrative
services for the Trust, in which the Accounts invest, and for purchasers of
shares of the Trust are the responsibility of the Trust.
PADCO recognizes the Company, on behalf of the Accounts, as the shareholder
of shares of the Trust purchased under the Participation Agreement. PADCO
further recognizes that the Trust will derive a substantial savings in
administrative expenses by virtue of having the Company as a single
shareholder of record of shares of the Trust rather than multiple
shareholders having record ownership of such shares. The administrative and
other services provided by the Company from which the Trust will derive
such savings are set forth in Schedule A to this letter agreement.
2. Administrative Expense Payments. In consideration of the administrative
services provided by the Company and the anticipated administrative expense
savings and administrative convenience resulting to the Trust from the
Company's services, XXXXX agrees to pay the Company a fee as set forth in
Schedule B
As soon as practicable after the end of each month, the Company will send
PADCO, at the address and in the manner set forth in the Participation
Agreement, or XXXXX's delegate, a statement of the average daily net asset
value of each Account for the preceding month on which the fee stated in
this Paragraph 2 is calculated, together with a statement of the amount of
such fee. In the calculation of such fee, the Trust's records will govern
unless an error can be shown in the number of shares used in such
calculation.
PADCO will pay such fee within sixty (60) days after receipt of such
statement by PADCO or its delegate. Such payment will be by wire transfer
unless the amount thereof is less than $500. Wire transfers will be sent to
the account and in the manner specified by the Company. Such wire transfer
will be separate from wire transfers of redemption proceeds and
distributions. Amounts less than $500 may be paid by check or by another
method acceptable to the parties.
3. Nature of Payments. The parties to this letter agreement recognize and
agree that XXXXX's payments to the Company relate to administrative
services only and do not constitute payment in any manner for investment
advisory services or for costs of distribution of Contracts or of shares of
the Trust, and that these payments are not otherwise related to investment
advisory or distribution services or expenses. The amount of administrative
expense payments made by PADCO to the Company pursuant to Paragraph 2 of
this letter agreement will not be deemed to be conclusive with respect to
actual administrative expenses or savings of the Trust.
From time to time, the parties will review the administrative expense
payments to determine whether they exceed or are reasonably expected to
exceed the incurred and anticipated costs, over time, of the Company.
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The appropriate parties agree to negotiate in good faith a reduction to the
administrative expense payments as necessary to eliminate any such excess.
4. Term. This letter agreement will remain in full force and effect from the
date of this agreement specified on page one for so long as assets of the
Trust are attributable to amounts invested by the Company under the
Participation Agreement, unless terminated in accordance with Paragraph 5
of this letter agreement. Notwithstanding termination, this fee will
continue to be due and payable with respect to shares held by the Accounts
on the date of termination and that remain outstanding thereafter.
5. Termination. Any party may terminate this letter agreement, without
penalty, on 60 days' written notice to the other party. Unless so
terminated, this letter agreement will continue in effect for so long as
PADCO or its successors in interest, or any affiliate thereof, continues to
perform in a similar capacity for the Trust, and for so long as the Company
provides the services contemplated hereunder with respect to the Contracts
under which values or monies are allocated to the Trust.
6. Amendment. This letter agreement may be amended only upon mutual agreement
of the parties hereto in writing.
7. Counterparts. This letter agreement may be executed in counterparts, each
of which will be deemed an original but all of which will together
constitute one and the same instrument.
8. Arbitration. Any controversy or claim arising out of or relating to this
letter agreement, or breach thereof, shall be settled by arbitration in a
forum jointly selected by the relevant parties (but if applicable law
requires some other forum, then such other forum) in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
9. Governing Law. This letter agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the State of
If this letter agreement is consistent with your understanding of the matters we
discussed concerning administrative expense payments, kindly sign below and
return a signed copy to us.
Very truly yours,
PADCO Advisors II, Inc.
By: /s/ Xxxx Xxxxxxxxxxx
Name: Xxxx Xxxxxxxxxxx
Title: Chief Executive Officer
Acknowledged and Agreed:
Integrity Life Insurance Company
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President and General Counsel
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SCHEDULE A
ADMINISTRATIVE SERVICES
Maintenance of Books and Records
o Assist as necessary to maintain book entry records on behalf of the
Trust regarding issuance to, transfer within (via net purchase orders)
and redemption by the Accounts of Trust shares
o Maintain general ledgers regarding the Accounts' holdings of Trust
shares, coordinate and reconcile information, and coordinate
maintenance of ledgers by financial institutions and other contract
owner service providers
Communication with the Trust
o Serve as the designee of the Trust for receipt of purchase and
redemption orders from the Accounts and to transmit such orders, and
payment therefore, to the Trust
o Coordinate with the Trust's agents respecting daily valuation of the
Trust's shares and the Accounts' units
o Purchase Orders
- Determine net amount available for investment in the Trust
- Deposit receipts at the Trust's custodian (generally by wire
transfer)
- Notify the custodian of the estimated amount required to pay
dividends or distributions
o Redemption Orders
- Determine net amount required for redemptions by the Trust
- Notify the custodian and Trust of cash required to meet
redemption payments
o Purchase and redeem shares of the Trust on behalf of the Accounts at
the then-current price in accordance with the terms of the Trust's
then-current prospectus
o Assist in routing and revising sales and marketing materials to
incorporate or reflect the comments made on behalf of the Trust or its
distributor
o Assist in enforcing procedures adopted by the Trust to reduce,
discourage, or eliminate frequent trading of Trust shares
o Provide such certifications as the Trust deems necessary or
appropriate to fulfill its obligations under Rule 38a-1 under the
Investment Company Act of 1940
Processing Distributions from the Trust
o Process ordinary dividends and capital gains distributions
o Reinvest the Trust's distributions
Reports
o Provide information periodically to the Trust, including, but not
limited to, furnishing registration statements, prospectuses,
statements of additional information, reports, sales or promotional
materials and any other SEC filings with respect to the Accounts, as
not otherwise provided for
o Provide information periodically about the Trust, including any
necessary delivery of the Trust's prospectus and annual and
semi-annual reports to contract owners, as not otherwise provided for.
Proxy Solicitations
o Assist with proxy solicitations, specifically with respect to
soliciting voting instructions from Contract owners
o Oversee and assist in the counting and voting of contract owner voting
interests in the Trust
Trust-related Contract owner Services
o Maintain adequate fidelity bond or similar coverage as provided for by
the Participation Agreement
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o Provide general information with respect to Trust inquiries (not
including information about performance or related to sales)
o Provide information regarding performance of the Trust and the
sub-accounts of the Accounts
Other Administrative Support
o Provide other administrative support for the Trust as mutually agreed
between the Company and the Trust or PADCO
o Relieve the Trust of other usual or incidental administrative services
provided to individual contract owners
SCHEDULE B
FEES
1. XXXXX agrees to pay the Company a fee, computed daily and paid monthly in
arrears, equal to an annual rate of 20 basis points of average daily net
assets of the Company invested in shares of the Trust for the Accounts..
2. For purposes of this Schedule B, the average net assets of the Trust will
be based on the net asset values reported by the Trust to the Company. No
adjustments will be made to correct errors in the net asset values so
reported for any day unless such error is corrected and the corrected net
asset value per share is reported to the Company before 6:00 p.m. Eastern
time on the first Business Day after the day to which the error relates.
This provision shall not create an independent obligation on the part of
the Trust or PADCO to correct any such error as the parties understand and
agree that such matters are addressed by the Participation Agreement.
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