Exhibit 99.(h)(4)
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT is made and entered into as of September 26,
2001 by and between EQUITRUST LIFE INSURANCE COMPANY (the "Company"), and
AMERICAN CENTURY INVESTMENT SERVICES, INC. ("Distributor").
WHEREAS, the Company offers to the public certain individual variable
annuity and variable life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to make available as investment options under
certain of the Contracts as listed in Exhibit A, designated series of mutual
fund shares as listed in Exhibit B (the "Funds") mutual funds registered under
the Investment Company Act of 1940 (the "1940 Act") and issued by American
Century Variable Portfolios, Inc. (the "Issuer"), and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor
desires to make shares of the Funds available as investment options under the
Contracts.
NOW, THEREFORE, the Company and Distributor agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of this
Agreement, Distributor will cause the Issuer to make shares of the Funds
available to be purchased, exchanged, or redeemed, by or on behalf of the
Accounts (defined in SECTION 8(a) below) through a single account per Fund at
the net asset value applicable to each order. The Funds' shares shall be
purchased and redeemed on a net basis in such quantity and at such time as
determined by the Company to satisfy the requirements of the Contracts for which
the Funds serve as underlying investment media. Dividends and capital gains
distributions will be automatically reinvested in full and fractional shares of
the Funds.
2. TIMING OF TRANSACTIONS. Distributor hereby appoints the Company as
agent for the Funds for the limited purpose of accepting purchase and redemption
orders for Fund shares from the Contract owners. On each day the New York Stock
Exchange (the "Exchange") and the Company are open for business (each, a
"Business Day"), the Company may receive instructions from the Contract owners
for the purchase or redemption of shares of the Funds ("Orders"). Orders
received and accepted by the Company prior to the close of regular trading on
the Exchange (the "Close of Trading") on any given Business Day (currently, 4:00
p.m. Eastern time) and transmitted to the Funds' transfer agent by 9:30 a.m.
Eastern time on the next Business Day will be executed at the net asset value
determined as of the Close of Trading on that Business Day. Any Orders received
by the Company on such day but after the Close of Trading, and all Orders that
are transmitted to the Funds' transfer agent after 9:30 a.m. Eastern time on the
next Business Day, will be executed at the net asset value determined as of the
Close of Trading on the next Business Day following the day of receipt of such
Order. The day as of which an Order is executed by the Funds' transfer agent
pursuant to the provisions set forth above is referred to herein as the "Trade
Date".
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All orders are subject to acceptance or rejection by Distributor or the
Funds in the sole discretion of either of them.
3. PROCESSING OF TRANSACTIONS
The transactions in Fund shares are to be settled directly
with the Funds' transfer agent and the following provisions shall apply:
(a) By 6:30 p.m. Eastern time on each Business Day, Distributor (or
one of its affiliates) will provide to the Company via facsimile or other
electronic transmission acceptable to the Company the Funds' net asset
value, dividend and capital gain information and, in the case of income
funds, the daily accrual for interest rate factor (mil rate), determined at
the Close of Trading.
(b) By 9:30 a.m. Eastern time on the Business Day next following the
Trade Date, the Company will provide to Distributor via facsimile or other
electronic transmission acceptable to Distributor a report stating whether
the instructions received by the Company from Contract owners by the Close
of Trading on such Business Day resulted in the Accounts being a net
purchaser or net seller of shares of the Funds. As used in this Agreement,
the phrase "other electronic transmission acceptable to Distributor"
includes the use of remote computer terminals located at the premises of
the Company, its agents or affiliates, which terminals may be linked
electronically to the computer system of Distributor, its agents or
affiliates (hereinafter, "Remote Computer Terminals").
(c) Upon the timely receipt from the Company of the report described
in (2) above, the Funds' transfer agent will execute the purchase or
redemption transactions (as the case may be) at the net asset value
computed as of the Close of Trading on the Trade Date. Payment for net
purchase transactions shall be made by wire transfer to the applicable Fund
custodial account designated by the Funds on the Business Day next
following the Trade Date. Such wire transfers shall be initiated by the
Company's bank prior to 4:00 p.m. Eastern time and received by the Funds
prior to 6:00 p.m. Eastern time on the Business Day next following the
Trade Date ("T+1"). If payment for a purchase Order is not timely received,
such Order will be, at Distributor's option, either (i) executed at the net
asset value determined on the Trade Date, and the Company shall be
responsible for all costs to Distributor or the Funds resulting from such
delay, or (ii) executed at the net asset value next computed following
receipt of payment. Payments for net redemption transactions shall be made
by wire transfer by the Issuer to the account(s) designated by the Company
on T+1; PROVIDED, HOWEVER, the Issuer reserves the right to settle
redemption transactions within a reasonably sufficient time after the date
the order is placed in order to enable the Company to pay redemption
proceeds within the time specified in Section 22(e) of the 1940 Act or such
shorter period of time as may be required by law. On any Business Day when
the Federal Reserve Wire Transfer System is closed, all communication and
processing rules will be suspended for the settlement of Orders. Orders
will be settled on the next
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Business Day on which the Federal Reserve Wire Transfer System is open and
the original Trade Date will apply.
