PARTICIPATION AGREEMENT
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Among
VARIABLE INSURANCE PRODUCTS FUNDS,
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FIDELITY DISTRIBUTORS CORPORATION
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and
EQUITRUST LIFE INSURANCE COMPANY
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THIS AGREEMENT, made and entered into as of the 28th day of
August, 2001 by and among EQUITRUST LIFE INSURANCE COMPANY, (hereinafter the
"Company"), an Iowa corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); and FIDELITY DISTRIBUTORS CORPORATION (hereinafter the
"Underwriter"), a Massachusetts corporation; and each of VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II and VARIABLE INSURANCE
PRODUCTS FUND III, each an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (each referred to hereinafter as the
"Fund").
RECITALS
WHEREAS, each Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in each Fund is divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, each Fund has obtained an order from the Securities
and Exchange Commission, dated October 15, 1985 (File No. 812-6102) or
September 17, 1986 (File No. 812-
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6422), granting Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940,
as amended, (hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b)
(15) thereunder, to the extent necessary to permit shares of the Fund to be
sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, each Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the variable life insurance and/or variable annuity
products identified on Schedule A hereto ("Contracts") have been or will be
registered by the Company under the 1933 Act, unless such Contracts are exempt
from registration thereunder; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act, unless such Account is
exempt from registration thereunder; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid Contracts and the
Underwriter is authorized to sell such shares to each Account at net asset
value;
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NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Underwriter and each Fund agree as follows:
ARTICLE A. FORM OF AGREEMENT
Although the parties have executed this Agreement in the form of
a Master Participation Agreement for administrative convenience, this Agreement
shall create a separate participation agreement for each Fund, as though the
Company and the Distributor had executed a separate, identical form of
participation agreement with each Fund. No rights, responsibilities or
liabilities of any Fund shall be attributed to any other Fund.
ARTICLE I. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1.1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Boston time
on the next following Business Day. Beginning within three months of the
effective date of this Agreement, the Company agrees that all orders for the
purchase and redemption of Fund shares on behalf of the Accounts will be placed
by the Company with the Funds or their transfer agent by electronic
transmission. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the Contract
owners invested in such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as
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Articles I, III, V, VII and Section 2.5 of Article II of this Agreement is in
effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the Contracts shall be invested in the
Fund, in such other Funds advised by the Adviser as may be mutually agreed to in
writing by the parties hereto, or in the Company's general account, provided
that such amounts may also be invested in an investment company other than the
Fund.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purposes of Section 2.10 and 2.11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time. If the Fund is unable to meet the
7:00 p.m. time stated herein, it shall provide reasonable additional time for
the Company to place orders for the purchase and redemption of shares, so long
as such additional time period does not prejudice shareholders generally.
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ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act or are exempt from registration
thereunder; that the Contracts will be issued and sold in compliance in all
material respects with all applicable Federal and State laws and that the sale
of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under Section 508A of the
Iowa Insurance Code and that each Account is either registered or exempt from
registration as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Iowa and all applicable federal and state securities laws and that the Fund is
and shall remain registered under the 0000 Xxx. The Fund shall amend the
Registration Statement for its shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
shares. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. Subject to the Fund's compliance with applicable
diversification requirements under this Agreement, the Company represents that
the Contracts are currently treated as endowment, life insurance or annuity
insurance contracts, under applicable provisions of the Code and that it will
make every effort to maintain such treatment and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund
currently does not intend to make any payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it may make
such payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
12b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
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(b) With respect to Service Class shares and Service Class 2
shares, the Fund has adopted Rule 12b-1 Plans under which it makes payments to
finance distribution expenses. The Fund represents and warrants that it has a
board of trustees, a majority of whom are not interested persons of the Fund,
which has formulated and approved each of its Rule 12b-1 Plans to finance
distribution expenses of the Fund and that any changes to the Fund's Rule 12b-1
Plans will be approved by a similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance with
the laws of the State of Iowa and the Fund and the Underwriter represent that
their respective operations are and shall at all times remain in material
compliance with the laws of the State of Iowa to the extent required to perform
this Agreement.
