ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT is made and executed by and between
EquiTrust Life Insurance Company ("EquiTrust Life"), an Iowa corporation
having its principal offices at 0000 Xxxxxxxxxx Xxxxxx, Xxxx Xxx Xxxxxx, Xxxx
00000; and Southern Farm Bureau Life Insurance Company (the "Company"), a
life insurance company having its principal offices at 0000 Xxxxxxxxxx Xxxx,
Xxxxxxx, Xxxxxxxxxxx 00000.
RECITALS
The Company desires to have EquiTrust Life provide services to the Company
with respect to certain annuity contracts and/or insurance policies and
EquiTrust Life is willing to provide such services, subject to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and obligations
hereinafter expressed and for the consideration recited herein, the Company and
EquiTrust Life hereby covenant, stipulate and agree as follows:
PART 1 - SERVICES
1.1 SCOPE OF SERVICES. From and after the date of this Agreement, EquiTrust
Life agrees to provide to the Company financial reporting and service
functions with respect to the annuity contract and/or insurance policy forms
underwritten and issued by the Company, as identified and listed in the
schedule of contract and policy forms and riders annexed hereto as Schedule
A. Such financial reporting and service functions shall consist of the
activities set forth and described in the Description of Services annexed
hereto and incorporated herein as Schedule B, including all expenses and fees
related thereto. Schedules A and B may be amended from time to time by mutual
written agreement of the Company and EquiTrust Life.
1.2 ADDITIONAL SERVICES. EquiTrust Life shall review any additional servicing
requirements at the request of the Company, and EquiTrust Life will provide
the Company with a written proposal to include specific services to be
provided, an implementation schedule and any associated fees and expenses.
1.3 COMPENSATION. In consideration of its administration services under this
Agreement for and on behalf of the Company and its contract or policy
holders, annuitants and beneficiaries, the Company will pay EquiTrust Life
such compensation and reimburse EquiTrust Life for such expenses as are
provided for in the schedule of administrative fees annexed hereto as
Schedule C. EquiTrust Life agrees that the compensation payable pursuant to
Schedule C shall be accepted by EquiTrust Life as full compensation from the
Company for the services described in Schedule B.
1.4 COMPANY DIRECTIVES. EquiTrust Life shall, in all cases and at all times,
to the extent there is reasonable notice thereof, observe and obey the rules,
regulations, instructions and directives of the Company as the Company may,
from time to time, promulgate for its operations, and shall not bind the
Company in contravention of any such rules, regulations, instructions or
directives. EquiTrust Life shall not, however, upon reasonable prior notice
to the Company, be responsible for observing or obeying any rule, regulation,
instruction or directive of the Company, if in so doing, EquiTrust Life, in
the opinion of its counsel, would
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be in violation of any statute, rule or regulation promulgated by any
governmental authority with jurisdiction thereover.
1.5 REFERRAL OF COMMUNICATIONS. EquiTrust Life shall handle all
correspondence of a routine nature and other general functions necessary for
satisfactory administration of the Company's annuity contracts or insurance
policies and shall maintain files relative thereto. EquiTrust Life shall
immediately forward to the Company copies of all complaints and all attorney
letters or other communications notifying EquiTrust Life of threatened or
actual litigation against EquiTrust Life or the Company. The Company shall
forward to EquiTrust Life, immediately upon receipt, all complaints and
inquiries, and all attorney letters containing complaints received by the
Company but appropriate for EquiTrust Life response. EquiTrust Life will
dispatch responses within a reasonable period or as required by appropriate
law, whichever is sooner, and will copy the Company on such responses to all
complaints. The Company shall have an opportunity to review EquiTrust Life's
response to all attorney letters and EquiTrust Life will not mail or
otherwise transmit any such written responses to such attorney letters
without the prior written approval of the Company.
PART 2 - STANDARDS OF PERFORMANCE
2.1 LICENSURE. EquiTrust Life will be properly licensed with each state or
other jurisdiction as required.
2.2 GENERAL STANDARD. All services to be provided by EquiTrust Life under
this Agreement shall be performed in a professional manner consistent with
reasonable industry standards consistent with the maintenance of an "A" or
better rating as determined by A.M. Best Company and in accordance with all
applicable laws and regulations.
