MANAGEMENT AND ADMINISTRATIVE SERVICE AGREEMENT
THIS MANAGEMENT AND ADMINISTRATIVE SERVICE AGREEMENT (the "Agreement") made
and entered into by and among Ameritas Variable Life Insurance Company, a
Nebraska life insurance corporation ("AVLIC"), American Mutual Life Insurance
Company ("AML"), an Iowa mutual life insurance company, and Ameritas Life
Insurance Corp., a Nebraska mutual life insurance company ("XXXX"), as of this
1st day of April, 1996.
W-I-T-N-E-S-S-E-T-H
WHEREAS, AVLIC is primarily engaged in the variable life insurance and
annuity business; and
WHEREAS, XXXX has, in the past, rendered administrative and other services,
advice and accommodations to AVLIC in the sales, administration, development and
marketing of variable life and annuity products for AVLIC; and
WHEREAS, AML is engaged in the life insurance and annuity business and has
the capacity to render management, administrative and other services, advice and
accommodations to AVLIC in the sales, administration, development and marketing
of fixed annuity products; and
WHEREAS, AVLIC was, immediately prior to the date hereof, a direct wholly-
owned subsidiary of XXXX and is currently owned by a joint venture of XXXX and
AML; and
WHEREAS, AVLIC has determined to contract with XXXX and AML to provide
management, administrative services, advice and accommodations to AVLIC on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises of
the parties hereto, the parties hereby covenant and agree as follows:
1. DEFINITIONS. For the purposes of this Agreement, unless the context
otherwise requires, the following terms shall have the meanings set forth below:
(a) "XXXX Systems" means any System or part thereof, including
modifications thereof, which is at any time designed, developed, owned or
modified by XXXX or any of its Affiliates.
(b) "AML Systems" means any System or part thereof, including
modifications thereof, which is at any time designed, developed, owned or
modified by AML or any of its Affiliates
(c) "AVLIC's Business" means the continuous operation of a licensed
insurance company including the sale, issuance and ongoing administration of
such Fixed Annuity products and of Variable Products as are currently being
offered and as may be developed in the future.
(d) "Board" means the Board of Directors of AVLIC.
(e) "Cause" means gross negligence, willful or intentional misconduct,
and/or the material breach of any of the material duties set forth herein, which
breach has not been remedied so as to place AVLIC in the same position as if
same had never occurred within 15 Business Days after written notice is given by
AVLIC to AML with respect to the services, advice or accommodations provided for
the Fixed Annuity operations or by AVLIC to XXXX with respect to any other
services, advice or accommodations provided for hereunder of such gross
negligence, willful misconduct or breach.
(f) "DP Services" means data processing services.
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(g) "Fixed Annuity Assets" means those assets of AVLIC which are
identified as being related to and supporting the Fixed Annuity contracts of
AVLIC.
(h) "Fund Gain (Losses)" means gains (losses) in the separate accounts of
AVLIC resulting from incorrect mutual fund values, calculation of incorrect
separate account unit value, misapplication or misunderstanding of policyholder
instructions, out of balance mutual funds or policyholder accounts or similar
occurances.
(i) "Joint Venture Agreement" means that certain Joint Venture Agreement
dated as of March 8, 1996 between AML and XXXX.
(j) "Other Assets" means all of those invested assets of AVLIC which are
not Fixed Annuity Assets or which are not held in the separate accounts of
AVLIC, but which includes assets held in the general account.
(k) "System" or "Systems" means computer programs and programming aids
with supporting documentation, including, but not limited to, input and output
formats, program listings, systems flow charts, narrative descriptions and
operating instructions, and shall include tangible media upon which such
programs are recorded.
(l) "Third Party Systems" means Systems other than XXXX Systems and AML
Systems.
Unless otherwise specified herein, the capitalized terms used herein shall
have the same meaning as used in the Joint Venture Agreement.
2. DATA PROCESSING
2.1 XXXX XX Services. Except as otherwise specifically provided in
Sections 2.3 and 3.3, XXXX agrees to provide or to cause to be provided to AVLIC
all DP Services as are
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reasonably necessary in order to provide the services contemplated for the
proper operation of AVLIC's Business. Such DP Services shall at all times be
of at least equivalent scope, timeliness, and quality to those provided by
XXXX to AVLIC as of the date of this Agreement.
2.2 RIGHT TO USE SYSTEMS OF XXXX. Except as otherwise specifically
provided in Sections 2.3 and 3.3, XXXX has obtained all third-party consents, if
any, necessary to permit all Systems to be utilized by XXXX in providing any and
all services contemplated under this Agreement. Upon termination of this
Agreement, XXXX shall deliver to AVLIC magnetic tapes, or the then equivalent
media, containing:
a) the data records for the business being administered for AVLIC
along with hard copy record layouts or printouts, and
b) subject only to any existing restrictions thereon previously
imposed by a third party, all specific plan files and operating
company tables; and
XXXX shall grant AVLIC for use by AVLIC or as AVLIC may determine, subject only
to any existing restrictions thereon previously imposed by a third party, a
nonexclusive, royalty-free license to use the following:
a) any XXXX System developed or purchased during the term of this
Agreement in order to provide DP Services principally to AVLIC,
so long as AVLIC agrees to pay to XXXX the undepreciated cost of
such System over a five year period if it chooses to utilize such
XXXX System;
b) any improvements or modifications, including source code, which
XXXX or any of its Affiliates have made to Third Party Systems
prior to or during the term of this Agreement which are used in
providing services to AVLIC
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hereunder and which XXXX has authority to assign royalty-free
and without loss of the right to use by XXXX or its Affiliates or
without any additional royalty fees being required to be paid;
and
c) any XXXX System that is essential to the administration of
AVLIC's Variable Products and cannot be obtained elsewhere
without commercially unreasonable expense;
provided, however, that in order to preserve and to protect the confidentiality
of any XXXX Systems, if AVLIC shall elect to use such XXXX Systems after the
date this Agreement is terminated, AVLIC shall enter into an agreement or
agreements with XXXX or XXXX'x Affiliates containing such covenants and
conditions as are necessary or reasonably required to protect the
confidentiality of such XXXX System.
2.3 AML DP SERVICES. AML agrees to provide or cause to be provided to
AVLIC all DP Services as are reasonably necessary in order to provide the
services contemplated for the proper operation of AVLIC's Fixed Annuity
business. Such DP Services shall at all times be of at least equivalent scope,
timeliness and quality to those provided by AML with respect to its own Fixed
Annuity business as of the date of this Agreement.
