UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT made this 26th day of April, 2001, by and between
EquiTrust Life Insurance Company ("ETLIC"), an Iowa corporation, on its own
behalf and on behalf of EquiTrust Life Variable Accounts I and II and EquiTrust
Life Annuity Accounts I and II ("Accounts"), and EquiTrust Marketing Services,
LLC ("EquiTrust Marketing"), a Delaware limited liability company.
WITNESSETH
WHEREAS, ETLIC has established and maintains the Accounts, segregated
investment accounts, pursuant to the laws of the State of Iowa for the purpose
of selling flexible premium deferred variable universal life policies and
flexible premium last survivor variable universal life policies (the "Policies")
and individual flexible premium deferred variable annuity contracts (the
"Contracts"), to commence after the effectiveness of the registration statement
for the Policies and Contracts as filed with Securities and Exchange Commission
(the "SEC") on Form S-6 and Form N-4, respectively, pursuant to the Securities
Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Accounts are registered as unit investment trusts under the
Investment Company Act of 1940, as amended (the "1940 Act:"); and
WHEREAS, EquiTrust Marketing is registered as a broker-dealer with the
SEC under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member of the National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the parties desire to have EquiTrust Marketing act as principal
underwriter for the Accounts and assume such supervisory responsibility as is
required by federal and state securities law and applicable requirements of the
NASD for the securities activities of any "person associated" (as that term is
defined in Section 3(a)(18) of the 0000 Xxx) with EquiTrust Marketing, including
ETLIC personnel, and engaged directly or indirectly in ETLIC's variable life and
annuity operations (the "associated persons"); and
WHEREAS, ETLIC and the Accounts desire to have the Policies and Contracts
sold and distributed through EquiTrust Marketing, and EquiTrust Marketing is
willing to market and distribute such Policies and Contracts on a non-exclusive
basis, under the terms stated herein.
NOW THEREFORE, the parties hereto agree as follows:
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1. DISTRIBUTOR AND PRINCIPAL UNDERWRITER
ETLIC grants to EquiTrust Marketing the right to be, and EquiTrust Marketing
agrees to serve as, distributor and principal underwriter of the Policies and
Contracts during the term of this Agreement. EquiTrust Marketing agrees to use
its best efforts to solicit applications for the Policies and Contracts, and to
undertake to provide sales services relative to the Policies and Contracts and
otherwise to perform all duties and functions which are necessary and proper for
the distribution of the Policies and Contracts.
2. PREMIUM PAYMENTS
All premium payments or other monies payable for the Policies and Contracts
shall be paid or remitted in full by or on behalf of Policy owners directly to
ETLIC or its designated servicing agent together with such applications, forms
and other documentation as may be required by ETLIC. Checks or money orders in
payment of premiums or other monies payable shall be drawn to the order of
"EquiTrust Life Insurance Company." ETLIC will retain all such payments except
to the extent such payments are allocated to the Accounts.
3. SALES IN ACCORDANCE WITH CURRENT PROSPECTUS
EquiTrust Marketing agrees to offer the Policies and Contracts for sale in
accordance with the current prospectuses therefor. EquiTrust Marketing is not
authorized to give any information or to make any representations concerning the
Policies and Contracts other than those contained in the current prospectuses
therefor filed with the SEC or in such sales literature as may be developed and
authorized by ETLIC.
4. PROSPECTUSES AND PROMOTIONAL MATERIALS
On behalf of the Accounts, ETLIC shall furnish EquiTrust Marketing with copies
of all prospectuses, financial statements, and other documents which EquiTrust
Marketing reasonably requests for use in connection with the distribution of the
Policies and Contracts. ETLIC shall have responsibility for preparing, filing
and printing all required prospectuses and/or registration statements in
connection with the Policies and Contracts and the payment of all related
expenses. EquiTrust Marketing and ETLIC shall cooperate fully in the design,
draft, and review of sales promotion materials and the preparation of individual
sales proposals related to the sale of the Policies and Contracts. EquiTrust
Marketing shall not use any such materials not provided or approved by ETLIC.