2.3 RESERVATION OF MANAGEMENT AUTHORITY. Services as are rendered by
EquiTrust Life hereunder are subject to the express limitation that they
shall in no way constitute a relinquishment of the management responsibility
of the Company, which shall not be relieved of any obligation or liability to
which it would otherwise be subject by law as a result of these services
being rendered. The Company retains ultimate and final authority to
underwrite, issue policies, arrange reinsurance or otherwise service the
policies as set forth in Schedule B. The authority granted and delegated in
Schedule B can be amended or removed pursuant to section 3.2 in the sole
discretion of the Company.
PART 3 - EFFECTIVE DATE, TERM; TERMINATION
3.1 EFFECTIVE DATE; TERM. This Agreement shall become and be effective on and
as of January 1, 2000, and, unless sooner terminated pursuant to Section 3.2
hereof, shall thereafter continue in full force and effect until December 31,
2004 (the "Initial Term"); provided, however, upon written notice to
EquiTrust Life on or before December 31, 2002, the Company, at its sole
option, may elect to extend the Initial Term to December 31, 2009; and
provided further, however, after the Initial Term, this Agreement, and all of
its terms and provisions, as the same may have previously been amended by the
parties, shall be automatically renewed and reconducted for successive six
month renewal terms unless one party shall, not less than 90 days prior to
the conclusion of the Initial Term or any renewed term, advise the other
party in writing of its intent that this Agreement terminate as of the
conclusion of any such term.
3.2 TERMINATION: After the conclusion of the Initial Term or any renewed or
extended term, this Agreement may be terminated:
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a. by either party with respect to new business, upon 90 days prior written
notice to the other party;
b. by the Company with respect to business in force, upon 90 days prior
written notice to EquiTrust Life;
c. by the Company, with respect to new business and/or business in force, upon
written notice to EquiTrust Life in the event of the bankruptcy or
insolvency of EquiTrust Life; or
d. by either party upon prior written notice to the other party specifying the
other party's breach or default in the performance of any material covenant
or obligation of this Agreement and failure to cure or remedy such breach
or non-performance within 30 days of the date on which notice of such
breach or default is received, or such longer period as may be permitted by
the party giving notice.
Prior to the completion of the Initial Term of this Agreement, this Agreement
may be terminated only for the reasons stated in subparagraphs "c" and "d"
above, or by the express written agreement of the parties.
3.4 RIGHTS AND OBLIGATIONS UPON TERMINATION. Upon the termination of this
Agreement, EquiTrust Life shall supply the Company with copies of claims and
policy administration documents and all information necessary to administer
the business covered by this Agreement, including data on magnetic media.
PART 4 - INDEMNIFICATION
4.1 MUTUAL INDEMNIFICATION. EquiTrust Life agrees to indemnify and hold the
Company harmless from any liability, damages or losses which the Company may
incur as a result of any claims, actions or judgments, negligent or
intentional, in connection with EquiTrust Life's provision of services to the
Company; provided, however, EquiTrust Life shall not be responsible for
decisions made by the Company or for actions as directed by the Company in
writing. The Company similarly agrees to indemnify and hold EquiTrust Life
harmless for decisions made by the Company or actions as directed by the
Company in writing. Each party warrants to the other that its services and
obligations as performed under this Agreement, including, but not limited to
the materials used therein, will not infringe upon the proprietary interests
or rights of third parties and each party will further indemnify, hold
harmless and defend the other party, its directors, officers, agents and
employees, against any infringement liability, claim or action as a result of
the actions of the indemnifying party.
4.2 NOTICE OF CLAIM. If any claim is made by a party which would give rise to
a right of indemnification under Section 4.1, the party entitled to
indemnification (the "Indemnified Party") promptly will give notice of the
claim to the party required to provide indemnification (the "Indemnifying
Party"). The Indemnified Party will permit the Indemnifying Party to
participate in such defense at the Indemnifying Party's expense. The
Indemnifying Party will not, in the defense of any such claim or litigation,
consent to entry or any judgment or enter into any settlement without the
written consent of the Indemnified Party which will not be withheld
unreasonably. The Indemnified Party shall cooperate fully with the
Indemnifying Party and make available to the Indemnifying Party all pertinent
information under its control relating thereto.