2.4 RIGHT TO USE SYSTEMS OF AML. AML has obtained all third-party
consents, if any, necessary to permit all Systems to be utilized by or at the
direction of AML in providing any and all services contemplated under this
Agreement. Upon termination of this Agreement, AML shall deliver to AVLIC
magnetic tapes, or the then equivalent media, containing:
a) the data records for the business being administered for AVLIC
along with hard copy record layouts or printouts, and
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b) subject only to any existing restrictions thereon previously
imposed by a third party, all specific plan files and operating
company tables; and
AML shall grant AVLIC for use by AVLIC or as AVLIC may determine, subject only
to any existing restrictions thereon previously imposed by a third party, a
nonexclusive, royalty-free license to use the following:
a) any AML System developed or purchased during the term of this
Agreement in order to provide DP Services principally to AVLIC,
so long as AVLIC agrees to pay to AML the undepreciated cost of
such System over a five year period if it chooses to utilize such
AML System;
b) any improvements or modifications, including source code, which
AML or any of its Affiliates have made to Third Party Systems
prior to or during the term of this Agreement which are used in
providing services to AVLIC hereunder and which AML has authority
to assign royalty-free and without loss of the right to use by
AML or its Affiliates or without any additional royalty fees
being required to be paid; and
c) any AML System that is essential to the administration of AVLIC's
Variable Products and cannot be obtained elsewhere without
commercially unreasonable expense;
provided, however, that in order to preserve and to protect the confidentiality
of any AML Systems, if AVLIC shall elect to use such AML Systems after the date
this Agreement is terminated, AVLIC shall enter into an agreement or agreements
with AML or AML's Affiliates
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containing such covenants and conditions as are necessary or reasonably
required to protect the confidentiality of such AML System.
2.5 XXXX COMPUTER EQUIPMENT. Except for computer equipment in the
possession or offices of AVLIC's insurance agents, XXXX will provide or will
cause to be provided all computer equipment which, together with the computer
equipment presently owned by AVLIC, is necessary or reasonably required to
render the DP Services to be rendered to AVLIC pursuant to this Section 2. Such
computer equipment shall be provided at no cost to AVLIC except as a portion of
the costs provided for in Section 7.
2.6 AML COMPUTER EQUIPMENT. Except for computer equipment in the
possession or offices of AVLIC's insurance agents, AML will provide or will
cause to be provided all computer equipment which, together with the computer
equipment presently owned by AVLIC, is necessary or reasonably required to
render the DP Services to be rendered to AVLIC pursuant to this Section 2. Such
computer equipment shall be provided at no cost to AVLIC except as a portion of
the costs provided for in Section 7.
2.7 SAFEGUARDING DATA. XXXX and AML shall establish or will cause
reasonable safeguards to be established to protect against the distribution,
loss or alteration of AVLIC's data files and other records. Such safeguards
shall be no less rigorous than those XXXX or AML uses in protecting its own data
and as is necessary to comply with applicable laws and regulations.
3. MANAGEMENT, ADMINISTRATIVE AND OTHER SERVICES, ACCOMMODATIONS AND
COSTS
3.1 COMPENSATION OF EMPLOYEES. No employee of XXXX or AML shall receive
any salary or other compensation, including without limitation, director's fees,
from AVLIC by
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reason of performing duties on behalf of AML or XXXX for AVLIC under the
terms of this Agreement except as may be determined by the Board of Directors
of AVLIC in its sole and absolute discretion.
3.2 XXXX SERVICES. Except as provided in Sections 2.3 and 3.3, XXXX shall
provide to AVLIC all management, administrative and other services, advice and
other accommodations reasonably necessary to effectively and efficiently manage,
operate and administer AVLIC's Business in a manner consistent with good
business practice and the terms of the Joint Venture Agreement. The foregoing
shall include all materials, supplies and other sundry items reasonably
necessary to providing the foregoing. The foregoing management, administrative
and other services, advice and accommodations shall include without limitation
all such management, administrative, and other services, advice and
accommodations currently being provided by XXXX to AVLIC.
3.3 AML SERVICES. AML shall provide to AVLIC all management,
administrative and other services, advice and other accommodations reasonably
necessary to effectively manage, operate and administer the Fixed Annuity
operations of AVLIC in a manner consistent with good business practice and the
terms of the Joint Venture Agreement. The foregoing shall include all
materials, supplies and other sundry items reasonably necessary to providing the
foregoing. The foregoing management, administrative and other services, advice
and accommodations shall include without limitation the following:
(a) All such management, administrative, and other services, advice and
accommodations currently being provided by AML with respect to its own fixed
annuities;
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provided, however, that XXXX will incorporate the Fixed Annuity
operational information into the complete financial or other reports of AVLIC
and will be the preparer of all such reports; and
(b) AML shall provide in a timely fashion such information with respect to
AVLIC's Fixed Annuity business in such form as is reasonably necessary for XXXX
to prepare all of AVLIC's financial statements and other reports as are required
by applicable law or regulation or by customary insurance operations and
practices.
3.4 COSTS. XXXX and AML shall pay all of their own respective personnel
and other costs and expenses of all types necessary or appropriate to render the
management, administrative and other services, advice and accommodations
provided for by this Agreement, except as to the following costs which shall
either be paid directly by AVLIC, or if paid by XXXX or AML on behalf of AVLIC,
shall be promptly reimbursed by AVLIC:
(a) All costs and expenses incurred in connection with the employment of
outside legal counsel for (i) policyholder or customer litigation involving
AVLIC and (ii) enforcing defaulted obligations related to invested assets;
(b) All out of pocket costs and expenses incurred in connection with the
independent audit of the financial statements and governmental regulatory
examinations of AVLIC by persons who are not employees of XXXX or AML;
(c) Any costs incurred in the development of substantially new or
different products requested by AVLIC in excess of two such variable products to
be developed by XXXX in each calendar year and two such fixed annuity products
by AML in each calendar year;
(d) Out of pocket costs incurred in connection with meeting with
nationally recognized insurance company rating agencies;
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(e) All costs and expenses incurred in connection with extraordinary
actuarial, tax, accounting, systems, or other studies, functions or
consultations performed solely for and at the request of AVLIC by independent
professional or consulting individuals or organizations;
(f) Investment expenses detailed in Column 4 on Lines 9.1 and 9.2 of
Exhibit 5 General Expenses of the 1995 Annual Statement Blank of the National
Association of Insurance Commissioners for life, health and accident insurance
(the "Exhibit 5 Blank");
(g) All fines and penalties of AVLIC including interest assessed;
(h) Premium taxes;
(i) Federal taxes, state or other governmental subdivision taxes, licenses
and fees and interest thereon;
(j) Costs (including wages and benefits) incurred in connection with the
employment or leasing of a Chief Operating Officer of AVLIC;
(k) Guaranty Fund assessments;
(l) Fees and other costs related to the acquisition, disposition or
maintenance of Fixed Annuity Assets or Other Assets including commissions,
custodian fees, collection fees and bank service fees;
(m) Expenses for the expansion of the broker-dealer distribution system to
the extent not covered by allowances available to AIC;
(n) Agency expense allowances in Column 1 on Line 7.1 of the Exhibit 5
Blank;
(o) Fees paid to Outside Directors;
(p) Costs of insurance not otherwise covered by this Agreement which is
purchased directly by AVLIC and at AVLIC's discretion; and
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(q) Fund Gains (Losses); provided, however, that payment by AVLIC of
amounts under this Section 3.4(q) shall not relieve any other party of its
obligation to provide indemnification for such amounts pursuant to Section 8.6
hereof.