4. PRICING ERRORS.
(a) In the event any adjustment is required to correct any error in the
computation of the net asset value of a Fund's shares at the shareholder level
as a result of a pricing error that is deemed to be material under the pricing
policy of the Fund's Board of Directors or which Distributor otherwise deems
necessary to correct at the shareholder level, Distributor shall notify Company
as soon as reasonably practical after discovering the need for such adjustment.
(b) Any such notice shall state for each day for which the error occurred
the incorrect price, the correct price and, to the extent communicated to the
Fund's shareholders, the reason for the price change. Company may send this
notice or a derivation thereof (so long as such derivation is approved in
advance by Distributor) to Participants whose accounts are affected by the price
change.
(c) If as a result of any such error the Account maintained by the Fund
receives an amount in excess of the amount to which it otherwise would be
entitled, Distributor and Company agree to evaluate the situation together, on a
case by case basis, with a goal toward pursuing an appropriate course of action.
In the event the Company makes any overpayments to Contract owners attributable
to the provision of materially incorrect share net asset value information that
is not subsequently corrected and communicated to the Company in sufficient time
to prevent overpayment, Distributor agrees to reimburse the Company for the
amount of overpayments. If an adjustment to the Account is necessary,
Distributor shall reimburse Company its reasonable out-of-pocket expenses in
correcting each Participant's records, communicating with Participants regarding
any adjustment to their accounts, and mailing out corrected statements to
Participants.
5. PROSPECTUS AND PROXY MATERIALS.
(a) Distributor shall provide the Company with copies of the Issuer's
proxy materials, periodic fund reports to shareholders and other materials that
are required by law to be sent to the Issuer's shareholders. In addition,
Distributor shall provide the Company with a sufficient quantity of prospectuses
of the Funds to be used in conjunction with the transactions contemplated by
this Agreement, together with such additional copies of the Issuer's
prospectuses and Statements of Additional Information as may be reasonably
requested by Company. If the Company provides for pass-through voting by the
Contract owners, or if the Company determines that pass-through voting is
required by law, Distributor will provide the Company with a sufficient quantity
of proxy materials for each, as directed by the Company.
(b) The cost of preparing, printing and shipping of the prospectuses,
periodic fund reports and other materials of the Issuer to the Company shall be
paid by Distributor or its agents or
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affiliates; PROVIDED, HOWEVER, that if at any time Distributor or its agent in
good faith reasonably deems the usage by the Company of such items to be
excessive, it may, prior to the delivery of any quantity of materials in excess
of what is deemed reasonable, request that the Company demonstrate the
reasonableness of such usage. If Distributor believes in good faith the
reasonableness of such usage has not been adequately demonstrated, it may
request that the party responsible for such excess usage pay the cost of
printing (including press time) and delivery of any excess copies of such
materials. Unless the Company agrees to make such payments, Distributor may
refuse to supply such additional materials and Distributor shall be deemed in
compliance with this SECTION 5 if it delivers to the Company at least the number
of prospectuses and other materials as may be required by the Issuer under
applicable law.
(c) If the Company so requests, Distributor shall provide the Issuer's
prospectuses, periodic fund reports and other materials of the Issuer to the
Company by electronic file instead of
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by paper copy. If the Company chooses to receive electronic files, the Company
shall be responsible for any costs of preparing, printing and shipping such
documents.
(d) The cost of any distribution of prospectuses, proxy materials,
periodic fund reports and other materials of the Issuer to the Contract owners
shall be paid by the Company and shall not be the responsibility of Distributor
or the Issuer.
6. RECORD OWNER. The Separate Accounts listed in Exhibit A shall be the
sole shareholder of Fund shares purchased for the Contract owners pursuant to
this Agreement (the "Record Owner"). The Record Owner shall properly complete
any applications or other forms required by Distributor or the Issuer from time
to time.
7. REPRESENTATIONS.
(a) The Company represents and warrants that (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
Separate Accounts listed in Schedule A hereto (the "Accounts"), each of which is
a duly authorized and established separate account under Iowa Insurance law, and
has registered each Account as a unit investment trust under the 1940 Act to
serve as an investment vehicle for the Contracts; (iii) each Contract provides
for the allocation of net amounts received by the Company to an Account for
investment in the shares of one or more specified investment companies available
through the Account to act as underlying investment media; (iv) selection of a
particular investment company is made by the Contract owner under a particular
Contract, who may change such selection from time to time in accordance with the
terms of the applicable Contract; and (v) the activities of the Company
contemplated by this Agreement comply in all material respects with all
provisions of federal and state securities laws applicable to such activities.