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PART 5 - GENERAL PROVISIONS
5.1 AUTHORIZED OFFICERS. The Company authorizes each of its officers
identified in Schedule D, attached hereto and incorporated herein by
reference (hereinafter referred to as "Authorized Officers"), within the
scope of the officers' authority as described in Schedule D, to: (i)
coordinate communications with EquiTrust Life with respect to this Agreement;
(ii) provide to EquiTrust Life written requests and instructions with respect
to the services provided for herein; and (iii) clarify with EquiTrust Life
the specific scope and timing of records maintained, reports prepared and
other services performed by EquiTrust Life. The Company authorizes its
Executive Vice President, any of its Senior Vice Presidents, and its General
Counsel ("Executive Officers") to agree in writing with EquiTrust Life on
changes in the compensation payable by the Company to EquiTrust Life to
reflect changes in the scope and timing of the services. If EquiTrust Life
receives any letter or other writing from an Executive Officer of the Company
authorizing an officer of the Company to sign documents on behalf of the
Company, then such officer shall be considered an Authorized Officer for
purposes of this Agreement and Schedule D shall be considered amended
accordingly. The Company may amend Schedule D from time to time by giving
notice to EquiTrust Life of the amendment.
5.2 CONFIDENTIAL INFORMATION. In performing the obligations arising under
this Agreement, each party may have access to and receive disclosure of
certain confidential or proprietary information of the other party
(hereinafter "Confidential Information"). Each party shall take all
reasonable steps necessary to protect the confidential and proprietary nature
of all Confidential Information of the other party by affording thereto the
same types of protection which the party in possession of Confidential
Information of the other party affords its own confidential and proprietary
information. Except as provided in this Agreement or as reasonably required
to perform the services referenced herein, neither party shall, directly or
indirectly, disclose or make available to any third party, or use for any
purpose, any Confidential Information belonging to the other party except as
may be required by law. Notwithstanding the foregoing, Confidential
Information shall not include: (i) any information which is or becomes
generally available to the public or the insurance industry, other than as a
result of a breach of this Agreement by the party obtaining the Confidential
Information; (ii) any information which is lawfully obtained by the party
from a third party, provided that the third party is not, to the knowledge of
the party obtaining the information, bound by a nondisclosure agreement with
respect thereto; or (iii) any information which subsequently develops from
independent sources.
5.3 COMPANY PROPERTY. All contract and policy forms, records and supplies
furnished by the Company to EquiTrust Life, shall remain the property of the
Company and shall be turned over to the Company promptly on demand. All other
contract and policy forms or other supplies, and all underwriting files or
other files pertaining to an annuitant's or insured's coverage, whether
retained by the Company or EquiTrust Life, shall be copied upon request and
said copies provided to the other party at the expense of the requesting
party. All licenses and other materials relating to government licensing or
authorizations of the Company with respect to this Agreement shall be and
remain the property of the Company and shall be turned over to the Company by
EquiTrust Life promptly upon demand.
5.4 INSPECTION OF BOOKS AND RECORDS. The Company, or others on its behalf,
shall have the right at any reasonable time to inspect all books and
documents relating to the business administered under this Agreement.
EquiTrust Life shall provide any and all information
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concerning the business administered hereunder required in order to administer
this Agreement and to permit the Company to comply with governmental
regulations, examinations, audits and inspections.
5.5 EQUITRUST LIFE AUTHORITY. EquiTrust Life expressly represents and
warrants that it has the authority to enter into this Agreement and that it
is not or will not be, by virtue of entering into this Agreement or
otherwise, in breach of any other agreement with any other insurance company,
association, firm, person or corporation.
5.6 COMPANY AUTHORITY. The officer signing this Agreement on behalf of the
Company and EquiTrust Life represent and warrant that they are authorized to
execute this document on behalf of such corporations pursuant to their bylaws
or a resolution of their boards of directors.