2.7. The Underwriter represents and warrants that it is duly
organized and in good standing under the laws of the Commonwealth of
Massachusetts. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the Commonwealth of Massachusetts and all
applicable state and federal securities laws, including without limitation the
1933 Act, the 1934 Act, and the 0000 Xxx.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the Commonwealth of Massachusetts and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the 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. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for
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larceny and embezzlement, and is in an amount not less than $5 million. The
Company agrees to make all reasonable efforts to see that this bond or another
bond containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide camera-ready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus, private offering
memorandum or other disclosure document ("Disclosure Document") for the
Contracts and the Fund's prospectus printed together in one document, and to
have the Statement of Additional Information for the Fund and the Statement of
Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies' prospectuses
and statements of additional information. Except as provided in the following
three sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in lieu
of receiving printed copies of the Fund's prospectus, the Fund will reimburse
the Company in an amount equal to the product of A and B where A is the number
of such prospectuses distributed to owners of the Contracts, and B is the Fund's
per unit cost of typesetting and printing the Fund's prospectus. The same
procedures shall be followed with respect to the Fund's Statement of Additional
Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.
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3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular separate account in
the same proportion as Fund shares of such
portfolio for which instructions have been received
in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Fund or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material. Notwithstanding that the
Fund or its designee did not initially object, the Fund, the Underwriter, 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 Fund or the
Advisor or the Underwriter is named, and no such material shall be used if the
Fund, the Underwriter, or its designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
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supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company, the Contracts
and/or its separate account(s), is named at least fifteen Business Days prior to
its use. No such material shall be used if the Company or its designee
reasonably objects to such use within fifteen Business Days after receipt of
such material. Notwithstanding that the Company did not initially object, the
Company reserves the right to object at any time thereafter to the continued use
of any such sales literature or other promotional material in which the Company
is named, and no such material shall be used thereafter if the Company so
objects.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or Disclosure Document for the Contracts,
as such registration statement or Disclosure Document may be amended or
supplemented from time to time, or in published reports for each Account which
are in the public domain or approved by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters and
notices, orders or responses relating thereto and all supplements and amendments
to any of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with, or issuance of such documents by, the
Securities and Exchange Commission or the NASD.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, Disclosure Documents, Statements of
Additional Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters and notices, orders or responses relating thereto
and all supplements and amendments to any of the above, that relate to the
Contracts or each Account, contemporaneously with the filing of such document
with, or issuance of such documents by, the SEC or the NASD or, if a Contract
and its associated Account are exempt from registration, at the time such
documents are first published.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
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
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listings), electronic or other public media), sales literature (I.E., any
written communication distributed or made generally available to customers or
the public, including 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, and
registration statements, Disclosure Documents, Statements of Additional
Information, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b-1 to finance
distribution expenses, then the Underwriter may make payments to the underwriter
for the Contracts if and in amounts agreed to by the Underwriter in writing and
such payments will be made out of existing fees otherwise payable to the
Underwriter, past profits of the Underwriter or other resources available to the
Underwriter. No such payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall be responsible for ensuring
that all its shares are registered and authorized for issuance in accordance
with applicable federal law and, if and to the extent deemed advisable by the
Fund, in accordance with applicable state laws prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus and reports to owners of Contracts issued by the Company. The
Fund shall bear the costs of soliciting Fund proxies from Contract owners,
including the costs of mailing proxy materials and tabulating proxy voting
instructions, not to exceed the costs charged by any service provider engaged by
the Fund for this purpose. The Fund and the Underwriter shall not be responsible
for the costs of any proxy solicitations of the Company, the Accounts, the
Contracts or mutual funds other than the Fund. The Fund and the Underwriter
shall not seek to hold the Company responsible for the costs of soliciting Fund
proxies.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all
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times comply with Section 817(h) of the Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts and any amendments or other modifications to such
Section or Regulations. In the event of a breach of this Article VI by the Fund,
it will take all reasonable steps (a) to notify Company of such breach and (b)
to adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) 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.
