AMENDMENT TO PARTICIPATION AGREEMENT
As of May 3, 2004
by and among
Franklin Xxxxxxxxx Variable Insurance Products Trust
Franklin/Xxxxxxxxx Distributors, Inc.
EquiTrust Life Insurance Company
Franklin Xxxxxxxxx Variable Insurance Products Trust (the "Trust"),
Franklin/Xxxxxxxxx Distributors, Inc. (the "Underwriter," and together with the
Trust, "we" or "us") and EquiTrust Life Insurance Company ("you"), on your
behalf and on behalf of certain Accounts, have previously entered into a
Participation Agreement dated September 7, 2001 (the "Agreement"). The parties
now desire to amend the Agreement in this amendment (the "Amendment").
Except as modified hereby, all other terms and conditions of the Agreement
shall remain in full force and effect. Unless otherwise indicated, the terms
defined in the Agreement shall have the same meaning in this Amendment.
AMENDMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Section 2.1.6 of the Agreement is hereby amended to add the following
sentence at the end of the section:
"Without limiting the foregoing, you agree that, in your agreements with
broker-dealers governing sales of Contracts, you require that the
broker-dealers, in recommending to a Contract owner the purchase, sale or
exchange of any subaccount units under the Contracts, shall have reasonable
grounds for believing that the recommendation is suitable for such Contract
owner."
2. A new Section 2.1.12 is hereby added to the Agreement as follows:
"2.1.12 As covered financial institutions we, only with respect to
Portfolio shareholders, and you, only with respect to Contract owners, each
undertake and agree to comply, and to take full responsibility in complying
with any and all applicable laws, regulations, protocols and other
requirements relating to money laundering including, without limitation,
the International Money Laundering Abatement and Anti-Terrorist Financing
Act of 2001 (Title III of the USA PATRIOT Act)."
3. Section 3 of the Agreement is hereby deleted in its entirety and replaced
with the following Section 3:
"3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
3.1 AVAILABILITY OF TRUST PORTFOLIO SHARES
3.1.1 We will make shares of the Portfolios available to the
Accounts for the benefit of the Contracts. The shares will be available for
purchase at the net asset value per share next computed after we (or our
agent, or you as our designee) receive a purchase order, as established in
accordance with the provisions of the then current prospectus of the Trust.
All orders are subject to acceptance by us and by the Portfolio or its
transfer agent, and become effective only upon confirmation by us.
Notwithstanding the foregoing, the Trust's Board of Trustees ("Trustees")
may refuse to sell shares of any Portfolio to any person, or may suspend or
terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Trustees, they deem such action to be in the
best interests of the shareholders of such Portfolio.
3.1.2 Without limiting the other provisions of this Section 3.1,
among other delegations by the Trustees, the Trustees have determined that
there is a significant risk that the Trust and its shareholders may be
adversely affected by investors with short term trading activity and/or
whose purchase and redemption activity follows a market timing pattern as
defined in the prospectus for the Trust, and have authorized the Trust, the
Underwriter and the Trust's transfer agent to adopt procedures and take
other action (including, without limitation, rejecting specific purchase
orders in whole or in part) as they deem necessary to reduce, discourage,
restrict or eliminate such trading and/or market timing activity. You agree
that your purchases and redemptions of Portfolio shares are subject to, and
that you will assist us in implementing, the Market Timing Trading Policy
and Additional Policies (as described in the Trust's prospectus) and the
Trust's restrictions on excessive and/or short term trading activity and/or
purchase and redemption activity that follows a market timing pattern.
3.1.3 We agree that shares of the Trust will be sold only to
life insurance companies which have entered into fund participation
agreements with the Trust ("Participating Insurance Companies") and their
separate accounts or to qualified pension and retirement plans in
accordance with the terms of the Shared Funding Order. No shares of any
Portfolio will be sold to the general public.
3.2 MANUAL OR AUTOMATED PORTFOLIO SHARE TRANSACTIONS
3.2.1 Section 3.3 of this Agreement shall govern and Section 3.4
shall not be operative, unless we receive from you at the address provided
in the next sentence, written notice that you wish to communicate, process
and settle
2
purchase and redemptions for shares (collectively, "share transactions")
via the Fund/SERV and Networking systems of the National Securities
Clearing Corporation ("NSCC"). The address for you to send such written
notice shall be: Retirement Services, Franklin Xxxxxxxxx Investments, 000
Xxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx 00000-0000. After giving ten
(10) days' advance written notice at the address provided in the previous
sentence of your desire to use NSCC processing, Section 3.4 of this
Agreement shall govern and Section 3.3 shall not be operative.
3.2.2 At any time when, pursuant to the preceding paragraph,
Section 3.4 of this Agreement governs, any party to this Agreement may send
written notice to the other parties that it chooses to end the use of the
NSCC Fund/SERV and Networking systems and return to manual handling of
share transactions. Such written notice shall be sent: (i) if from you to
us, to the address provided in the preceding paragraph; (ii) if from us to
you, to your address in Schedule G of this Agreement. After giving ten
(10) days' advance written notice at the address as provided in the
previous sentence, Section 3.3 of this Agreement shall govern and Section
3.4 shall not be operative.