5.7 INDEPENDENT CONTRACTOR. EquiTrust Life is an independent contractor.
Nothing contained in this Agreement shall be construed to create the
relationship of employer and employee between the Company and EquiTrust Life,
nor shall EquiTrust Life's employees be considered employees of the Company
for any purposes.
5.8 ARBITRATION. In the event of any dispute arising between EquiTrust Life
and the Company with reference to the rights or liabilities of either party
under this Agreement, the dispute shall be referred to three arbitrators
(other than present or former officers or employees of EquiTrust Life, the
Company, any affiliated company or any company with a monetary interest in
the dispute) familiar with the business of insurance. One of the arbitrators
shall be chosen by EquiTrust Life, another by the Company and a third by the
first two. The decision of the arbitrators shall be binding and final. The
standards to be used in the proceedings will be the Commercial Arbitration
Rules of the American Arbitration Association. Each party shall initially pay
the costs and fees of the arbitrator it selects, and the costs and fees of
the third arbitrator shall be divided equally by the parties; PROVIDED,
HOWEVER, that the prevailing party in any arbitration proceeding conducted
pursuant to this Section shall be entitled to recover from the other party
any costs or expenses incurred by the prevailing party in connection with the
arbitration, including the fees of arbitrators and the reasonable fees of
attorneys, actuaries, accountants and other experts.
5.9 ASSIGNMENT. Neither party may assign or delegate all or any part of its
rights and duties under this Agreement without the prior written consent of
the other party.
5.10 NON-WAIVER. The waiver of any breach of any term, covenant or condition of
this Agreement shall not be deemed a waiver of any subsequent breach of the same
or any other term, covenant or condition. No term, covenant or condition of this
Agreement shall be deemed to have been waived unless such waiver is in writing
and signed by the party charged therewith.
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5.11 NOTICES. Any notice required or permitted under this Agreement shall be
deemed sufficiently given and effective five (5) business days after deposit
with the United States Postal Service, postage-prepaid, registered or certified,
return-receipt-requested, by facsimile or other electronic transmission, or upon
receipt if delivered personally. Such notice shall be directed as follows:
EQUITRUST LIFE INSURANCE SOUTHERN FARM BUREAU LIFE
COMPANY INSURANCE COMPANY
Attn.: Xxxxxxx X. Xxxx Attn.: Executive Vice President,
Executive Vice President Chief Executive Officer
and General Manager 0000 Xxxxxxxxxx Xxxx
0000 Xxxxxxxxxx Xxxxxx Xxxxxxx, Xxxxxxxxxxx 00000
Xxxx Xxx Xxxxxx, Xxxx 00000
5.12 TITLES AND HEADINGS. The titles and headings appearing in this Agreement
are included for convenience only and shall not be taken into account in the
interpretation, construction or application of this Agreement.
5.13 AMENDMENT. Any amendment to this Agreement shall be in writing and signed
by authorized representatives of both parties.
5.14 ENTIRE AGREEMENT. This Agreement, together with the several Schedules
appended hereto and incorporated herein, constitutes the entire agreement
between the parties relative to the subject matter hereof, superseding any and
all prior understandings or agreements between the parties and any subsidiary,
parent or affiliated company and may not be amended except by written instrument
executed by the parties.
IN WITNESS WHEREOF, EquiTrust Life and the Company have caused this Agreement
to be subscribed and executed, in triplicate original, by their undersigned
officers, duly authorized hereunto, on the dates hereinafter indicated.