7.2. 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 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.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority of
the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question 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 Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2), establishing a new
registered management investment company or managed separate account.
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7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; 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. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; 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. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that
12
terms and conditions substantially identical to such Sections are contained in
such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of, or investment in, the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
the Disclosure Documents for the Contracts or contained in the
Contracts or advertisement or sales literature for the Contracts
(or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Company by
or on behalf of the Fund for use in any Disclosure Document
relating to the Contracts or in the Contracts or advertisement
or or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature of the Fund not supplied by the Company, or persons
under its control) or wrongful conduct of the Company or persons
under its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or advertisement or sales literature of
the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company; or
13
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation incurred or assessed against an Indemnified Party as
such may arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the
Company of the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts or the
operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other
14
expenses) to which the Indemnified Parties may become subject under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements are related to the
sale or acquisition of, or investment in, the Fund's shares or the Contracts
and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the registration statement or prospectus
or advertisement or sales literature of the Fund (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf
of the Company for use in the registration statement
or prospectus for the Fund or advertisement or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or wrongful conduct of the Fund,
Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii)arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Disclosure Document or advertisement or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon and in conformity with information furnished to
the Company by or on behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement, or to
comply with Section 2.3 of this Agreement); or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
15
result from any other material breach of this
Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
result from the gross negligence, bad faith or willful misconduct of the Board
or any member thereof, are related to the operations of the Fund and:
16
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement, or to
comply with Section 2.3 of this Agreement);or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
17
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party for any reason by sixty (60) days
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are
not reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
any of the Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or federal law
or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be
issued by the Company; or
(d) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio 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; or
(e) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Portfolio in the event
that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or
the Underwriter respectively, shall determine, in their sole
judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith,
18
that either the Fund, the Adviser or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(h) termination by any party by written notice upon the
institution of formal proceedings against the Company, the
Fund, the Adviser or the Underwriter by the NASD, the SEC or
other regulatory body; or
(i) termination by any party by advance written notice upon the
"assignment" of the Agreement (as defined under the 0000
Xxx) unless made with the written consent of each party to
the Agreement; or
(j) termination by any party in the event of a material breach
of this Agreement by another party which breach remains
uncured after thirty days following written notice thereof.
10.2. Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall at the option of the Company, continue to make
available additional shares of the 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 shall be
permitted to reallocate investments in the Fund, redeem investments in the Fund
and/or invest in the Fund upon the making of additional purchase payments under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3. The provisions of Articles II (Representations and
Warranties), VIII (Indemnification), IX (Applicable Law) and XII (Miscellaneous)
shall survive termination of this Agreement. In addition, all other applicable
provisions of this Agreement shall survive termination as long as shares of the
Fund are held on behalf of Contract owners in accordance with section 10.2,
except that the Fund and Underwriter shall have no further obligation to make
Fund shares available in Contracts issued after termination.
10.4. The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. For
the purposes of clause (i) above, "Contract Owner initiated or approved
transactions" shall be deemed to include any redemptions required by the
Contracts as a result of Contract Owner actions. Upon request, the Company will
promptly furnish to the Fund and the Underwriter the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Fund and the
Underwriter) to the effect that any
19
redemption pursuant to clause (ii) above is a Legally Required Redemption.
Furthermore, except in cases where permitted under the terms of the Contracts,
the Company shall not prevent Contract Owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
the Fund or the Underwriter 60 days notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail or overnight mail through a nationally-recognized delivery
service to the other party at the address of such party set forth below or at
such other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
00 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Treasurer
If to the Company:
c/o EquiTrust Life Insurance Company
0000 Xxxxxxxxxx Xxxxxx
Xxxx Xxx Xxxxxx, Xxxx 00000
Attention: Xx. Xxxxxx Xxxxxx,Vice-President - Investment
Admininistration.
If to the Underwriter:
00 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts 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.
20
12.3 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.