3.3 MANUAL PURCHASE AND REDEMPTION
3.3.1 You are hereby appointed as our designee for the sole
purpose of receiving from Contract owners purchase and exchange orders and
requests for redemption resulting from investment in and payments under the
Contracts that pertain to subaccounts that invest in Portfolios
("Instructions"). "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates its
net asset value pursuant to the rules of the SEC and its current
prospectus. "Close of Trading" shall mean the close of trading on the New
York Stock Exchange, generally 4:00 p.m. Eastern Time. You represent and
warrant that all Instructions transmitted to us for processing on or as of
a given Business Day ("Day 1") shall have been received in proper form and
time stamped by you prior to the Close of Trading on Day 1. Such
Instructions shall receive the share price next calculated following the
Close of Trading on Day 1, provided that we receive such Instructions from
you before 9 a.m. Eastern Time on the next Business Day ("Day 2"). You
represent and warrant that Instructions received in proper form and time
stamped by you after the Close of Trading on Day 1 shall be treated by you
and transmitted to us as if received on Day 2. Such Instructions shall
receive the share price next calculated following the Close of Trading on
Day 2. You represent and warrant that you have, maintain and periodically
test, procedures and systems in place reasonably designed to prevent
Instructions received after the Close of Trading on Day 1 from being
executed with Instructions received before the Close of Trading on Day 1.
All Instructions we receive from you after 9 a.m. Eastern Time on Day 2
shall be processed by us on the following Business Day and shall receive
the share price next calculated following the Close of Trading on Day 2.
3
3.3.2 We shall calculate the net asset value per share of each
Portfolio on each Business Day, and shall communicate these net asset
values to you or your designated agent on a daily basis as soon as
reasonably practical after the calculation is completed (normally by 6:30
p.m. Eastern Time).
3.3.3 You shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account in federal funds transmitted by wire to
the Trust or to its designated custodian, which must receive such wires no
later than the close of the Reserve Bank, which is 6:00 p.m. Eastern Time,
on the Business Day following the Business Day as of which such purchases
orders are made.
3.3.4 We will redeem any full or fractional shares of any
Portfolio, when requested by you on behalf of an Account, at the net asset
value next computed after receipt by us (or our agent or you as our
designee) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust. We shall make
payment for such shares in the manner we establish from time to time, but
in no event shall payment be delayed for a greater period than is permitted
by the 0000 Xxx.
3.3.5 Issuance and transfer of the Portfolio shares will be by
book entry only. Stock certificates will not be issued to you or the
Accounts. Portfolio shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
3.3.6 We shall furnish, on or before the ex-dividend date,
notice to you of any income dividends or capital gain distributions payable
on the shares of any Portfolio. You hereby elect to receive all such income
dividends and capital gain distributions as are payable on shares of a
Portfolio in additional shares of that Portfolio, and you reserve the right
to change this election in the future. We will notify you of the number of
shares so issued as payment of such dividends and distributions.
3.3.7 Each party to this Agreement agrees that, in the event of
a material error resulting from incorrect information or confirmations, the
parties will seek to comply in all material respects with the provisions of
applicable federal securities laws.
3.4 AUTOMATED PURCHASE AND REDEMPTION
3.4.1 "Fund/SERV" shall mean NSCC's Mutual Fund Settlement,
Entry and Registration Verification System, a system for automated,
centralized processing of mutual fund purchase and redemption orders,
settlement, and account registration; "Networking" shall mean NSCC's system
that allows mutual funds and life insurance companies to exchange account
level information electronically; and "Settling Bank" shall mean the entity
appointed by the Trust or you, as applicable, to perform such settlement
services on behalf of the Trust and you, as applicable, which entity agrees
to abide by NSCC's then current rules and
4
procedures insofar as they relate to same day funds settlement. In all
cases, processing and settlement of share transactions shall be done in a
manner consistent with applicable law.
3.4.2 You are hereby appointed as our designee for the sole
purpose of receiving from Contract owners purchase and exchange orders and
requests for redemption resulting from investment in and payments under the
Contracts that pertain to subaccounts that invest in Portfolios
("Instructions"). "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates its
net asset value pursuant to the rules of the SEC and its current
prospectus. "Close of Trading" shall mean the close of trading on the New
York Stock Exchange, generally 4:00 p.m. Eastern Time. Upon receipt of
Instructions, and upon your determination that there are good funds with
respect to Instructions involving the purchase of shares, you will
calculate the net purchase or redemption order for each Portfolio.