EQUITRUST LIFE INSURANCE COMPANY SOUTHERN FARM BUREAU LIFE
INSURANCE COMPANY
By:________________________________ By:________________________________
Xxxxxxx X. Xxxx
Executive Vice President and
General Manager
Date:_______________________ Date:_______________________
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SCHEDULE A
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SCHEDULE OF CONTRACTS, POLICY FORMS AND RIDERS
------
Description Policy Number
-------------------------------------------------------------------------------
-Variable Products folder 43X-001
-Variable Products brochure 43X-002
-Variable Annuity guide 43X-003
-Variable Annuity Prospectus 43X-007
-Annuity Buyers Guide (if required) 43X-018
-Non-Participating Flexible Premium 43X-062
Deferred Variable Annuity
-Beneficiary Designation form 43X-064
-XXX Disclosure Statement 43X-085
-Xxxx XXX Disclosure Statement 43X-085R
-Simple XXX Disclosure Statement 43X-085S
-Variable Annuity Application form 43X-121
-Systematic Withdrawal/DCA Service form 43X-129
-Settlement Election form 43X-130
-Texas - special complaint notice 43X-174
-Replacement Notice (if required by state) 43X-176XX
-Guaranty Association Notice (if required by state) 43X-177XX
-EFT Notice 43X-279
-Policy Service Request Form 43X-279
-Variable Policyowner Service Request 43X-289
-Beneficiary Statement 43X-341
-Amendment of Application 43X-358
-403(b) Annuity Endorsement 43X-531
-XXX Endorsement 43X-550
-Qualified Plan Endorsement 43X-551
-Xxxx XXX Endorsement plus Texas variation 43X-553
-SIMPLE XXX Endorsement 43X-554
-Lost Policy Certificate 43X-566
-Settlement Options 43X-585
-Statement of Values 43X-821
-Statement of Values 43X-822
-Absolute Assignment 43X-830
-Request for transfer 43X-832
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SCHEDULE B
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DESCRIPTION OF SERVICES
------
1. NEW BUSINESS
EquiTrust Life shall:
(a) Receive all premiums and applications, and shall date stamp and
process those applications promptly.
(b) Verify that agency and agent licenses are in place according to data
provided by the Company.
(c) Maintain all written communication pertinent to the application.
2. UNDERWRITING AND POLICY ISSUE
EquiTrust Life shall:
(a) Prepare a systems master file.
(b) Underwrite all applications.
(c) Create policy and data pages.
(d) Verify that policies are issued as applied for or amended.
(e) Mail, via Regular United States Postal Service, policies to owner
and/or broker/dealer in accordance with the Company's placement.
(f) Create a policyholder file.
3. POLICYHOLDER SERVICE
EquiTrust Life shall:
(a) Maintain policyholder records (computer, hard copy, microfilm or image
system as applicable).
(b) Record all policy services changes on master file.
(c) Receive and respond to requests, complaints and inquiries from
policyholder, and other authorized people in accordance with the
Company's complaint procedures, subject to the provisions set forth
in part 1 Section 1.5.
(d) Maintain all written material reflecting system changes.
(e) Receive and process all disbursement requests with confirmations to
policyholder and broker/dealer in accordance with agreed upon
procedures.
(f) Calculate and collect fees and taxes as applicable.
(g) Receive and process policyholder service requests.
(h) Receive and process policyholder requests for settlement/annuity
options.
(i) Prepare periodic and non-periodic disbursement payments by check to
policyholders or designated payees and deliver in accordance with
agreed upon procedures.
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(j) Withhold and report federal and state income tax as required.
(k) Record and acknowledge assignments of ownership and collateral.
(l) Produce and mail periodic statements of account to policyholders.
(m) Prepare and mail tax forms to policyholders and other payees as
required by law.
4. CLAIMS PROCESSING
The Company shall advise and instruct EquiTrust Life in writing
concerning disputed claims and policy interpretations brought to the
attention of the Company by EquiTrust Life. In the event a Claimant's file is
to be sent to the Company for review, the original copy of that file shall be
retained by EquiTrust Life unless requested by the Company.
EquiTrust Life shall:
(a) Withhold and report federal and state income tax as required.
(b) Fulfill state requirements for Tax Notices and Consents in the
payment of claims.
(c) Include statutory interest on the payment of claims when applicable.
(d) Abide by the applicable state Unfair Claim Settlement Practices
regulations.
(e) Receive and respond to complaints in accordance with the Company's
complaint procedures as set forth in part 1 Section 1.5.
5. AGENCY/AGENT SERVICES
EquiTrust Life shall:
(a) Prepare and transmit to the Company daily production data and
commission information.
(b) Prepare and transmit to the Company tax information for
broker/dealer or other payees as required by law.
(c) Carry sufficient information on registered representatives of the
broker so that proper identification of business issued can be
appropriately credited.