5. COMPLIANCE WITH APPLICABLE LAWS
Except as provided in Section 6 hereof, EquiTrust Marketing represents that it
is duly registered as a broker-dealer under the 1934 Act and is a member in good
standing of the NASD and, to the extent necessary to offer the Policies and
Contracts, shall be duly registered
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or otherwise qualified under the securities laws of any state or other
jurisdiction. EquiTrust Marketing shall be responsible for carrying out its
sales and underwriting obligation hereunder in continued compliance with the
NASD Rules of Fair Practice and federal and state securities laws and
regulations. Without limiting the generality of the foregoing, EquiTrust
Marketing agrees that it shall be fully responsible for:
(a) ensuring that no person shall offer or sell the Policies and Contracts on
its behalf until such person is duly registered as a representative of
EquiTrust Marketing, duly licensed and appointed by ETLIC under
applicable state insurance law, and appropriately licensed, registered or
otherwise qualified to offer and sell such Policies and Contracts under
the federal securities laws and any applicable securities laws of each
state or other jurisdiction in which such Policies and Contracts may be
lawfully sold, in which ETLIC is licensed to sell the Policies and
Contracts and in which such persons shall offer or sell the Policies and
Contracts; and
(b) training, supervision, and control of all such persons for purposes of
complying on a continuous basis with the NASD Conduct Rules and with
federal and state securities laws requirements applicable in connection
with the offering and sale of the Policies and Contracts. In this
connection EquiTrust Marketing shall:
(i) conduct such training (including the preparation and utilization
of training materials) as in the opinion of EquiTrust Marketing is
necessary to accomplish the purposes of this Agreement;
(ii) establish and implement reasonable written procedures for
supervision of sales practices of associated persons or brokers
selling the Policies and Contracts;
(iii) establish branch offices and offices of supervisory jurisdiction,
as necessary or appropriate; and
(iv) take reasonable steps to ensure that the various sales
representatives associated with it shall not make recommendations
to an applicant to purchase a Policy or Contract in the absence of
reasonable grounds to believe that the purchase of the Policy or
Contract is suitable for such applicant. While not limited to the
following, a determination of suitability shall be based on
information furnished to a sales representative after reasonable
inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the
likelihood of whether the applicant will persist with the Policy
or Contract for such a period of time that ETLIC's acquisition
costs are amortized over a reasonable period of time.
6. SALES AGREEMENTS
EquiTrust Marketing is hereby authorized to enter into separate written
agreements, on such terms and conditions as EquiTrust Marketing may determine
not inconsistent with this Agreement, with broker-dealers which agree to
participate in the distribution of the Policies
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and Contracts and to use their best efforts to solicit applications for the
Policies and Contracts. All such sales agreements shall provide that each
independent broker-dealer will assume full responsibility for items described in
Sections 5(a) and 5(b) hereof, and for the continued compliance by itself and
its representatives with applicable federal and state securities laws. Such
broker-dealers and their agents or representatives soliciting applications for
the Policies and Contracts shall be duly and appropriately licensed, registered
or otherwise qualified for the sale of such Policies and Contracts under the
federal securities laws, the state insurance laws and any applicable state
securities laws of each state or other jurisdiction in which such Policies and
Contracts may be lawfully sold and in which ETLIC is licensed to sell the
Policies and Contracts.
Each such organization shall be both registered as a broker-dealer under the
1934 Act and a member of the NASD.
Applications for the Policies and Contracts solicited by such organizations
through their representatives shall be forwarded to ETLIC. All payments for the
Policies and Contracts shall be made by check payable to "EquiTrust Life
Insurance Company" and remitted promptly by such organizations to ETLIC as agent
for EquiTrust Marketing. All broker-dealers who agree to participate in the
distribution of the Policies and Contracts shall act as independent contractors
and nothing herein contained shall constitute such broker-dealers or their
agents or employees as employees of ETLIC in connection with the sale of the
Policies and Contracts.
7. INSURANCE LICENSES
Designated persons associated with EquiTrust Marketing, or with other
independent broker-dealers which have entered into agreements with EquiTrust
Marketing for the sales of the Policies and Contracts, who maintain the proper
insurance licenses in the appropriate states or jurisdictions shall be appointed
with ETLIC, provided that ETLIC reserves the right to refuse to appoint any
proposed registered representatives as an agent or broker, and to terminate an
agent or broker once appointed.
8. MAINTENANCE OF BOOKS, RECORDS AND ACCOUNTS
ETLIC and EquiTrust Marketing shall cause to be maintained and preserved, for
the periods prescribed, such accounts, books and other documents as are required
of them by the 1940 Act, the 1934 Act and any other applicable laws and
regulations. The books, accounts and records of ETLIC, the Accounts, and
EquiTrust Marketing as to all transactions hereunder shall be maintained so as
to disclose clearly and accurately the nature and details of the transactions.