12.4 This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations. Nothing in
this paragraph shall require a party to waive any rights or privileges to which
they are legally entitled.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly organized,
licensed and registered to perform the obligations of the Underwriter under this
Agreement. The Company shall promptly notify the Fund and the Underwriter of any
change in control of the Company.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical
and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory)
(and GAAP, if any), as soon as practical and in
any event within 45 days after the end of each
quarterly period:
21
(c) any financial statement, proxy statement, notice
or report of the Company sent to stockholders
and/or policyholders, as soon as practical after
the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulator, as soon as practical after
the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any
annual, interim or special audit made by them of
the books of the Company, as soon as practical
after the receipt thereof.
22
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative.
EQUITRUST LIFE INSURANCE COMPANY
By: _/s/ Xxxxxx X. Marker_______
Name: _Dennis M. Marker _________
Its: _Vice President - Investment Administration__
VARIABLE INSURANCE PRODUCTS FUND,
VARIABLE INSURANCE PRODUCTS FUND II, and
VARIABLE INSURANCE PRODUCTS FUND III
By: _/s/ Xxxxxx Xxxxxx _________
Name: Xxxxxx Xxxxxx
Their: Treasurer
FIDELITY DISTRIBUTORS CORPORATION
By: _/s/ Xxxx Xxxxxxx _________
Name: Xxxx Xxxxxxx
Its: Executive Vice President
23
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
NAME OF SEPARATE ACCOUNT AND POLICY FORM NUMBERS OF CONTRACTS
DATE ESTABLISHED BY BOARD OF DIRECTORS FUNDED BY SEPARATE ACCOUNT
EquiTrust Life Annuity Account Individual flexible premium deferred
Established 1/6/98 variable annuity contract
EquiTrust Life Annuity Account II Individual flexible premium deferred
Established 1/6/98 variable annuity contract
EquiTrust Life Variable Account Flexible premium variable life
Established 1/6/98 insurance policy
EquiTrust Life Variable Account II Flexible premium variable life
Established 1/6/98 insurance policy
EquiTrust Life Variable Account Flexible premium last survivor
Established 1/6/98 variable life insurance policy
EquiTrust Life Variable Account II Flexible premium last survivor
Established 1/6/98 variable life insurance policy
24
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At
this time the Underwriter will inform the Company of the Record, Mailing
and Meeting dates. This will be done verbally approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company shall produce and
personalize the Voting Instruction Cards. The Legal Department of the
Underwriter or its affiliate ("Fidelity Legal") must approve the Card
before it is printed. Allow approximately 2-4 business days for printing
information on the Cards. Information commonly found on the Cards
includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and
verification of votes (already on Cards as printed by the
Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
25
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided
and paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed
to the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is
a small, single sheet of paper that requests Customers
to vote as quickly as possible and that their vote is
important. One copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and
reviewed and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund MUST allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process used.
An often used procedure is to sort Cards on arrival by proposal into
vote categories of all yes, no, or mixed replies, and to begin data
entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Xxxxxxx X.
Xxxxx, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
26
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter, a new Card and return envelope. The mutilated or illegible Card
is disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) Fidelity
Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may request an earlier deadline if required to
calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
27
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
American Century
VP Ultra Fund
VP Vista Fund
Dreyfus Variable Investment Funds
VIF Appreciation Portfolio
VIF Disciplined Stock Portfolio
VIF Growth & Income Portfolio
VIF International Equity Portfolio
VIF Small Cap Portfolio
VIF Socially Responsible Growth Portfolio
EquiTrust Variable Insurance Series Fund
Blue Chip Portfolio
High Grade Bond Portfolio
High Yield Bond Portfolio
Managed Portfolio
Money Market Portfolio
Value Growth Portfolio
Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Small Cap
Franklin Value Securities
Franklin U.S. Government
Mutual Shares Securities Fund
Xxxxxxxxx Growth Securities
X.X. Xxxxxx Series Trust II
Mid-Cap Value Portfolio
Small Company Portfolio
Summit Pinnacle Series
S&P MidCap 400 Index Portfolio
NASDAQ-100 Index Portfolio
Xxxxxxx 2000 Small Cap Index Portfolio
X. Xxxx Price Equity Series, Inc.
Equity Income Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
X. Xxxx Price International Series, Inc.
International Stock Portfolio
28
SUB-LICENSE AGREEMENT
Agreement effective as of this 28th of August, 2001, by and between
Fidelity Distributors Corporation (hereinafter called "Fidelity"), a corporation
organized and existing under the laws of the Commonwealth of Massachusetts, with
a principal place of business at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
and EquiTrust Life Insurance Company (hereinafter called "Company"), a company
organized and existing under the laws of the State of Iowa with a principal
place of business at 0000 Xxxxxxxxxx Xxx., Xxxx Xxx Xxxxxx, Xxxx 00000.
WHEREAS, FMR Corp., a Massachusetts corporation, the parent company of
Fidelity, is the owner of the trademark and the tradename "FIDELITY INVESTMENTS"
and is the owner of a trademark in a pyramid design (hereinafter, collectively
the "Fidelity Trademarks"), a copy of each of which is attached hereto as
Exhibit "A"; and
WHEREAS, FMR Corp. has granted a license to Fidelity (the "Master
License Agreement") to sub-license the Fidelity Trademarks to third parties for
their use in connection with Promotional Materials as hereinafter defined; and
WHEREAS, Company is desirous of using the Fidelity Trademarks in
connection with distribution of "sales literature and other promotional
material" with information, including the Fidelity Trademarks, printed in said
material (such material hereinafter called the Promotional Material). For the
purpose of this Agreement, "sales literature and other promotional material"
shall have the same meaning as in the certain Participation Agreement dated as
of the __ day of August, 2001, among Fidelity, Company and the Variable
Insurance Products Funds (hereinafter "Participation Agreement"); and
WHEREAS, Fidelity is desirous of having the Fidelity Trademarks used in
connection with the Promotional Material.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy whereof is hereby acknowledged,
and of the mutual promises hereinafter set forth, the parties hereby agree as
follows:
1. Fidelity hereby grants to Company a non-exclusive, non-transferable
license to use the Fidelity Trademarks in connection with the promotional
distribution of the Promotional Material and Company accepts said license,
subject to the terms and conditions set forth herein.
2. Company acknowledges that FMR Corp. is the owner of all right, title
and interest in the Fidelity Trademarks and agrees that it will do nothing
inconsistent with the ownership of the Fidelity Trademarks by FMR Corp., and
that it will not, now or hereinafter, contest any registration or application
for registration of the Fidelity Trademarks by FMR Corp., nor will it, now or
hereafter, aid anyone in contesting any registration or application for
registration of the Fidelity Trademarks by FMR Corp.
1
3. Company agrees to use the Fidelity Trademarks only in the form and
manner approved by Fidelity and not to use any other trademark, service xxxx or
registered trademark in combination with any of the Fidelity Trademarks without
approval by Fidelity.
4. Company agrees that it will place all necessary and proper notices
and legends in order to protect the interests of FMR Corp. and Fidelity therein
pertaining to the Fidelity Trademarks on the Promotional Material including, but
not limited to, symbols indicating trademarks, service marks and registered
trademarks. Company will place such symbols and legends on the Promotional
Material as requested by Fidelity or FMR Corp. upon receipt of notice of same
from Fidelity or FMR Corp.
5. Company agrees that the nature and quality of all of the Promotional
Material distributed by Company bearing the Fidelity Trademarks shall conform to
standards set by, and be under the control of, Fidelity.
6. Company agrees to cooperate with Fidelity in facilitating Fidelity's
control of the use of the Fidelity Trademarks and of the quality of the
Promotional Material to permit reasonable inspection of samples of same by
Fidelity and to supply Fidelity with reasonable quantities of samples of the
Promotional Material upon request.
7. Company shall comply with all applicable laws and regulations and
obtain any and all licenses or other necessary permits pertaining to the
distribution of said Promotional Material.
8. Company agrees to notify Fidelity of any unauthorized use of the
Fidelity Trademarks by others promptly as it comes to the attention of Company.