(b) Distributor represents that (i) this Agreement has been duly
authorized by all necessary corporate action and, when executed and delivered,
shall constitute the legal, valid and binding obligation of Distributor,
enforceable in accordance with its terms; (ii) the prospectus of each Fund
complies in all material respects with federal and state securities laws; (iii)
shares of the Issuer are registered and authorized for sale in accordance with
all federal and state securities laws; (iv) each Fund engages in business as an
open-end, diversified management investment company and was established for the
purpose of serving as the investment vehicle for separate accounts established
for variable life insurance contracts and variable annuity contracts offered by
insurance companies which have entered into agreements substantially similar to
this Agreement; (v) each Fund is currently qualified as a Regulated Investment
Company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), they will maintain such qualification (under Subchapter M or any
successor or similar provision and the Distributor will notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to qualify or that it might not so qualify in the future); (vi) each Fund will
at all times be adequately diversified within the meaning of Section 817(h) of
the Code and Treasury Regulation 1.817-5 relating to the
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diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations or successors thereto and Distributor will notify the Company
immediately upon having a reasonable basis for believing that a Fund has ceased
to qualify or that it might not so qualify in the future; (vii) the Issuer is
lawfully organized and validly existing under the laws of the State of Maryland
and it does and will comply with applicable provisions of the 1940 Act; (viii)
the Funds and all of their directors, officers, employees and other
individuals/entities having access to the funds and/or securities of the Funds
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage issued by a reputable bonding company (including coverage for
larceny and embezzlement) for the benefit of each Fund in an amount not less
than the minimal coverage as required currently by Rule 17g-1 of the 1940 Act or
related provisions as may be promulgated from time to time; (ix) the Distributor
is a member in good standing of the NASD and is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended (the "1934 Act"); and (x)
the Distributor will sell and distribute the Funds' shares in accordance with
all applicable federal and state securities laws.
8. ADDITIONAL COVENANTS AND AGREEMENTS.
(a) Each party shall comply with all provisions of federal and state laws
applicable to its respective activities under this Agreement. All obligations of
each party under this Agreement are subject to compliance with applicable
federal and state laws.
(b) Each party shall promptly notify the other party in writing in the
event that it is, for any reason, unable to perform any of its obligations under
this Agreement.
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to each Account on any Business Day
will be based upon instructions that it received from the Contract owners, in
proper form prior to the Close of Trading of the Exchange on that Business Day.
The Company shall time stamp all Orders or otherwise maintain records that will
enable the Company to demonstrate compliance with SECTION 9(c) hereof.
(d) The Company covenants and agrees that all Orders transmitted to the
Issuer, whether by telephone, telecopy, or other electronic transmission
acceptable to Distributor, shall be sent by or under the authority and direction
of a person designated by the Company as being duly authorized to act on behalf
of the Accounts. Distributor shall be entitled to rely on the existence of such
authority and to assume that any person transmitting Orders for the purchase,
redemption or transfer of Fund shares on behalf of the Company is properly
authorized to act in such capacity. The Company shall maintain the
confidentiality of all passwords and security procedures issued, installed or
otherwise put in place with respect to the use of Remote Computer Terminals and
assumes full responsibility for the security therefor. The Company further
agrees to be responsible for the accuracy, propriety and consequences of all
data transmitted to Distributor by the Company by telephone, telecopy or other
electronic transmission acceptable to Distributor.
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(e) The Company agrees that, to the extent it is able to do so, it will
use its best efforts to give equal emphasis and promotion to shares of the Funds
as is given to other underlying investments of the Accounts, subject to
applicable Securities and Exchange Commission rules. In addition, the Company
shall not impose any fee, condition, or requirement for the use of the Funds as
investment options for the Contracts that operates to the specific prejudice of
the Funds VIS-A-VIS the other investment media made available for the Contracts
by the Company.
9. COMPANY TO PROVIDE DOCUMENTS AND INFORMATION ABOUT ISSUER.
(a) The Company will provide to Distributor or its designated agent at
least one (1) complete copy of Account Prospectuses, reports, final voting
instruction solicitation material applications for exemptions, requests for
no-action letters and notices, orders or responses relating thereto, and all
amendments and supplements to any of the above, that relate to each Account or
the Contracts, within a reasonable time with the filing of such document with
the SEC or NASD.