3.5 MANAGEMENT ADMINISTRATIVE SERVICES.
(a) XXXX agrees that the management, administrative and other services,
advice and accommodations performed hereunder by XXXX will at all times be
timely and accurate and of at least equivalent quality to those provided by XXXX
to AVLIC as of the date of this Agreement.
(b) XXXX shall retain the right to contract with any third party,
affiliated or unaffiliated, for the performance of services or use of facilities
upon receipt of the consent of the Executive Committee of AVLIC, which shall not
be unreasonably withheld.
(c) AML agrees that the management, administrative and other services,
advice and accommodations performed hereunder by AML will at all times be
timely and accurate and of at least equivalent quality to those provided by AML
for the administration of its own Fixed Annuities as of the date of this
Agreement.
(d) AML shall retain the right to contract with any third party,
affiliated or unaffiliated, for the performance of services or use of facilities
upon receipt of the consent of the Executive Committee of AVLIC, which shall not
be unreasonably withheld.
(e) No facility or System used by XXXX or AML in performing services for
or subject to use by AVLIC shall be deemed to be transferred, assigned,
conveyed, or leased to AVLIC by performance or use pursuant to this Agreement,
except as XXXX or AML and AVLIC may otherwise agree in writing.
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(f) In providing any services hereunder which require the exercise of
judgment, XXXX will endeavor to perform any such service in accordance with any
reasonable and appropriate standards and guidelines AVLIC develops and
communicates to XXXX provided such guidelines are in accord with all relevant
Laws.
(g) In providing any services hereunder which require the exercise of
judgment, AML will endeavor to perform any such service in accordance with any
reasonable and appropriate standards and guidelines AVLIC develops and
communicates to AML provided such guidelines are in accord with all relevant
Laws.
(h) The performance or receipt of services or the making available or use
of facilities pursuant to this Agreement shall in no way impair the absolute
control of the business and operations of each of the parties by its own Board
of Directors.
(i) AVLIC shall be entitled to all income realized on its business
activity and on its investments and shall be responsible for all investment
expenses incurred in its behalf except as specifically provided by this
Agreement.
3.6 COOPERATION. XXXX and AML agree to cooperate so long as this
Agreement is fully in effect to assist in facilitating the proper operations of
AVLIC, including the timely sharing of information, the coordination of
operating procedures and supplying of individual employees by XXXX or AML,
respectively, to serve as officers of AVLIC; provided, however, that AML, XXXX
and AVLIC agree to cause any such individual provided to act as an officer of
AVLIC to be removed upon the request of the party supplying such individual in
accordance with the Joint Venture Agreement.
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3.7. ADDITIONAL DUTIES. XXXX and AML agree that they will perform
additional duties of providing such sales management, compliance supervision,
recruiting, market conduct supervision, market suggestions and advice,
logistical support, materials distribution, advanced underwriting, meeting
sponsorship and continuing education and other marketing-related activities as
may be reasonably required from time to time for the sale and servicing of AVLIC
products by the Distribution Force of XXXX and the Distribution Force of AML,
respectively. The duties provided for in this Section 3.7 shall be in addition
to the other obligations provided for in this Agreement.
4. SUPERVISION BY BOARD OF DIRECTORS. XXXX and AML acknowledge that the
Board is vested with the power, authority, and responsibility for managing
AVLIC's Business, and acknowledges that any and all actions, whether management,
supervisory or ministerial, taken by XXXX or AML pursuant to Sections 2 and 3
shall be subject to the continuous supervision of said Board; provided, however,
that the routine, day to day practices and procedures used to comply with the
terms of this Agreement by AML and XXXX shall be within their respective
discretion so long as they are consistent with the terms and conditions of this
Agreement and with good business practices.
5. INVESTMENTS MANAGED BY AML. AML agrees to act as investment advisor
for and manage the investment and reinvestment of the Fixed Annuity Assets
subject to the supervision of the Board and any committees thereof designated to
perform such supervisory functions as appropriate and consistent with the
limitations set forth in Section 5.2 hereof. For purposes of this Agreement,
AML shall be granted and may exercise full investment discretion and authority
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to act as agent for AVLIC in acquiring, disposing of or otherwise managing the
Fixed Annuity Assets subject to the supervision of the Board or such designated
committee.
5.1 INVESTMENT ADVISORY SERVICES. In carrying out its obligations to
manage the investment and reinvestment of the Fixed Annuity Assets of AVLIC, AML
shall:
(i) perform research and obtain and evaluate pertinent economic,
statistical and financial data relevant to the investment policies of AVLIC;
(ii) consult with the Board or the designated committee thereof and
furnish to the Board recommendations with respect to an overall investment
strategy for the Fixed Annuity Assets of AVLIC for approval, modification, or
rejection by the Board or such designated committee thereof;
(iii) seek out and implement specific investment opportunities
consistent with any overall investment strategies approved by the Board or such
designated committee thereof;
(iv) take such steps as are necessary to implement any overall
investment strategies approved by the Board or such designated committee thereof
including, with respect to its management of investments and any other property
of AVLIC, providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments;
(v) regularly report to the Board or the designated committee thereof
with respect to the implementation of any approved overall investment strategy
and any other significant activities in connection with management of the Fixed
Annuity Assets of AVLIC including furnishing, upon AVLIC's request, within 30
days after the end of each calendar quarter, a statement of all purchases and
sales during the quarter and a schedule of Fixed Annuity Assets as of the end of
the quarter; and
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(vi) maintain all required accounts, records, memoranda, instructions
or authorizations relating to the acquisition or disposition of investments for
AVLIC.
5.2 LIMITATIONS ON INVESTMENT SERVICES. AML shall perform the investment
services under this Agreement subject to the supervision and review of the Board
or such designated committee thereof and in a manner consistent with the
investment objectives and policies of AVLIC and the provisions of other
applicable Laws.
5.3 PORTFOLIO TRANSACTIONS AND BROKERAGE. AML will determine the Fixed
Annuity Assets to be purchased or sold by AVLIC, subject to the provisions of
Subsections 5.1 and 5.2, and may place orders pursuant to its determinations
either directly with the issuer, with any broker-dealer or underwriter that
specializes in the investments for which the order is made or with any other
broker-dealer selected by AML. AML is authorized to select the broker-dealers
that will execute the purchases and sales of investments for AVLIC and will use
its best efforts to obtain the most favorable net results and execution of
AVLIC's orders, taking into account all appropriate factors, including price,
dealer spread or commission, if any, size of the transaction and difficulty of
the transaction. Subject to the above requirements and applicable regulatory
restrictions, nothing shall prohibit AML from selecting broker-dealers with
which it or AVLIC is affiliated.