Fidelity or FMR Corp. shall have the sole right and discretion to commence
actions or other proceedings for infringement, unfair competition or the like
involving the Fidelity Trademarks and Company shall cooperate in any such
proceedings if so requested by Fidelity or FMR Corp.
9. This agreement shall continue in force until terminated by Fidelity.
This agreement shall automatically terminate upon termination of the Master
License Agreement. In addition, Fidelity shall have the right to terminate this
agreement at any time upon notice to Company, with or without cause. Upon any
such termination, Company agrees to cease immediately all use of the Fidelity
Trademarks and shall destroy, at Company's expense, any and all materials in its
possession bearing the Fidelity Trademarks, and agrees that all rights in the
Fidelity Trademarks and in the goodwill connected therewith shall remain the
property of FMR Corp. Unless so terminated by Fidelity, or extended by written
agreement of the parties, this agreement shall expire on the termination of that
certain Participation Agreement.
10. Company shall indemnify Fidelity and FMR Corp. and hold each of them
harmless from and against any loss, damage, liability, cost or expense of any
nature whatsoever, including without limitation, reasonable attorneys' fees and
all court costs, arising out of use of the Fidelity Trademarks by Company.
2
11. In consideration for the promotion and advertising of Fidelity as a
result of the distribution by Company of the Promotional Material, Company shall
not pay any monies as a royalty to Fidelity for this license.
12. This agreement is not intended in any manner to modify the terms and
conditions of the Participation Agreement. In the event of any conflict between
the terms and conditions herein and thereof, the terms and conditions of the
Participation Agreement shall control.
13. This agreement shall be interpreted according to the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals, and
hereby execute this agreement, as of the date first above written.
FIDELITY DISTRIBUTORS CORPORATION
By: _/s/ Xxxx Kellogg______
Name: Xxxx Xxxxxxx
Title: Executive Vice President
EQUITRUST LIFE INSURANCE OCMPANY
By: _/s/ Xxxxxx X. Marker___
Name: _Dennis M. Marker _
Title: Vice President-Investment Admin
3
EXHIBIT A
Int. Cl.: 36
Prior U.S. Cls.: 101 and 000
Xxx. Xx. 0,000,000
XXXXXX XXXXXX PATENT AND TRADEMARK OFFICE Registered Mar. 15, 1988
------------------------------------------------------------------
SERVICE XXXX
PRINCIPAL REGISTER
[LOGO] FIDELITY
INVESTMENTS
FMR CORP. (MASSACHUSETTS FIRST USE 2-22-1984; IN COMMERCE 2-
CORPORATION) 22-1984.
00 XXXXXXXXXX XXXXXX
XXXXXX, XX 00000, ASSIGNEE OF NO CLAIM IS MADE TO THE
FIDELITY DISTRIBUTORS EXCLUSIVE RIGHT TO USE
CORPORATION (MASSACHUSETTS "INVESTMENTS", APART FROM THE
CORPORATION) XXXXXX, XX 00000 XXXX AS SHOWN.
FOR: MUTUAL FUND AND STOCK SER. NO. 641,707, FILED 1-28-1987
BROKERAGE SERVICES, IN CLASS 36
(U.S. CLS. 101 AND 102) XXXX XXXXXX, EXAMINING
ATTORNEY
4
SERVICE CONTRACT
With Respect to Service Class 2 shares of:
Variable Insurance Products Fund - All Portfolios
Variable Insurance Products Fund II - All Portfolios
Variable Insurance Products Fund III - All Portfolios
To Fidelity Distributors Corporation:
We desire to enter into a Contract with you for activities in connection with
(i) the distribution of shares of the funds noted above (the "Funds") of which
you are the principal underwriter as defined in the Investment Company Act of
1940 (the "Act") and for which you are the agent for the continuous distribution
of shares, and (ii) the servicing of holders of shares of the Funds and existing
and prospective holders of Variable Products (as defined below).