(b) The Company will provide to Distributor or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which Issuer, any Fund, Distributor or any of their
affiliates are named, at least fifteen (15) Business Days prior to its use or
such shorter period as the parties hereto may, from time to time, agree upon. No
such material shall be used if Distributor or its designated agent objects to
such use within ten (10) Business Days after receipt of such material or such
shorter period as the parties hereto may, from time to time, agree upon.
Distributor or its designee reserves the right to reasonably object to the
continued use of any such sales literature or other promotional material in
which Issuer, any Fund, Distributor or any of their affiliates is named, and no
such material shall be used if Distributor or its designee so object.
(c) Neither the Company nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
Issuer, any Fund, Distributor or their affiliates in connection with the sale of
the Contracts other than (i) the information or representations contained in the
registration statement, including the Fund Prospectus contained therein,
relating to shares, as such registration statement and Fund Prospectus may be
amended from time to time; or (ii) in reports or proxy materials for Issuer or
any Fund; or (iii) in published reports for Issuer or any Fund that are in the
public domain; or (iv) in sales literature or other promotional material
approved by Distributor, except with the express written permission of
Distributor.
(d) For the purposes of Sections 10 and 11 of this Agreement, the phrase
"sales literature or other promotional material" includes, but is not limited
to, 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, telephone
directories (other than routine listings), electronic media, computerized media,
or other public media (e.g., on-line networks such as the Internet or other
electronic messages), sales literature (i.e., any written or electronic
communication distributed or made generally available to
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customers or the public, including, but not limited to, brochures, circulars,
research reports, market letters, performance reports or summaries, form
letters, telemarketing scripts, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 0000 Xxx.
10. DISTRIBUTOR TO PROVIDE DOCUMENTS AND INFORMATION ABOUT THE COMPANY.
(a) Distributor will provide to the Company at least one (1) complete copy
of Fund Prospectuses, reports and final proxy material and all amendments and
supplements to any of the above. Distributor will also provide to the Company at
least one (1) complete copy of applications for exemptions, requests for
no-action letters and notices, orders or responses relating thereto, and all
amendments and supplements to any of the above, that are reasonably likely to
affect the Company's business, within a reasonable time of the filing of such
document with the SEC or NASD.
(b) Distributor will provide to the Company or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which the Company, or any of its respective affiliates
is named, or that refers to the Accounts or the Contracts, at least fifteen (15)
Business Days prior to its use or such shorter period as the parties hereto may,
from time to time, agree upon. No such material shall be used if the Company or
its designated agent objects to such use within ten (10) Business Days after
receipt of such material or such shorter period as the parties hereto may, from
time to time, agree upon. The Company or its designee reserves the right to
reasonably object to the continued use of any such sales literature or other
promotional material in which the Company or any of its affiliates is named or
that refers to the Accounts or the Contracts, and no such material shall be used
if the Company or its designee so object.
(c) Neither Distributor, Issuer nor any of their affiliates will give any
information or make any representations or statements on behalf of or concerning
the Company, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by the Company for distribution; or (iii) in sales literature or
other promotional material approved by the Company or its affiliates, except
with the express written permission of the Company.
(d) Distributor will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Fund, and of any change
in the Fund's registration statement or prospectus, particularly any change
resulting in a change to the registration statement or prospectus for any
Account. Distributor will work with the Company so as to enable the
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Company to solicit proxies from Contract owners, or to make changes to its
registration statement or prospectus, in an orderly manner.
11. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither Distributor nor any of its affiliates nor the Funds shall use
any trademark, trade name, service xxxx or logo of the Company, or any variation
of any such trademark, trade name, service xxxx or logo, without the Company's
prior written consent, the granting of which shall be at the Company's sole
option. Except as otherwise expressly provided for in this Agreement, the
Company shall not use any trademark, trade name, service xxxx or logo of the
Issuer, Distributor or any variation of any such trademarks, trade names,
service marks, or logos, without the prior written consent of either the Issuer
or Distributor, as appropriate, the granting of which shall be at the sole
option of Distributor and/or the Issuer.
12. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all
Contract owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges. It shall be the responsibility of the Company to
assure that it and the separate accounts of the other Participating Companies
(as defined in SECTION 13(a) below) participating in any Fund calculate voting
privileges in a consistent manner.
(b) The Company will distribute to Contract owners proxy material
furnished by Distributor and will vote shares in accordance with instructions
received from such Contract owners. The Company shall vote Fund shares for which
no voting instructions are received in the same proportion as shares for which
such instructions have been received as long as required by applicable law. The
Company and its agents shall not oppose or interfere with the solicitation of
proxies for Fund shares held for such Contract owners.