5.4 ACTIVITIES OF AML
(i) The investment services of AML to AVLIC under
this Agreement are not to be deemed exclusive and AML will be free to render
similar services to others so long as its services under this Agreement are not
impaired. It is understood that directors, officers and employees of AML are or
may become interested in AVLIC as directors, officers or otherwise.
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(ii) It is agreed that AML may use any supplemental investment research
obtained for the benefit of AVLIC in providing investment advice to its other
investment advisory accounts, if any, and may utilize other sources, at AML's
cost, to provide some of the services provided hereunder. AML and its
Affiliates may also use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of business
for AML or other entities advised by AML will be considered by and may be useful
to AML in carrying out its obligations to AVLIC.
(iii) Investments held by AVLIC may also be held by separate investment
accounts or other mutual funds for which AML may act as an advisor or by AML or
its Affiliates. Because of different investment objectives or other factors, a
particular investment may be bought by AML or its Affiliates or for itself or
for one or more clients when either it or one of its Affiliates or one or more
clients are selling the same security. If purchases or sales of investments for
AVLIC are made by AML, for itself or its Affiliates or for other entities for
which AML or its Affiliates act as investment advisor or for their advisory
clients, or if such purchases or sales arise for consideration at or about the
same time, AVLIC agrees that AML may make transactions in such investments,
insofar as feasible, for the respective entities and clients in a manner AML
deems equitable to all. To the extent that transactions on behalf of more than
one client of AML during the same period may increase the demand for investments
being purchased or the supply of investments being sold, AVLIC recognizes that
there may be an adverse effect on price.
(iv) It is agreed that, on occasions when AML deems the purchase or sale of
an investment to be in the best interest of AVLIC as well as other accounts or
companies (including
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its own or its Affiliates'), it may, to the extent permitted by applicable
laws and regulations, but will not be obligated to, aggregate the investments
to be so sold or purchased for AVLIC with those to be sold or purchased for
other accounts or companies in order to obtain favorable execution and lower
brokerage commissions. In that event, allocation of the investments
purchased or sold, as well as the expenses incurred in the transaction, will
be made by AML in the manner it considers to be most equitable and consistent
with its fiduciary obligations to AVLIC and to such other accounts or
companies. AVLIC recognizes that in some cases this procedure may adversely
affect the size of the position obtainable for AVLIC.
6. INVESTMENTS MANAGED BY XXXX. XXXX agrees to act as investment advisor
for and manage the investment and reinvestment of the Other Assets subject to
the supervision of the Board and any committees thereof designated to perform
such supervisory functions as appropriate and consistent with the limitations
set forth in Section 6.2 hereof. For purposes of this Agreement, XXXX shall be
granted and may exercise full investment discretion and authority to act as
agent for AVLIC in acquiring, disposing of or otherwise managing the Other
Assets subject to the supervision of the Board or such designated committee.
6.1 INVESTMENT ADVISORY SERVICES. In carrying out its obligations to
manage the investment and reinvestment of the Other Assets of AVLIC, XXXX shall:
(i) perform research and obtain and evaluate pertinent economic,
statistical and financial data relevant to the investment policies of AVLIC;
(ii) consult with the Board or the designated committee thereof and
furnish to the Board recommendations with respect to an overall investment
strategy for the Other Assets of
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AVLIC for approval, modification, or rejection by the Board or such
designated committee thereof;
(iii) seek out and implement specific investment opportunities
consistent with any overall investment strategies approved by the Board or such
designated committee thereof;
(iv) take such steps as are necessary to implement any overall
investment strategies approved by the Board or such designated committee thereof
including, with respect to its management of investments and any other property
of AVLIC, providing or obtaining such services as may be necessary in managing,
acquiring or disposing of investments;
(v) regularly report to the Board or the designated committee thereof
with respect to the implementation of any approved overall investment strategy
and any other significant activities in connection with management of the Other
Assets of AVLIC including furnishing, upon AVLIC's request, within 30 days after
the end of each calendar quarter, a statement of all purchases and sales during
the quarter and a schedule of Other Assets as of the end of the quarter; and
(vi) maintain all required accounts, records, memoranda, instructions
or authorization relating to the acquisition or disposition of investments for
AVLIC.
6.2 LIMITATIONS ON ADVISORY SERVICES. XXXX shall perform the investment
services under this Agreement subject to the supervision and review of the Board
or such designated committee thereof and in a manner consistent with the
investment objectives and policies of AVLIC and the provisions of applicable
Laws.
6.3 PORTFOLIO TRANSACTIONS AND BROKERAGE. XXXX will determine the Other
Assets to be purchased or sold by AVLIC, subject to the provisions of
Subsections 6.1 and 6.2, and may
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place orders pursuant to its determinations either directly with the issuer,
with any broker-dealer or underwriter that specializes in the investments for
which the order is made or with any other broker-dealer selected by XXXX.
XXXX is authorized to select the brokers-dealers that will execute the
purchases and sales of investments for AVLIC and will use its best efforts to
obtain the most favorable net results and execution of AVLIC's orders, taking
into account all appropriate factors, including price, dealer spread or
commission, if any, size of the transaction and difficulty of the
transaction. Subject to the above requirements and applicable regulatory
restrictions, nothing shall prohibit XXXX from selecting broker-dealers with
which it or AVLIC is affiliated.
6.4 ACTIVITIES OF XXXX.
(i) The investment services of XXXX to AVLIC under this Agreement are not
to be deemed exclusive and XXXX will be free to render similar services to
others so long as its services under this Agreement are not impaired. It is
understood that directors, officers and employees of XXXX are or may become
interested in AVLIC as directors, officers, or otherwise, and that directors,
officers, or employees of AVLIC are or may become similarly interested in XXXX.
(ii) It is agreed that XXXX may use any supplemental investment research
obtained for the benefit of AVLIC in providing investment advice to its other
investment advisory accounts, if any, and may utilize other sources, at AVLIC's
cost, to provide some of the services provided hereunder. XXXX and its
Affiliates may also use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of business
for
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XXXX or other entities advised by XXXX will be considered by and may be
useful to XXXX in carrying out its obligations to AVLIC.
(iii) Investments held by AVLIC may also be held by separate investment
accounts or other mutual funds for which XXXX may act as an advisor or by XXXX
or its Affiliates. Because of different investment objectives or other factors,
a particular investment may be bought by XXXX or its Affiliates or for itself or
for one or more clients when either it or one of its Affiliates or one or more
clients are selling the same security. If purchases or sales of investments for
AVLIC are made by XXXX, for itself or its Affiliates or for other entities for
which XXXX or its Affiliates act as investment advisor or for their advisory
clients, or if such purchases or sales arise for consideration at or about the
same time, AVLIC agrees that XXXX may make transactions in such investments,
insofar as feasible, for the respective entities and clients in a manner XXXX
xxxxx equitable to all. To the extent that transactions on behalf of more than
one client of XXXX during the same period may increase the demand for
investments being purchased or the supply of investments being sold, AVLIC
recognizes that there may be an adverse effect on price.