THE TERMS AND CONDITIONS OF THIS CONTRACT ARE AS FOLLOWS:
1. We shall provide distribution and certain shareholder services for our
clients who own or are considering the purchase of variable annuity contracts or
variable life insurance policies for which shares of the Funds are available as
underlying investment options ("Variable Products"), which services may include,
without limitation, answering questions about the Funds from owners of Variable
Products; receiving and answering correspondence (including requests for
prospectuses and statements of additional information for the Funds); performing
sub-accounting with respect to Variable Products' values allocated to the Funds;
preparing, printing and distributing reports of values to owners of Variable
Products who have contract values allocated to the Funds; printing and
distributing prospectuses, statements of additional information, any supplements
to prospectuses and statements of additional information, and shareholder
reports; preparing, printing and distributing marketing materials for Variable
Products; assisting customers in completing applications for Variable Products;
preparing, printing and distributing subaccount performance figures for
subaccounts investing in Fund shares; and providing other reasonable assistance
in connection with the distribution of Fund shares to insurers.
2. We shall provide such office space and equipment, telephone facilities and
personnel (which may be all or any part of the space, equipment and facilities
currently used in our business, or all or any personnel employed by us) as is
necessary or beneficial for us to provide information and services to existing
and prospective owners of Variable Products, and to assist you in providing
services with respect to Variable Products.
3. We agree to indemnify and hold you, the Funds, and the agents and affiliates
of each, harmless from any and all direct or indirect liabilities or losses
resulting from requests, directions, actions or inactions, of or by us or our
officers, employees or agents regarding the purchase, redemption, transfer or
registration of Fund shares that underlie Variable Products of our clients. Such
indemnification shall survive the termination of this Contract.
Neither we nor any of our officers, employees or agents are authorized
to make any representation concerning Fund shares except those contained in the
registration statement or prospectus for the Fund shares, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in sales literature or other
promotional material approved by the Fund or its designee or by you, except with
the permission of the Fund or you or the designee of either.
4. In consideration of the services and facilities described herein, we shall be
entitled to receive, and you shall pay or cause to be paid to us, fees at an
annual rate as set forth on the accompanying fee schedule. We understand that
the payment of such fees has been authorized pursuant to, and shall be paid in
accordance with, a Distribution and Service Plan approved by the Board of
Trustees of the applicable Fund, by those Trustees who are not "interested
persons" of the Fund (as defined in the 0000 Xxx) and who have no direct or
indirect
5
financial interest in the operation of the Distribution and Service Plan or in
any agreements related to the Distribution and Service Plan ("Qualified
Trustees"), and by shareholders of such class; and that such fees are subject to
change during the term of this Contract and shall be paid only so long as this
Contract is in effect. We also understand and agree that, notwithstanding
anything to the contrary, if at any time payment of all such fees would, in your
reasonable determination, conflict with the limitations on sales or service
charges set forth in Section 2830(d) of the NASD Conduct Rules, then such fees
shall not be paid; provided that in such event each Fund's Board of Trustees
may, but is not required to, establish procedures to pay such fees, or a portion
thereof, in such manner and amount as they shall deem appropriate.
5. We agree to conduct our activities in accordance with any applicable federal
or state laws and regulations, including securities laws and any obligation
thereunder to disclose to our clients the receipt of fees in connection with
their investment in Variable Products.
6. This Contract shall continue in force for one year from the effective date
(see below), and thereafter shall continue automatically for successive annual
periods, provided such continuance is specifically subject to termination
without penalty at any time if a majority of each Fund's Qualified Trustees or a
majority of the outstanding voting securities (as defined in the 0000 Xxx) of
the applicable class vote to terminate or not to continue the Distribution and
Service Plan. Either of us also may cancel this Contract without penalty upon
telephonic or written notice to the other; and upon telephonic or written notice
to us, you may also amend or change any provision of this Contract. This
Contract will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
7. All communications to you shall be sent to you at your offices, 00 Xxxxxxxxxx
Xxxxxx, Xxxxxx, XX 00000. Any notice to us shall be duly given if mailed or
telegraphed to us at the address shown in this Contract.