13. INDEMNITY.
(a) Distributor agrees to indemnify and hold harmless the Company and its
officers, directors, employees, agents, affiliates and each person, if any, who
controls the Company within the meaning of the Securities Act of 1933
(collectively, the "Indemnified Parties" for purposes of this SECTION 13(a))
against any losses, claims, expenses, damages or liabilities (including amounts
paid in settlement thereof) or litigation expenses (including legal and other
expenses) (collectively, "Losses"), to which the Indemnified Parties may become
subject, insofar as such Losses
(i) arise out of or are based upon any untrue statement of any
material fact contained in the Issuer's 1933 Act registration statement,
Fund Prospectus or sales literature or advertising of any Fund (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or
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omission or was made in reliance upon and in conformity with the
information furnished to Distributor or its affiliates by or on behalf of
the Company or its affiliates for use in Issuer's 1933 Act registration
statement, Fund Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or Shares (or
any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in any
Account's 1933 Act registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf of
Distributor, Issuer or other affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct of
Distributor, Issuer or their affiliates or persons under their control in
connection with the sale or distribution of Fund Shares; or
(iii) arise out of or are based upon any untrue statement of any
material fact contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the foregoing, or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such statement
or omission was in reliance upon and in conformity with information
furnished to the Company or its affiliates by or on behalf of Distributor,
Issuer or its affiliates for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or advertising covering
the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by Distributor to perform the
obligations, provide the services and furnish the materials required of it
under the terms of this Agreement, or any material breach of any
representation and/or warranty made by Distributor in this Agreement or
arise out of or result from any other material breach of this Agreement by
Distributor or the Issuer.
Distributor will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any such
Losses. Distributor shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of the Company in
performing its obligations under this Agreement.
(b) The Company agrees to indemnify and hold harmless Distributor and the
Issuer, and their respective officers, directors, employees, agents, affiliates
and each person, if any, who controls Issuer or Distributor within the meaning
of the Securities Act of 1933 (but not including any participating insurance
company) (collectively, the "Indemnified Parties" for purposes of this SECTION
13(b)) against any Losses to which the Indemnified Parties may become subject,
insofar as such Losses
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(i) arise out of or are based upon any untrue statement of any
material fact contained in any Account's 1933 Act registration statement,
any Account Prospectus, the Contracts, or sales literature or advertising
for the Contracts (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission made in
reliance upon and in conformity with information furnished to the Company
by or on behalf of Distributor or Issuer for use in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or sales
literature or advertising or otherwise for use in connection with the sale
of Contracts or shares (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in the
Issuer's 1933 Act registration statement, any Fund Prospectus, sales
literature or advertising of any Fund, or any amendment or supplement to
any of the foregoing, not supplied for use therein by or on behalf of the
Company or its respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent conduct of the
Company or its respective affiliates or persons under their control; or
(iii) arise out of or are based upon any untrue statement of any
material fact contained in the Issuer's 1933 Act registration statement,
Fund Prospectus, sales literature or advertising of any Fund, or any
amendment or supplement to any of the foregoing, or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information furnished to
Distributor, Issuer or their affiliates by or on behalf of the Company, or
its respective affiliates for use in Issuer's 1933 Act registration
statement, Fund Prospectus, sales literature or advertising of any Fund, or
any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Company to perform the
obligations, provide the services and furnish the materials required of it
under the terms of this Agreement, or the material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company.
The Company will reimburse any legal or other expenses reasonably incurred by
the Indemnified Parties in connection with investigating or defending any such
Losses. The Company shall not be liable for indemnification hereunder if such
Losses are attributable to the negligence or misconduct of Distributor or the
Issuer in performing their obligations under this Agreement.
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(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party of the commencement thereof; but the omission so to notify
the indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this Section 13. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish to, assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this SECTION 13 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnifying party assumes the defense of any such action, the
indemnifying party shall not, without the prior written consent of the
indemnified parties in such action, settle or compromise the liability of the
indemnified parties in such action, or permit a default or consent to the entry
of any judgment in respect thereof, unless in connection with such settlement,
compromise or consent, each indemnified party receives from such claimant an
unconditional release from all liability in respect of such claim.