6. COLLECTION AND DISPOSITION OF FUNDS
(a) EquiTrust Life shall act on behalf of the Company in collecting and
receiving funds from insureds, reinsurers, agents and brokers/dealers.
All funds so received and collected shall be deposited promptly in a
bank account for the Company and established by the Company, separate
and apart from any funds belonging to EquiTrust Life or third parties.
(b) The Company shall grant EquiTrust Life authority to disburse funds
from such bank account for the following purposes:
1. Payment of commissions to broker.
2. Payment of return premiums.
3. Payment to the Company of net due to the Company.
4. Payment of fees to EquiTrust Life pursuant to the Settlement
Information section below and Schedule C.
5. Payment of policy proceeds including, but not limited to,
surrenders and claims.
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6. Remit Federal and State policyholder benefit withholding to the
Company for distribution to the proper authorities.
EquiTrust Life shall not disburse funds from the account for any other reason
without written authorization from the Company.
EquiTrust Life shall monitor the account balance on an as needed basis,
determine daily funding needs and communicate deposit requests to the
Company. When requested by EquiTrust Life, the Company shall deposit funds in
amounts sufficient to maintain a minimum balance in the account. It shall be
the responsibility of the Company to make deposits on a timely basis.
7. SETTLEMENT INFORMATION
(a) Within 10 business days after the end of each quarter, EquiTrust Life
shall report to the Company the net due to or from the Company; and the
prior quarter's activity shall be reconciled by EquiTrust Life.
(b) EquiTrust Life shall provide service reports to the Company, including
but not limited to the following reports:
1. Check Register.
2. Premiums and commissions on a year-to-date basis, broken down by first
year and renewals.
3. Benefits including but not limited to: surrender, annuitization or
death.
4. Statutory tax information.
5. Standard production or Marketing Reports as agreed upon.
MONTHLY
(1) Commissions Payable.
(2) A reconciliation between what flowed through bank account
vs. what was reported.
(3) Pending Premium Report.
QUARTERLY
(1) Premiums by State.
(2) Agents' Debit Balances.
(3) Interest Credited.
(4) Reserve Report.
(5) Reconciliation Report (Reinsurance)
ANNUALLY
(1) Surrenders by State.
(2) Death Claims by State.
(3) Any other Policyholder Benefits Paid by State.
(4) Policy Exhibit by State Information.
(5) Death Claim counts by State.
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8. OTHER SERVICES
EquiTrust Life shall:
(a) Reconcile bank statements and cash accounts on a monthly basis.
(b) Furnish to the Company all applicable data necessary for preparation of
the Company's NAIC Convention Blank and corporate tax return.
(c) Have Responsibility for compliance with all statutory and regulatory
requirements with respect to services provided hereunder.
(d) Provide historical record retention in hard copy, microfilm or image as
applicable and in conformance with the Company's retention policy.
(e) Maintain off-site computer disaster recovery backup and recovery tapes on a
daily, weekly and monthly basis, with recovery time to mirror the
Company's rules.
(f) Provide statutory and tax reserve information, such as minimum death
benefits reserves, contingency reserves, ETC., and supporting detail, as
required by the Company.
(g) Support financial, administrative, claim, regulatory and data processing
audit reviews in accordance with guidelines agreed to with the Company.
(h) Process special mailings and/or mailing inserts as reasonably required.
(i) To the extent not specifically provided for herein, EquiTrust Life will
provide such services as are necessary to allow the Company to comply with
its obligations under the Variable Annuity Reinsurance Agreement with
EquiTrust Life Insurance Company.
The Company will notify EquiTrust Life in writing and, likewise,
EquiTrust Life will notify the Company in writing, if there are any
changes in federal, state or local law, rules or regulations which
affect the services provided to the Company under this Agreement.
EquiTrust Life will develop and implement the necessary changes and take
other actions reasonably required so that the services continue to
satisfy applicable laws, rules and regulations. The Company may request
in writing system changes not required by law, rule or regulation.
EquiTrust Life will use its best effort to develop and implement these
changes where the changes are practical and feasible at a pre-agreed
upon cost.