(iv) It is agreed that, on occasions when XXXX xxxxx the purchase or
sale of an investment to be in the best interest of AVLIC as well as other
accounts or companies (including its own or its Affiliates'), it may, to the
extent permitted by applicable laws and regulations, but will not be obligated
to, aggregate the investments to be so sold or purchased for AVLIC with those to
be sold or purchased for other accounts or companies in order to obtain
favorable execution and lower brokerage commissions. In that event, allocation
of the investments purchased or sold, as well as the expenses incurred in the
transaction, will be made by XXXX in
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the manner it considers to be most equitable and consistent with its
fiduciary obligations to AVLIC and to such other accounts or companies.
AVLIC recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for AVLIC.
7. AMOUNT AND PAYMENT OF FEES
7.1 XXXX FEES. As consideration for XXXX providing services pursuant
to this Agreement for AVLIC, AVLIC will pay XXXX pursuant to Exhibit 1 hereto.
7.2 AML FEES. As consideration for AML providing services pursuant to
this Agreement for AVLIC, AVLIC will pay AML pursuant to Exhibit 2 hereto.
7.3 COMPENSATION FOR ADDITIONAL DUTIES. Each of the parties
acknowledges and agrees that it is difficult to determine how much effort
will be required of XXXX and AML during the term of this Agreement to perform
the duties described in Section 3.7 above. Therefore it is appropriate that
the Board of Directors of AVLIC shall determine each quarter during the term
of this Agreement the amount of effort extended by XXXX and AML during the
immediately preceding quarter in connection with the services described in
Section 3.7 above, including but not limited to the volume of business
realized by AVLIC, and establish a sum to be paid to XXXX and AML during the
next immediately succeeding quarter. The parties further recognize and agree
that the effort to be extended by XXXX and AML may not be equal and therefore
the amounts determined to be paid to XXXX and AML need not be equal but shall
be in that sum as the Board of Directors of AVLIC in its sole and absolute
discretion shall determine to be fair and equitable under the circumstances.
In the event that the Board of Directors is at any time unable to reach a
decision as to the amount of compensation to be paid, then the amount
determined by
21
the Board in its most recent determination hereunder shall remain payable for
subsequent periods until and unless the Board subsequently reaches a decision.
7.4 MECHANICS OF TIMING, CALCULATION, AND REPORTING OF PAYMENT OF FEES.
XXXX and AML shall each deliver to AVLIC, within 10 days after the end of
each calendar month during the term of this Agreement, statements showing all
fees due and payable pursuant to this Agreement in respect of such period,
together with any amounts to be reimbursed pursuant to Section 3.4 hereof.
Such statements shall include detail sufficient to show the basis of XXXX'x
and AML's calculation of such fees. AVLIC shall pay all amounts due
thereunder within 10 days after such statement is received.
8. CONFIDENTIALITY, PERFORMANCE AND RELATIONSHIP OF PARTIES
8.1 DISCLOSURE OF INFORMATION. Section 2.8(h) of the Joint Venture
Agreement is hereby incorporated herein in its entirety by reference thereto
as if it were fully set forth herein.
8.2 RECORDS AND REPORTS. All forms, records, statements, reports,
files and other data and information prepared, maintained or collected by
XXXX and AML on behalf of AVLIC in the performance of this Agreement shall
become the sole property of AVLIC and shall be delivered to AVLIC upon
request in the form and format in which it is maintained; provided, however,
that if such request impedes XXXX'x or AML's ability to perform its duties or
obligations under this Agreement, then to the extent of such impediment such
party shall be relieved of such duty and obligation without reduction in fees
to be paid by AVLIC. AML and XXXX agree to preserve, for the period
prescribed by applicable regulatory authorities, the Books and Records of
AVLIC maintained by AML and XXXX pursuant to this Agreement.
22
8.3 INSPECTION OF BOOKS AND RECORDS. XXXX and AML shall keep proper
Books and Records relating to the services performed hereunder in which full
and correct entries and financial data will be maintained in accordance with
generally accepted accounting practices. AVLIC may at its option and at its
expense inspect the Books and Records of XXXX and/or AML as they pertain to
this Agreement at the offices of XXXX and AML in which said Books and Records
are maintained, during normal business hours, for any purpose related to
XXXX'x or AML's performance of this Agreement or the collection and
determination of the fees required to be paid by AVLIC to XXXX and AML under
this Agreement. Such inspection and/or audits may be on a continuous or
periodic basis or both and may be conducted by employees of AVLIC or an
Affiliate thereof or an independent auditor retained by such person. Either
XXXX or AML may also request that AVLIC make such an inspection. The
Executive Committee of AVLIC will then determine if it desires to make such
an inspection. If the Executive Committee does not decide to perform such an
inspection, then the party making such request may conduct such inspection at
its own expense; provided, however, that if material inaccuracies are found
in the course of the inspection, then AVLIC will pay the costs of such
inspection. Unless otherwise agreed, AML and XXXX shall continue to provide
such financial and statistical reports to AVLIC as they are currently
preparing for fixed annuities and variable products.
8.4 PERFORMANCE. The failure of any party to insist upon strict
performance of any provision of this Agreement shall not constitute a waiver
of the right to insist upon strict performance or the obligation to strictly
perform thereafter.
23
8.5 RELATIONSHIP OF PARTIES.
(a) XXXX and AML assume no responsibility under this Agreement other
than to render the services, advice and assistance provided for hereunder in
good faith and with reasonable care. The relationship between AVLIC as the
recipient of services and XXXX and AML as the providers of services with
respect to and for the purposes of this Agreement shall be that of
independent contractor and nothing contained herein shall create the
relationship of employer-employee or principal-agent, except that those
individuals who are elected as officers or directors of AVLIC shall have the
normal duties, responsibilities and relationships attendant to those
positions.
(b) Except as provided herein and except for individuals when acting in
their capacity as officers or directors of AVLIC, neither XXXX, AVLIC nor AML
shall act or hold itself out as the agent of the other. Associates of XXXX
and AML providing administrative services to AVLIC pursuant to this Agreement
shall provide such services as associates of XXXX and AML except when acting
as directors and officers of AVLIC. The facilities used by XXXX and AML in
providing such services shall be deemed to be owned and operated by XXXX and
AML, respectively, and, unless otherwise provided in writing, shall not be
considered as being leased to AVLIC.
8.6 INDEMNIFICATION.
(a) XXXX and AML each agree to indemnify and to hold AVLIC harmless
from any and all Damages incurred by it or any of its Affiliates as the
result of (i) any negligent or intentional act or omission or violation by
XXXX or AML (or their respective employees or agents) of its obligations
hereunder, except to the extent such negligent or intentional act,
24
omission or violation is caused by AVLIC or agents of AVLIC who are not
employees or agents of AML or XXXX; or (ii) any claims of infringement of any
license, patent, trademark or other right of another person asserted against
AVLIC with respect to any System used in providing services hereunder.