8. This Contract shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
Very truly yours,
By: _/s/ Xxxxxx X. Xxxxxx _____________
Name: _Dennis M. Marker________________
Title: _Vice President - Investment Administration__
Qualified Recipient: EquiTrust Marketing Services, LLC (NASD MEMBER
BROKER-DEALER affiliate)
An affiliate of: EquiTrust Life Insurance Company
_5400 University Avenue___
Street
_West Des Moines, IA 50266___
City State Zip Code
Date: _August 27, 2001__
FIDELITY DISTRIBUTORS CORPORATION
By: _Eric D. Roiter__
Xxxx X. Xxxxxx
NOTE: Please return TWO signed copies of this Service Contract to Fidelity
Distributors Corporation. Upon acceptance, one countersigned copy will be
returned to you.
FOR INTERNAL USE ONLY:
EFFECTIVE DATE: ___________________
6
FEE SCHEDULE FOR QUALIFIED RECIPIENTS OF
Variable Insurance Products Fund - All Portfolios
Variable Insurance Products Fund II - All Portfolios
Variable Insurance Products Fund III - All Portfolios
(1) Those who have signed the Service Contract and who render distribution,
administrative support and recordkeeping services as described in paragraph 1 of
the Service Contract will hereafter be referred to as "Qualified Recipients."
(2) A Qualified Recipient providing services pursuant to the Service
Contract will be paid a monthly fee at an annualized rate of 25 basis points of
the average aggregate net assets of its clients invested in Service Class 2
shares of the Funds referenced above.
(3) In addition, a Qualified Recipient providing services pursuant to the
Service Contract will be paid a quarterly fee at an annualized rate of five (5)
basis points of the average aggregate net assets of its clients invested in
Service Class 2 shares of the Funds referenced above, excluding the Money Market
and Index 500 Portfolios. In order to be assured of receiving full payment under
this paragraph (3) for a given calendar quarter, a Qualified Recipient must have
insurance company clients with a minimum of $100 million of average net assets
in the aggregate in the Funds listed below. For any calendar quarter during
which assets in these Funds are in the aggregate less than $100 million, the
amount of qualifying assets may be considered to be zero for the purpose of
computing the payments due under this paragraph (3), and the payments under this
paragraph (3) may be reduced or eliminated.
VIP Portfolios: Equity-Income, Growth, Overseas, Asset Manager, Contrafund,
Asset Manager: Growth, Growth Opportunities, Balanced, Growth & Income, Mid
Cap, Dynamic Capital Appreciation, Aggressive Growth, Value
(4) Recipient acknowledges and understands that the fee rate in paragraph
(3) of this Fee Schedule ("Rate Information") is to remain confidential, and
that this confidentiality is of great value and importance to the success of the
business of Fidelity Distributors and/or its affiliates ("Fidelity"). Recipient
agrees to use its best efforts (the same being not less than that employed to
protect its own confidential information) to safeguard the Rate Information and
to prevent the unauthorized, negligent or inadvertent disclosure thereof.
Recipient shall not, without the prior written approval of an officer of
Fidelity, directly or indirectly, disclose the Rate Information to any person or
business entity except for a limited number of employees, attorneys, accountants
and other advisors of the Recipient and its affiliates on a need-to-know basis.
Recipient shall not have any obligations under this paragraph (4) with respect
to the extent that the Rate Information is: (a) publicly known at the time of
the disclosure or becomes publicly known through no wrongful act or failure of
Recipient; (b) subsequently disclosed to Recipient or its affiliates on a
non-confidential basis by a third party not having a confidential relationship
with Fidelity which rightfully acquired such information; or (c) legally
compelled to be disclosed pursuant to a subpoena, summons, order or other
judicial or governmental process, provided Company provides prompt notice of any
such subpoena, order, etc. to Fidelity so that Fidelity will have the
opportunity to obtain a protective order. The Recipient's obligation not to
disclose the Rate Information shall survive any termination of the Service
Contract, as it may be amended, for a period of ten (10) years.
7