14. POTENTIAL CONFLICTS
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by the Issuer on December 21, 1987, with the SEC and
the order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in such
application, the Board of Directors of the Issuer (the "Board") will monitor the
Issuer for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts ("Participating
Companies") investing in funds of the Issuer. An irreconcilable material
conflict may arise for a variety of reasons, including: (i) an action by any
state insurance regulatory authority; (ii) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
actions by insurance, tax or securities regulatory authorities; (iii) an
administrative or judicial decision in any relevant proceeding; (iv) the manner
in which the investments of any portfolio are being managed; (v) a difference in
voting instructions given by variable annuity contract owners and variable life
insurance contract owners; or (vi) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order by providing the Board
with all information reasonably necessary for the
12
Board to consider any issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever contract owner voting
instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract owner investments in a Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company 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:
(i) withdrawing the assets allocable to the Accounts from the Fund
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 contract owners and as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Companies) that votes in favor of such segregation, or offering to the
affected contract owners the option of making such a change; and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contract owner voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contract owners having an interest in the Issuer, the Company at its sole
cost, may be required, at the Board's election, to withdraw an Account's
investment in the Issuer and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this SECTION 14, a majority of the disinterested
Board members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the Issuer
be required to establish a new funding medium for any Contract. The Company
shall not be required by this SECTION 14 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
Contract owners materially adversely affected by the irreconcilable material
conflict.
15. TERMINATION; WITHDRAWAL OF OFFERING. This Agreement may be terminated
by either party upon 180 days' prior written notice to the other party.
Notwithstanding the above, the Issuer reserves the right, without prior notice,
to suspend sales of shares of any Fund, in whole or in part, or to make a
limited offering of shares of any of the Funds in the event that (A) any
regulatory body commences formal proceedings against the Company, Distributor,
affiliates of Distributor, or the Issuer, which proceedings Distributor
reasonably believes may have a material adverse impact
13
on the ability of Distributor, the Issuer or the Company to perform its
obligations under this Agreement or (B) in the judgment of Distributor,
declining to accept any additional instructions for the purchase or sale of
shares of any such Fund is warranted by market, economic or political
conditions.
The Company reserves the right to terminate the Agreement:
(a) if shares of the Funds are not reasonably available to meet the
requirements of the Contracts as determined by the Company;
(b) upon institution of formal proceedings against a Fund or Distributor
by the National Association of Securities Dealers, the Securities and Exchange
Commission, or any state securities or insurance department or any other
regulatory body, which would have a material adverse effect on the Distributor's
or a Fund's ability to perform its obligations under this Agreement;
(c) upon a determination by a majority of the Board of Issuer, or a
majority of the disinterested Directors, that a material irreconcilable conflict
exists among the interests of (i) all contract owners of variable insurance
products of all separate accounts, or (ii) the interests of the participating
insurance companies investing in the Funds, as discussed in Section 13 above;
(d) if the Fund ceases to qualify as a Regulated Investment Company under
Subchapter M of the Code, or under any successor or similar provision, or if the
Company reasonably believes that the Fund may fail to so qualify;
(e) if the Fund fails to meet the diversification requirements of Section
817(h) of the Code or if the Company reasonably believes that the Fund will fail
to meet such requirements; or
(f) upon the "assignment" of the Agreement (as defined in the 0000 Xxx)
unless made with the written consent of each party;
(g) if the Fund's adviser is acquired; or
(h) if the Company determines in its sole judgment exercised in good
faith, that either any Fund or the Distributor has suffered a material adverse
change in its business, operations, or financial condition or is the subject of
material adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company or the Contracts (including the
sale thereof).
Notwithstanding the foregoing, this Agreement may be terminated immediately
(i) by any party as a result of any other breach of this Agreement by another
party, which breach is not cured within 30 days after receipt of notice from the
other party, or (ii) by any party upon a determination
14
that continuing to perform under this Agreement would, in the reasonable opinion
of the terminating party's counsel, violate any applicable federal or state law,
rule, regulation or judicial order.
Notwithstanding any termination of this Agreement, Issuer and Distributor
will, at the option of the Company, continue to make available additional shares
of each Fund pursuant to the terms and conditions of this Agreement for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts will be permitted to reallocate
investments in the Funds (as in effect on such date), redeem investments in the
Funds and/or invest in the Funds upon the making of additional purchase payments
under the Existing Contracts.
16. NON-EXCLUSIVITY. Both parties acknowledge and agree that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each party is free to enter into similar agreements and arrangements
with other entities.
17. SURVIVAL. The provisions of SECTION 11 (Use of Names) and SECTION 13
(Indemnity) of this Agreement shall survive termination of this Agreement.
18. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
19. NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
EquiTrust Life Insurance Company
0000 Xxxxxxxxxx Xxxxxx
Xxxx Xxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Maker, Vice President-Investment
Administration
000-000-0000 (office number)
000-000-0000 (telecopy number)
To the Issuer or Distributor:
American Century Investment Services, Inc.
0000 Xxxx Xxxxxx
00
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
(000) 000-0000 (office number)
(000) 000-0000 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
SECTION 19 shall be deemed to have been delivered on receipt.