Notwithstanding the foregoing, the provisions of this section will not apply
with respect to (i) consequential damages or (ii) actions or omissions by
agents or employees of XXXX or AML when such acts or omissions occur in those
individuals' fiduciary capacity as officers or directors of AVLIC and not as
providers of services hereunder; and, where the action required to be
performed under this Agreement involves the exercise of discretion, the fact
that damages result to AVLIC by reason of an XXXX or AML agent having
exercised such discretion shall not, if such action was taken in good faith
and with reasonable care, be deemed to be an act of negligence for which
indemnity may be recovered by AVLIC. In instances in which the agents or
employees of XXXX or AML are acting in their fiduciary capacities as officers
or directors of AVLIC, XXXX and AML shall be liable only for actions or
omissions involving intentional misconduct or a knowing violation of Law, or
those not made in good faith.
(b) AVLIC agrees to indemnify and to hold XXXX, AML and their
respective Affiliates harmless from any and all Damages incurred by XXXX or
AML and/or any of their respective Affiliates as the result of or in
connection with claims by Third Parties in connection with the performance of
duties under this Agreement except to the extent of claims described in
Section 8.6(a) (and excluding the costs incurred by XXXX or AML in rendering
the services and providing related accommodations and other goods under the
terms of this Agreement).
25
(c) Nothing set forth in this Section 8.6 shall deprive AML, XXXX or
AVLIC of any claims or causes of action that any of them may have against the
other(s) which are independent of this Agreement.
(d) AVLIC agrees that the directors and officers of AVLIC who are
provided by AML and XXXX as contemplated under this Agreement shall not be
liable for Damages which result from acts or omissions by such officers or
directors
(i) which are done or omitted to be done in connection with
their positions as director or officer of AVLIC; and
(ii) which are done in good faith; and
(iii) which do not involve intentional misconduct or a knowing
violation of the law; and
(iv) which do not result in such officer or director receiving an
improper direct or indirect financial benefit.
(e) Additionally, AVLIC agrees to indemnify and hold harmless all
directors and officers provided by AML and XXXX against any Damages they
incur as a result of or in connection with any action or failure to act by
such officer or director which result from acts or omissions by such officers
or directors
(i) which are done or omitted to be done in connection with
their positions as director or officer of AVLIC; and
(ii) which are done in good faith; and
(iii) which do not involve intentional misconduct or a knowing
violation of the law; and
26
(iv) which do not result in such officer or director receiving an
improper direct or indirect financial benefit.
(f) Within a reasonable time after the party seeking indemnification
pursuant to this Section 8.6 (the "Indemnified Party") has actual knowledge
of a claim for Damages, such Indemnified Party will give notice to the party
from whom indemnification is sought (the "Indemnifying Party").
(i) If the Indemnifying Party notifies the Indemnified Party
within 20 days after receiving notice of the claim from the Indemnified Party
that the Indemnifying Party does not dispute its obligation to the
Indemnified Party with respect to such claim and that the Indemnifying Party
desires to defend the Indemnified Party with respect to such claim for
Damages, then the Indemnifying Party will have the right to defend, at its
sole cost and expense, such claim by all appropriate proceedings, which
proceedings will be diligently prosecuted by the Indemnifying Party to a
final conclusion or will be settled at the discretion of the Indemnifying
Party (with the consent of the Indemnified Party, which consent will not be
withheld or delayed unreasonably). From the date of such notice, the
Indemnifying Party will have full control of such defense and proceedings,
including any compromise or settlement thereof; PROVIDED, HOWEVER, that the
Indemnified Party may, at any time prior to its receipt of such notice from
the Indemnifying Party, file any motion, answer, or other pleadings that the
Indemnified Party may deem necessary or appropriate to protect its interests.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party that the Indemnifying Party does not dispute its obligation to the
Indemnified Party and that the Indemnifying Party desires to defend the
Indemnified Party with respect to such claim for
27
Damages pursuant to this Section, or if the Indemnifying Party gives such
notice but fails diligently and promptly to prosecute or settle such claim,
then the Indemnified Party will have the right to defend, at the sole cost
and expense of the Indemnifying Party, such claim by all appropriate
proceedings, which proceedings will be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or will be settled at the
discretion of the Indemnified Party. The Indemnified Party will have full
control of such defense and proceedings, including any compromise or
settlement thereof; PROVIDED, HOWEVER, that if requested by the Indemnified
Party, the Indemnifying Party agrees, at the sole cost and expense of the
Indemnifying Party, to cooperate with the Indemnified Party and its counsel
in contesting such claim.
9. TERM OF AGREEMENT AND NOTICES
9.1 TERM OF AGREEMENT. This Agreement shall remain in full force and
effect for a period of five (5) years from the Closing Date (the "Initial
Term"). At the beginning of the fifth year, AML, XXXX and AVLIC agree to and
shall enter into discussions of the method and cost of obtaining the services
to be provided to AVLIC pursuant hereto. At such time, the parties shall
consider obtaining such services from other providers based upon market
conditions at that time and shall cooperate in determining whether to
terminate this Agreement or any portions thereof and whether to obtain such
services from another source. If no agreement has been achieved with respect
to the continuation of services rendered by AML and XXXX hereunder (or any
portion thereof) with six (6) months prior to the end of the Initial Term,
then AML, XXXX and AVLIC each agree to act in good faith to secure new
agreements based upon then existing competitive market conditions. Except
to the extent the parties otherwise agree to extend this
28
Agreement as to XXXX and/or AML (as contemplated under Section 9.2 hereof),
this Agreement will terminate at the end of the Initial Term.
9.2 PARTIAL TERMINATION. This Agreement shall be deemed severable so
that the obligations of XXXX to provide services hereunder may be terminated
(in whole, but not in part) without terminating the services of AML, and vice
versa.
9.3 TERMINATION FOR CAUSE. This Agreement (or portion hereof) may be
terminated by AVLIC at any time upon delivery of written notice to XXXX or
AML for Cause, provided that such notice shall be effective only as to the
services of the party (XXXX or AML) as to which such Cause exists.
9.4 PROVISIONS UPON TRANSFER OF SHARES. Notwithstanding the foregoing,
in the event of a sale of all of the Shares of AVLIC to AML or to XXXX
pursuant to an Auction or Unilateral Auction or other purchase and sale
transaction, this Agreement may be terminated only in accordance with the
following provisions:
(a) this Agreement shall not be terminable (other than due to the
expiration of the Initial Term) except by or at the direction of the party
purchasing the Shares during the one-year period beginning on the date such
purchase and sale is consummated; and
(b) this Agreement may be terminated by or at the direction of AVLIC
during such one-year period upon 180 days prior written notice, effective at
any time after the 180th day after giving such notice.