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SCHEDULE C
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EXPENSES
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1. INITIAL CHARGES: There shall be a one time charge of $75,000 for the
development and implementation of the variable annuity product. This amount
shall be paid no later than the execution date of this Agreement.
2. ONGOING CHARGES: Acquisition and maintenance charges related to the variable
annuity contract will be charged as follows:
VARIABLE
CHARGES AND FEES ANNUITY
--------
Acquisition charge per application $108
Annual maintenance fee per policy $53
ACQUISITION CHARGES AND MAINTENANCE FEES
Acquisition charges apply to new applications. The maintenance fee is charged
quarterly on the number of policies in force each quarter. The number of
policies in force each quarter will be equal to half of the sum of the number of
policies in force at the end of the prior quarter and the number in force on the
last day of the current quarter.
MAXIMUM ANNUAL ACQUISITION CHARGES AND MAINTENANCE FEES
If the Company issues at least the cumulative number of policies, as shown
in the following table, by the end of each of the first five calendar years
of this Agreement, then the annual per application acquisition charge and per
policy maintenance fee charged effective January 1 of the following year will
not be greater than charge and the fee shown in the table below. The policy
count would apply on a cumulative basis.
YEAR CUMULATIVE
NO. OF POLICIES MAXIMUM ANNUAL MAXIMUM ANNUAL
ISSUED ACQUISITION CHARGE MAINTENANCE FEE
2000 457 $105 $50
2001 1,656 $101 $46
2002 3,670 $98 $43
2003 6,314 $95 $40
2004 9,090 $95 $37
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Charges and fees in this section are based on 1998 experience. Subject to the
Company qualifying for a cap on the maximum acquisition charge and/or annual
maintenance fee based on the number of policies issued each year, as shown
above, charges and fees will be adjusted annually, on April 1. If the Company
does not meet the requirements regarding the number of policies issued, as
shown above, the maintenance fee will be based on actual results for the year
ended the previous December 31. If new charges and fees are not mutually
agreed to in writing within ninety (90) days after the announcement of the
new charges and fees, the parties agree to resolve any dispute about the new
charges and fees by arbitration pursuant to section 5.8 of this Agreement.
After the Initial Term of this Agreement, if new charges and fees are not
mutually agreed to in writing within ninety (90) days after the date of
announcement of the new charges and fees, this Agreement will terminate.
SERVICES PROVIDED
These initial charges and fees are based on the cost of providing the
services described in Schedule B.
3. OTHER EXPENSES
Except for the following listed services which are specifically excluded from
this Agreement and which will be provided by EquiTrust Life and paid for
separately by the Company only upon the written request for these additional
services by the Company, it is the intent of the parties that EquiTrust Life
will provide such services necessary to allow the Company to comply with
its obligations under the Variable Annuity Reinsurance Agreement with
EquiTrust Life Insurance Company. Those types of services which are excluded
from this agreement are as follows:
1. Additional product development and pricing. Product development,
filing with the appropriate regulatory authorities and pricing for the
initial products are covered by the fees paid under section 1 of this
Schedule C.
2. Agency matters (including fees and costs associated with the
appointment of agents).
3. Commissions.
4. Designing and printing brochures, applications or any other printed
material utilized by the Company.
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5. Filing fees. Any fee incurred by EquiTrust Life related to the
services provided to the Company.
6. Certain claims settlement expenses such as outside legal fees and
expenses.
7. Advertising costs.
8. Video/CD/ other media development.
9. Providing training for Companies' agents/managers/employees.
10. Illustration modification, systems modification, diskette
distribution.
11. Any system modification requested by the Company.
12. Market research conducted for or on behalf of the Company.
13. Advanced underwriting/marketing.
14. Investment accounting
15. Outside legal expenses.
16. Taxes.
17. Software expenses.
18. Preparation of prospectuses.
Direct expenses for services that are not included under Schedule B and that
are provided pursuant to the Company's written request will be billed as
incurred and will be payable within 15 days of receipt.
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SCHEDULE D
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AUTHORIZED OFFICERS
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Executive Vice President
Senior Vice President
Vice President
Treasurer
Assistant Treasurer
Secretary
Assistant Secretary
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