As agent for and on behalf of EquiTrust Marketing, ETLIC shall maintain such
books and records of EquiTrust Marketing pertaining to the sale of the Policies
and Contracts and
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required by the 1934 Act as may be mutually agreed upon from time to time by
ETLIC and EquiTrust Marketing; provided that such books and records shall be the
property of EquiTrust Marketing and shall at all times be subject to such
reasonable periodic, special or other examination by the SEC and all other
regulatory bodies having jurisdiction. In addition, ETLIC will maintain records
of all sales commissions paid to associated persons of EquiTrust Marketing in
connection with the sale of the Policies and Contracts. ETLIC, as agent for
EquiTrust Marketing, shall be responsible for sending all required confirmations
on customer transactions in compliance with applicable regulations, as modified
by an exemption or other relief obtained by ETLIC and EquiTrust Marketing.
EquiTrust Marketing shall have the responsibility for maintaining the records of
associated persons of EquiTrust Marketing who are licensed, registered, and
otherwise qualified to sell the Policies and Contracts, and for furnishing
periodic reports thereto to ETLIC. EquiTrust Marketing shall cause ETLIC to be
furnished with such other reports as ETLIC may reasonably request for the
purpose of meeting its reporting and recordkeeping requirements under the
insurance laws of the State of Iowa and any other applicable states or
jurisdictions.
9. COSTS AND EXPENSES BORNE BY EQUITRUST MARKETING
EquiTrust Marketing shall bear the costs and expenses of: (a) services,
materials, and supplies required to be supplied by EquiTrust Marketing pursuant
to the terms of this Agreement and (b) training and supervision of associated
persons.
10. COMPENSATION FOR EQUITRUST MARKETING'S SERVICES
As compensation for EquiTrust Marketing's assumption of the costs and expenses
set forth in Section 9 hereof, the sales services rendered by EquiTrust
Marketing and the associated persons of EquiTrust Marketing, and the continuing
obligations herein, ETLIC shall pay: (a) all commissions or other fees or
amounts which are due or otherwise payable to associated persons of EquiTrust
Marketing in accordance with the compensation schedules attached to the
associated persons agreements for the sale of the Policies and Contracts as may
be revised from time to time by EquiTrust Marketing and in accordance with the
election form of associated persons, if applicable; and (b) such compensation as
is due under dealer sales agreements that EquiTrust Marketing and ETLIC enter
into with other broker-dealers pursuant to Section 6 hereof.
11. PAYMENT ARRANGEMENT
In accordance with the terms of the Letter of Instruction dated the same date as
this Agreement and attached hereto as Exhibit A, as it may be amended from time
to time hereafter, from EquiTrust Marketing to ETLIC, ETLIC will forward
commissions payable to designated associated persons of EquiTrust Marketing as
paying agent on behalf of EquiTrust Marketing and will maintain the books and
records reflecting such payments in accordance with the
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requirements of the 1934 Act on behalf of EquiTrust Marketing. ETLIC
acknowledges and agrees that its services in this regard are purely ministerial
and clerical in nature and shall not interfere with the control and supervision
exercised by EquiTrust Marketing over its associated persons with regard to the
Policies and Contracts. ETLIC further acknowledges and agrees that EquiTrust
Marketing shall not be liable to any party for commissions payable hereunder.
ETLIC may delegate its responsibility to pay compensation or commissions
pursuant to this Section 11 to any other insurer affiliated with ETLIC, in its
discretion, provided such insurer agrees to comply with the provisions hereof
applicable to the payment of such compensation or commissions. ETLIC shall have
no right to compensation for the performance of any activities pursuant to this
Section 11. Associated persons of EquiTrust Marketing shall have no interest in
this Agreement or right to any compensation to be paid by or on behalf of
EquiTrust Marketing hereunder prior to their receipt thereof.
12. INDEMNIFICATION
ETLIC agrees to indemnify EquiTrust Marketing for any losses incurred as a
result of any action taken or omitted by ETLIC or any of its officers, agents,
or employees in performing their responsibilities under this Agreement in good
faith and without willful misfeasance, gross negligence, or reckless disregard
of such obligations.
13. INVESTIGATIONS AND PROCEEDINGS
EquiTrust Marketing and ETLIC agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Policies and Contracts distributed under this Agreement.
EquiTrust Marketing and ETLIC further agree to cooperate fully in any securities
regulatory inspection, inquiry, investigation or proceeding or any judicial
proceeding with respect to ETLIC, EquiTrust Marketing, their affiliates, or the
associated persons to the extent that such inspection, inquiry, investigation or
proceeding is in connection with the Policies and Contracts distributed under
this Agreement. Without limiting the foregoing:
(a) EquiTrust Marketing will be notified promptly of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding or judicial proceeding received by
ETLIC with respect to EquiTrust Marketing or any associated person
or which may affect ETLIC's issuance of any Policy or Contract
marketed under this Agreement; and
(b) EquiTrust Marketing will promptly notify ETLIC of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding received by EquiTrust Marketing or its
affiliates with respect to EquiTrust Marketing or any associated
person in connection with any Policy distributed under this
Agreement or any activity in connection with any such Policy. In
the
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case of a customer complaint, EquiTrust Marketing and ETLIC will
cooperate in investigating such complaint and arrive at a mutually
satisfactory response.