9.5 ACTIONS UPON TERMINATION. Upon termination, AVLIC shall
immediately pay XXXX and AML all sums due hereunder through the date of
termination for the rendition of services and XXXX and AML shall immediately
deliver to AVLIC or its designees all forms,
29
records, statements, files, reports and other data and information prepared
or collected by XXXX and AML in connection with the performance of this
Agreement. XXXX and AML respectively shall use all reasonable efforts to
cooperate in the transition of the services and accommodations provided
hereunder as directed by AVLIC. At the request of AVLIC, XXXX and AML shall
use its best efforts to cause all employees of XXXX and AML who are employed
in rendering service, advice and assistance required hereunder to AVLIC on
the date of termination to cooperate fully with AVLIC or its designee in all
respects, including but not limited to all actions necessary to facilitate
the transfer of the servicing obligations provided for hereunder.
10. MISCELLANEOUS
10.1 NOTICES. Section 12.1 of the Joint Venture Agreement is hereby
incorporated herein in its entirety by reference thereto. Any notices to be
given to AVLIC hereunder shall be directed to AVLIC, c/o ALIC and to AVLIC,
c/o AML at the respective addresses of XXXX and AML set forth in said
agreement.
10.2 ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties hereto and supersedes all prior agreements of the parties with
respect to the subject matter contained herein. Any condition to a party's
obligation hereunder may be waived in writing by such party except as
provided herein, in the Joint Venture Agreement or in any other agreement
executed in connection therewith.
10.3 AMENDMENTS. This Agreement shall not be amended, changed,
modified, terminated or discharged in whole or in part, and no notice
requirements set forth herein shall be waived or modified, except by an
instrument in writing duly executed by AML or XXXX and all parties hereto, or
their respective successors or assigns.
30
10.4 BINDING AGREEMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns and AML and XXXX, as participants in the Joint Venture, shall be
third party beneficiaries with respect to all the obligations, covenants, and
agreements set forth herein.
10.5 SEVERABLE PROVISIONS. If any provision of this Agreement shall be
found to be unenforceable by any administrative agency or court of competent
jurisdiction, such finding shall not affect the remaining provisions of this
Agreement and all other provisions herein shall remain in full force and
effect.
10.6 GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of Nebraska. XXXX, AML and AVLIC shall
appropriately comply with all applicable federal, state, and local laws and
rules, regulations or rulings issued under such laws.
10.7 ASSIGNMENT. Except as otherwise provided herein, this Agreement
shall not be assigned by any party hereto without the prior written consent
of the Joint Venture and all parties hereto.
10.8 COUNTERPARTS. This Agreement may be executed in two or more
separate counterparts, each of which shall be deemed to be an original
hereof, but all of which shall constitute one and the same instrument.
10.9 INTERPRETATION. The headings used in this Agreement are for
convenience and are not to be construed or interpreted in connection with
this Agreement. Unless the context of this Agreement otherwise requires,
(a) words using the singular or plural number also include the plural
or singular numbers, respectively;
31
(b) the terms "hereof", "herein", "hereby", "hereto" and similar words
refer to this Agreement; and
(c) the terms "Article" or "Section" refer to the specified Article or
Section of this Agreement.
10.10 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of the parties hereto and their
respective successors and assignors, and it is not the intention of the
parties to confer third party beneficiary rights upon any other person.
10.11 CONSTRUCTION. The parties acknowledge that they and their
respective counsel have worked together closely in drafting, negotiating and
reviewing this Agreement and that any rule of construction to the effect that
any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the 1st day of April, 1996, effective this 1st day of April, 1996.
AMERITAS VARIABLE LIFE INSURANCE
COMPANY
By: /s/ signature
---------------------------------
Attest:
/s/ XXXXXX XXXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxxx, Secretary
32
AMERITAS LIFE INSURANCE CORP.
By: /s/ signature
---------------------------------
Attest:
/s/ XXXXXX XXXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxxx, Secretary
AMERICAN MUTUAL LIFE INSURANCE COMPANY
By: /s/ XXXXX X. XXXXXX
---------------------------------
Attest:
/s/ XXX X. XXXXXX
---------------------------------
Xxx X. Xxxxxx, Asst. Secretary
33
EXHIBIT 1
to Management and Administrative Service Agreement dated as of April 1st, 1996
(the "Agreement")
among Ameritas Variable Life Insurance Company,
Ameritas Life Insurance Corp., and
American Mutual Life Insurance Company
This Exhibit 1 sets out the fees to be paid by AVLIC to XXXX for the services
rendered by XXXX for AVLIC under the terms of the Agreement:
(1) For services rendered by XXXX for AVLIC under Sections 2.1, 2.2,
2.5, 2.7, and 3.2 of the Agreement:
(a) A one-time fee of $136.00 for each repetitive premium variable
life contract issued by AVLIC plus an amount equal to $ .34 per
thousand of face amount of such contracts;
(b) A one-time fee equal to 22% of the first-year premium paid on
each repetitive premium variable life contract issued by AVLIC up
to the target premium on such contract and a one-time fee equal
to 6.8% of the first-year premium paid on each such contract in
excess of the target premium;
(c) A monthly maintenance charge for each in force repetitive premium
variable life contract of AVLIC equal to the sum of the
following:
(i) One-twelfth of $55.00; plus
(ii) One-twelfth of the product of $ .13 times the face amount of
such contract divided by $1,000.00;
(d) A one-time fee of $45.00 for each variable annuity contract
issued by AVLIC;
(e) A one-time fee equal to 1.25% of all premiums paid on each
variable annuity contract of AVLIC;
(f) A monthly maintenance charge for each in force variable annuity
contract of AVLIC equal to one-twelfth of $55.00;
(g) A one-time fee of $136.00 for each single premium variable life
contract issued by AVLIC plus an amount equal to $ .34 per
thousand of face amount of such contracts;
EXHIBIT 1 1 of 4
(h) A one-time fee equal to 1.25% of all premiums paid on each single
premium variable life contract issued by AVLIC; and
(i) A monthly maintenance charge for each in force single premium
variable life contract of AVLIC equal to the sum of the
following:
(i) One-twelfth of $55.00; plus
(ii) One-twelfth of the product of $ .13 times the face amount of
such contract divided by $1,000.00.
(2) For investment services rendered by XXXX for AVLIC under Sections 6,
6.1, 6.2 and 6.3 of the Agreement:
(a) A monthly service charge equal to one-twelfth of 13 basis points
times the average book value of the Other Assets (as defined in
the Agreement) of AVLIC, to the extent the Other Assets do not
exceed $500,000,000; and
(b) A monthly service charge equal to one-twelfth of 10 basis points
times the average book value of the Other Assets of AVLIC which
exceed $500,000,000.