16
20. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of both parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit both parties
hereto and their respective permitted successors and assigns.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
22. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23. CONFIDENTIALITY. Subject to requirements of legal process and
regulatory authority, each party hereto shall treat as confidential the names
and addresses of Contract owners and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
24. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
25. RIGHTS AND REMEDIES. The rights, remedies and obligations contained in
this Agreement are cumulative and are in addition to any and all rights,
remedies an obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
26. ENTIRE AGREEMENT. This Agreement, including the attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
17
If the foregoing correctly sets forth our understanding, please indicate
your agreement to and acceptance thereof by signing below, whereupon this
Agreement shall become a binding agreement between us as of the latest date
indicated.
AMERICAN CENTURY INVESTMENT
SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------
Title: Executive Vice President
-------------------------------
Date: September 28, 2001
--------------------------------
We agree to and accept the terms of the foregoing Agreement.
EQUITRUST LIFE INSURANCE
COMPANY
By: /s/ Xxxxxx X. Xxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------
Title: Vice President
-------------------------
Date: September 26, 2001
------------------------
18
EXHIBIT A
SEPARATE ACCOUNTS AND CONTRACTS
EquiTrust Life Annuity Account
EquiTrust Life Annuity Account II
Individual Flexible Premium Deferred Variable Annuity Contract
EquiTrust Life Variable Account
EquiTrust Life Variable Account II
Flexible Premium Variable Life Insurance Policy
Flexible Premium Last Survivor Variable Life Insurance Policy
1
EXHIBIT B
FUNDS OF AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. (CLASS I)
OFFERED TO THE SEPARATE ACCOUNTS LISTED IN SCHEDULE A
VP Ultra Fund
VP Vista Fund
2
SHAREHOLDER SERVICES AGREEMENT
THIS SHAREHOLDER SERVICES AGREEMENT is made and entered into as of
September 26, 2001 by and between EQUITRUST LIFE INSURANCE COMPANY (the
"Company"), and AMERICAN CENTURY INVESTMENT SERVICES, INC. ("Distributor").
WHEREAS, pursuant to that certain Participation Agreement (the
"Participation Agreement") by and between the Company and Distributor of even
date herewith, Distributor is making shares of certain mutual funds listed in
Exhibit A hereto (the "Funds") available to the Company for use as investment
options under certain individual variable annuity and variable life insurance
contracts (the "Contracts"); and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor
desires to retain the Company to perform certain administrative services on
behalf of the Funds, and the Company is willing and able to furnish such
services;
NOW, THEREFORE, the Company and Distributor agree as follows:
1. ADMINISTRATIVE SERVICES. The Company agrees to provide administrative
services for the Contract owners, including but not limited to those services
specified in Exhibit B (the "Administrative Services"). The Company agrees that
it will maintain and preserve all records as required by law to be maintained
and preserved in connection with providing the Administrative Services, and will
otherwise comply with all laws, rules and regulations applicable to the
marketing of the Contracts and the provision of the Administrative Services.
Upon request, the Company will provide Distributor or its representatives
reasonable information regarding the Administrative Services being provided and
its compliance with the terms of this Agreement.
2. COMPENSATION AND EXPENSES.
(a) Distributor acknowledges that it will derive a substantial savings in
administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Separate Accounts listed on Exhibit C
hereto (the "Accounts") rather than having each Contract owner as a shareholder.
In consideration of the Administrative Services and performance of all other
obligations under this Agreement by the Company, Distributor will pay the
Company a fee (the "Administrative Services Fee") equal to 25 basis points
(0.25%) per annum of the average aggregate amount invested by the Company under
this Agreement.
(b) The payments received by the Company under this Agreement are for
administrative and shareholder services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution.
3
(c) For the purposes of computing the payment to the Company contemplated
by this SECTION 2, the average aggregate amount invested by the Company on
behalf of the Accounts in the Funds over a one month period shall be computed by
totaling the Company's aggregate investment (share net asset value multiplied by
total number of shares of the Funds held by the Company) on each business day
during the month and dividing by the total number of business days during such
month.
(d) Distributor will calculate the amount of the payment to be made
pursuant to this SECTION 2 at the end of each calendar quarter and will make
such payment to the Company within 30 days thereafter. The check for such
payment will be accompanied by a statement showing the calculation of the
amounts being paid by Distributor for the relevant months and such other
supporting data as may be reasonably requested by the Company and shall be
mailed to:
EquiTrust Life Insurance Company
Attn: Xxxxx Xxxxxxxxx
Phone No.: 000-000-0000
Fax No.: 000-000-0000
3. TERM AND TERMINATION. Any party may terminate this Agreement, without
penalty, on 60 days' written notice to the other party. Unless so terminated,
this Agreement shall continue in effect for so long as Distributor (or its
successors in interest), or any affiliate thereof, continues to perform in a
similar capacity for the Funds, and for so long as the Company provides the
services contemplated hereunder with respect to Contracts under which values or
monies are allocated to the Funds.