14. TERMINATION
This Agreement may be terminated by either party hereto upon 60 days' written
notice to the other party without the payment of any penalty. This Agreement may
be terminated upon written notice of one party to the other party hereto in the
event of bankruptcy or insolvency of such party to which notice is given. This
Agreement may be terminated at any time upon the mutual written consent of the
parties hereto. This Agreement shall terminate automatically if it shall be
assigned.
Upon termination of this Agreement, all authorizations, rights and obligations
hereunder shall cease except (a) the obligation to settle accounts hereunder,
including commissions on premiums subsequently received for Policies and
Contracts in effect at the time of termination or issued pursuant to
applications received by ETLIC prior to termination, and (b) the agreements
contained in 12 hereof.
15. EXCLUSIVITY
The services of EquiTrust Marketing hereunder are not to be deemed exclusive and
EquiTrust Marketing shall be free to render similar services to others so long
as its services hereunder are not impaired or interfered with hereby.
16. REGULATION
This Agreement shall be subject to the provisions of the 1940 Act and the 1934
Act and the rules, regulations, and rulings thereunder and of the NASD, from
time to time in effect, including such exemptions from the 1940 Act as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
EquiTrust Marketing shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of ETLIC or the Accounts, present or
future, and will provide any information, reports or other material which any
such body by reason of this Agreement may request or require pursuant to
applicable laws or regulations. Without limiting the generality of the
foregoing, EquiTrust Marketing shall furnish the Iowa Department of Insurance
with any information or reports which the Department may request in order to
ascertain whether the variable life operations of ETLIC are being conducted in a
manner consistent with the Department's variable life insurance regulations and
any other applicable law or regulations.
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17. SEVERABILITY
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.
18. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Iowa.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the day and year
first above written.
Attest:
EQUITRUST LIFE INSURANCE COMPANY
/s/ Xxxxxxx X. Xxxx
Xxxxxxx X. Xxxx,
Chief Executive Officer and Director
Attest:
EQUITRUST MARKETING SERVICES, LLC
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx,
Vice President - Investment Administration
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EXHIBIT A
[EquiTrust Marketing Services, LLC Letterhead]
[Letter of Instruction from EquiTrust Marketing to ETLIC]
EquiTrust Life Insurance Company
To Whom it May Concern:
With reference to the agreement (the "Agreement") between you and the
undersigned regarding the payment of commissions for securities transactions to
our associated persons ("Reps"), you are hereby directed to follow these
instructions:
- You shall pay commissions to Reps for the sale of securities
effected on behalf of EquiTrust Marketing in accordance with the
compensation schedules currently in effect. In addition, you shall
pay commissions on an annualized basis as directed by a Rep's
election form, if applicable. You shall be responsible for any
losses incurred as the result of commissions being paid in advance
on premiums which were not received and retained by ETLIC.
- You will be furnished information regarding compensation payable
to each Rep for each processing period through the company's
internal life policy service system, which information may include
instructions with regard to the payment of advances on commissions
payable as well as instructions with regard to annualized payment,
if applicable.
- You will pay gross commissions to EquiTrust Marketing and these
amounts will be recorded on EquiTrust Marketing's accounting
records via book entry. Commissions earned will be paid to each
Rep and any excess commissions retained by EquiTrust Marketing.
- Payments made to Reps may be aggregated with other compensation
payable for other products and services for which you act as
payor.
- You must furnish a statement to each Rep detailing the
compensation paid on behalf of EquiTrust Marketing and indicating
that such portion is paid on behalf of EquiTrust Marketing.
- You may make deductions from commissions that have been authorized
by EquiTrust Marketing or by the Rep and are authorized to make
any deductions from compensation payable to a Rep, such as wage
garnishments ordered by a court of competent jurisdiction against
such Rep.
- You will reimburse to EquiTrust Marketing any commissions
previously paid to a Rep as an advance on commissions payable if
premiums are not received or if that Rep terminates his contract
with you and EquiTrust Marketing.
- You will furnish us on a monthly basis with a report concerning
compensation paid by you during the month pursuant to the
Agreement.
[Signed: EquiTrust Marketing Services, LCC]