(3) The fees payable by AVLIC to XXXX under this Exhibit 1 shall be
calculated as follows:
(a) The one-time fee of $136.00 payable under Section (1)(a) above
shall be determined monthly based on the number of repetitive
premium variable life contracts issued by AVLIC during that
month;
(b) The one-time fee of $ .34 per thousand of face amount payable
under Section (1)(a) above shall be determined monthly based on
the total face amount of repetitive premium variable life
contracts issued by AVLIC during that month;
(c) The fees payable under Section (1)(b) above shall be determined
monthly based on the total first year premiums paid during that
month on repetitive premium variable life contracts issued by
AVLIC;
(d) The fees payable under Subsection (1)(c)(i) and (ii) above shall
be determined monthly based on the number of repetitive premium
variable life contracts of AVLIC which are in force at the
beginning of that month and the total face amount of such
contracts, respectively;
EXHIBIT 1 2 of 4
(e) The fees payable under Section (1)(d) above shall be determined
monthly based on the number of variable annuity contracts issued
by AVLIC during that month;
(f) The fees payable under Section (1)(e) above shall be determined
monthly based on all premiums paid during that month on variable
annuity contracts of AVLIC;
(g) The fees payable under Section (1)(f) above shall be determined
monthly based on the number of variable annuity contracts of
AVLIC which are in force at the beginning of that month;
(h) The one-time fee of $136.00 payable under Section (1)(g) above
shall be determined monthly based on the number of single premium
variable life contracts issued by AVLIC during that month;
(i) The one-time fee of $ .34 per thousand of face amount payable
under Section (1)(g) above shall be determined monthly based on
the total face amount of single premium variable life contracts
issued by AVLIC during that month;
(j) The fees payable under Section (1)(h) above shall be determined
monthly based on the total premiums paid during that month on
single premium variable life contracts issued by AVLIC; and
(k) The fees payable under Section (1)(i) above shall be determined
monthly based on the number of single premium variable life
contracts of AVLIC which are in force at the beginning of that
month and the total face amount of such contracts, respectively.
(l) The fees payable under Section (2) above shall be determined
monthly based on the average of the Other Assets at the beginning
and end of that month.
(4) In making the calculations described in Section (3) above, reductions
will be made for contracts issued but not delivered or returned during
the "free look period" and for the premiums related thereto and for
similar occurrences.
(5) The term "premiums," as used herein, shall include all premium
payments and other deposits of any kind whatsoever made by
policyholders in respect of Variable Products of AVLIC.
EXHIBIT 1 3 of 4
(6) The term "issued" shall include any policy issued or reissued by AVLIC
other than a policy issued in substitution for a policy issued by
AVLIC within the prior twelve-month period.
(7) The fees detailed herein are for (a) all existing AVLIC Variable
Products; and (b) any newly ssued products which are substantially
similar to the Variable Products which are then currently issued by
AVLIC. The fees to be paid hereunder with respect to any Variable
Product which is not substantially similar to a Variable Product
described in the preceding sentence shall be determined by the parties
to the Agreement prior to the introduction of such Variable Product.
EXHIBIT 1 4 of 4
EXHIBIT 2
to Management and Administrative Service Agreement dated as of April 1st, 1996
(the "Agreement")
among Ameritas Variable Life Insurance Company,
Ameritas Life Insurance Corp., and
American Mutual Life Insurance Company
This Exhibit 2 sets out the fees to be paid by AVLIC to AML for the services
rendered by AML for AVLIC under the terms of the Agreement:
(1) For services rendered by AML for AVLIC under Section 2.3, 2.4,
2.6, 2.7 and 3.3 of the Agreement:
(a) A one-time fee of $90.00 for each Fixed Annuity issued by AVLIC;
(b) A monthly maintenance charge for each in force Fixed Annuity of
AVLIC equal to one-twelfth of $31.00;
(c) A one-time marketing expense charge equal to 3.5% of the total
distribution expense allowance (expressed as a percentage of
total premiums) built into each Fixed Annuity issued by AVLIC.
For example, a calculation of that percentage on total first year
premiums on Fixed Annuities issued by AVLIC is as follows:
(i) Advantage Bonus and Advantage Plus - Total distribution
expense allowance of 6.65% of the total first year premiums
times the marketing expense charge of 3.5% equals 23.3 basis
points; and
(ii) Advantage MVA - Total distribution expense allowance of
7.00% of the total first year premiums times the marketing
expense charge of 3.5% equals 24.5 basis points; and
(d) A similar one-time marketing expense charge equal to 3.5% of the
total distribution expense allowance (as reduced for years after
the first policy year) built into each Fixed Annuity issued by
AVLIC for premiums after the first year.
(2) For investment services rendered by AML for AVLIC under Sections 5,
5.1, 5.2 and 5.3 of the Agreement:
EXHIBIT 2 1 of 3
(a) A monthly service charge equal to one-twelfth of 13 basis points
times the average book value of the Fixed Annuity Assets of
AVLIC, to the extent the Fixed Annuity Assets do not exceed
$500,000,000; and
(b) A monthly service charge equal to one-twelfth of 10 basis points
times the average book value of the Fixed Annuity Assets of AVLIC
which exceed $500,000,000.
(3) The fees payable by AVLIC to AML under this Exhibit 2 shall be
calculated as follows:
(a) The fees payable under Sections (1)(a) above shall be
determined monthly based on the number of Fixed Annuities
issued by AVLIC during that month;
(b) The fees payable under Section (1)(b) above shall be determined
monthly based on the number of Fixed Annuities of AVLIC which are
in force at the beginning of that month;
(c) The fees payable under Sections (1)(c) and (d) above shall be
determined monthly based on the amount of premiums received
during that month on Fixed Annuities issued by AVLIC; and
(d) The fees payable under Section (2) above shall be determined
monthly based on the average of the Fixed Annuity Assets at the
beginning and end of that month.
(4) In making the calculations described in Section (3) above, reductions
will be made for Fixed Annuities issued but not delivered or returned
during the "free look period" and for the premiums related thereto and
for similar occurrences.
(5) The term "premiums," as used herein, shall include all premium
payments and other deposits of any kind whatsoever made by
policyholders in respect of Fixed Annuities of AVLIC.
(6) The term "issued" shall include any policy issued or reissued by AVLIC
other than a policy issued in substitution for a policy issued by
AVLIC within the prior twelve-month period.
(7) The fees determined herein are for (a) all existing AVLIC Fixed
Annuities; (b) all Fixed Annuities which are issued by AVLIC which are
substantially similar to Fixed Annuities currently sold by AML; and
(c) any newly issued products which are substantially similar to the
Fixed Annuities which are then currently sold by
EXHIBIT 2 2 of 3
AVLIC. The fees to be paid hereunder with respect to any Fixed
Annuity product which is not substantially similar to the Fixed
Annuity products described in the preceding sentence shall be
determined by the parties to the Agreement prior to the
introduction of such Fixed Annuity product.
EXHIBIT 2 3 of 3