Termination of this Agreement shall not affect the obligations of the
parties to make payments for Orders received by the Company prior to such
termination and shall not affect the Issuer's obligation to maintain the
Accounts set forth by this Agreement. Distributor shall not have any
administrative services payment obligation to the Company (except for payment
obligations accrued but not yet paid as of termination. However, notwithstanding
any such termination, for a period of two years after the date of such
termination, Distributor will remain obligated to pay the Company the
Administrative Services Fee. The Agreement shall survive the termination to the
extent necessary for each party to perform its obligations with respect to
shares for which Administrative Services Fees continues to be due subsequent to
such termination.
4. NON-EXCLUSIVITY. Both parties acknowledge and agree that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each party is free to enter into similar agreements and arrangements
with other entities.
5. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
4
6. NOTICES. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
EquiTrust Life Insurance Company
0000 Xxxxxxxxxx Xxxxxx
Xxxx Xxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Maker, Vice President-Investment
Administration
000-000-0000 (office number)
000-000-0000 (telecopy number)
To the Issuer or Distributor:
American Century Investment Services, Inc.
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx, Esq.
(000) 000-0000 (office number)
(000) 000-0000 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
SECTION 9 shall be deemed to have been delivered on receipt.
7. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of both parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit both parties
hereto and their respective permitted successors and assigns.
8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
5
9. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10. INTENDED BENEFICIARIES. Nothing in this Agreement shall be construed
to give any person or entity other than the parties, as well as any Fund, any
legal or equitable claim, right or remedy. Rather, this Agreement is intended to
be for the sole and exclusive benefit of the parties, as well as the Funds.
11. APPLICABLE LAW. This Agreement shall be interpreted, construed, and
enforced in accordance with the laws of the State of Missouri without reference
to the conflict of law principles thereof.
12. ENTIRE AGREEMENT. This Agreement, including the attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matters.
If the foregoing correctly sets forth our understanding, please indicate
your agreement to and acceptance thereof by signing below, whereupon this
Agreement shall become a binding agreement between us as of the latest date
indicated.
AMERICAN CENTURY INVESTMENT
SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
--------------------------------
Title: Executive Vice President
-------------------------------
Date: September 28, 2001
--------------------------------
We agree to and accept the terms of the foregoing Agreement.
EQUITRUST LIFE INSURANCE
COMPANY
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------
Title: Vice President
-------------------------------
Date: September 26, 2001
--------------------------------
6
EXHIBIT A
FUNDS (CLASS I)
VP Ultra Fund
VP Vista Fund
A-1
EXHIBIT B
ADMINISTRATIVE SERVICES
Pursuant to the Agreement to which this is attached, the Company shall perform
all administrative and shareholder services required or requested under the
Contracts with respect to the Contract owners, including, but not limited to,
the following:
1. Maintain separate records for each Contract owner, which records shall
reflect the shares purchased and redeemed and share balances of such Contract
owners. The Company will maintain a single master account with each Fund on
behalf of the Contract owners and such account shall be in the name of the
Company (or its nominee) as the record owner of shares owned by the Contract
owners.
2. Disburse or credit to the Contract owners all proceeds of redemptions
of shares of the Funds.
3. Prepare and transmit to the Contract owners, as required by law or the
Contracts, periodic statements showing the total number of shares owned by the
Contract owners as of the statement closing date, purchases and redemptions of
Fund shares by the Contract owners during the period covered by the statement
and the dividends and other distributions paid during the statement period
(reinvested in Fund shares), and such other information as may be required, from
time to time, by the Contracts.
4. Transmit purchase and redemption orders to the Funds on behalf of the
Contract owners in accordance with the procedures set forth by the Distributor.
5. Distribute to the Contract owners copies of the Funds' prospectus,
proxy materials, periodic fund reports to shareholders and other materials that
the Funds are required by law or otherwise to provide to their shareholders or
prospective shareholders.
6. Maintain and preserve all records as required by law to be maintained
and preserved in connection with providing the Administrative Services for the
Contracts.
7. Provide telephonic support for Contract owners with respect to Fund
inquiries (not including information about performance or related to sales) and
forward communications to Contract owners regarding Fund and subaccount
performance.
8. Provide other administrative support for the Funds as mutually agreed
between the Company and the Distributor.
B-1
EXHIBIT C
SEPARATE ACCOUNTS
EquiTrust Life Annuity Account
EquiTrust Life Variable Account
EquiTrust Life Annuity Account II
EquiTrust Life Variable Account II