3.4.3 On each Business Day, you shall aggregate all purchase and
redemption orders for shares of a Portfolio that you received prior to the
Close of Trading. You represent and warrant that all orders for net
purchases or net redemptions derived from Instructions received by you and
transmitted to Fund/SERV for processing on or as of a given Business Day
("Day 1") shall have been received in proper form and time stamped by you
prior to the Close of Trading on Day 1. Such orders shall receive the share
price next calculated following the Close of Trading on Day 1, provided
that we receive Instructions from Fund/SERV by 6:30 a.m. Eastern Time on
the next Business Day ("Day 2"). You represent and warrant that orders
received in good order and time stamped by you after the Close of Trading
on Day 1 shall be treated by you and transmitted to Fund/SERV as if
received on Day 2. Such orders shall receive the share price next
calculated following the Close of Trading on Day 2. All Instructions we
receive from Fund/SERV after 6:30 a.m. Eastern Time on Day 2 shall be
processed by us on the following Business Day and shall receive the share
price next calculated following the close of trading on Day 2. You
represent and warrant that you have, maintain and periodically test,
procedures and systems in place reasonably designed to prevent orders
received after the Close of Trading on Day 1 from being executed with
orders received before the Close of Trading on Day 1, and periodically
monitor the systems to determine their effectiveness. Subject to your
compliance with the foregoing, you will be considered the designee of the
Underwriter and the Portfolios, and the Business Day on which Instructions
are received by you in proper form prior to the Close of Trading will be
the date as of which shares of the Portfolios are deemed purchased,
exchanged or redeemed pursuant to such Instructions. Dividends and capital
gain distributions will be automatically reinvested at net asset value in
accordance with the Portfolio's then current prospectus.
3.4.4 We shall calculate the net asset value per share of each
Portfolio on each Business Day, and shall furnish to you through NSCC's
Networking or Mutual Fund Profile System: (i) the most current net asset
value
5
information for each Portfolio; and (ii) in the case of fixed income funds
that declare daily dividends, the daily accrual or the interest rate
factor. All such information shall be furnished to you by 6:30 p.m. Eastern
Time on each Business Day or at such other time as that information becomes
available.
3.4.5 You will wire payment for net purchase orders by the
Trust's NSCC Firm Number, in immediately available funds, to an NSCC
settling bank account designated by you in accordance with NSCC rules and
procedures on the same Business Day such purchase orders are communicated
to NSCC. For purchases of shares of daily dividend accrual funds, those
shares will not begin to accrue dividends until the day the payment for
those shares is received.
3.4.6 We will redeem any full or fractional shares of any
Portfolio, when requested by you on behalf of an Account, at the net asset
value next computed after receipt by us (or our agent or you as our
designee) of the request for redemption, as established in accordance with
the provisions of the then current prospectus of the Trust. NSCC will wire
payment for net redemption orders by the Trust, in immediately available
funds, to an NSCC settling bank account designated by you in accordance
with NSCC rules and procedures on the Business Day such redemption orders
are communicated to NSCC, except as provided in the Trust's prospectus and
statement of additional information.
3.4.7 Issuance and transfer of the Portfolio shares will be by
book entry only. Stock certificates will not be issued to you or the
Accounts. Portfolio shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
3.4.8 We shall furnish through NSCC's Networking or Mutual Fund
Profile System on or before the ex-dividend date, notice to you of any
income dividends or capital gain distributions payable on the shares of any
Portfolio. You hereby elect to receive all such income dividends and
capital gain distributions as are payable on shares of a Portfolio in
additional shares of that Portfolio, and you reserve the right to change
this election in the future. We will notify you of the number of shares so
issued as payment of such dividends and distributions.
3.4.9 All orders are subject to acceptance by Underwriter and
become effective only upon confirmation by Underwriter. Underwriter
reserves the right: (i) not to accept any specific order or part of any
order for the purchase or exchange of shares through Fund/SERV; and (ii) to
require any redemption order or any part of any redemption order to be
settled outside of Fund/SERV, in which case the order or portion thereof
shall not be "confirmed" by Underwriter, but rather shall be accepted for
redemption in accordance with Section 3.4.11 below.
6
3.4.10 All trades placed through Fund/SERV and confirmed by
Underwriter via Fund/SERV shall settle in accordance with Underwriter's
profile within Fund/SERV applicable to you. Underwriter agrees to provide
you with account positions and activity data relating to share transactions
via Networking.
3.4.11 If on any specific day you or Underwriter are unable to
meet the NSCC deadline for the transmission of purchase or redemption
orders for that day, a party may at its option transmit such orders and
make such payments for purchases and redemptions directly to you or us, as
applicable, as is otherwise provided in the Agreement; provided, however,
that we must receive written notification from you by 9:00 a.m. Eastern
Time on any day that you wish to transmit such orders and/or make such
payments directly to us.
3.4.12 In the event that you or we are unable to or prohibited
from electronically communicating, processing or settling share
transactions via Fund/SERV, you or we shall notify the other, including
providing the notification provided above in Section 3.4.11. After all
parties have been notified, you and we shall submit orders using manual
transmissions as are otherwise provided in the Agreement.
3.4.13 These procedures are subject to any additional terms in
each Portfolio's prospectus and the requirements of applicable law. The
Trust reserves the right, at the discretion of its Board of Trustees and
without notice, to suspend the sale of shares or withdraw the sale of
shares of any Portfolio.
3.4.14 Each party to the Agreement agrees that, in the event of a
material error resulting from incorrect information or confirmations, the
parties will seek to comply in all material respects with the provisions of
applicable federal securities laws.
3.4.15 You and Underwriter represent and warrant that each: (a)
has entered into an agreement with NSCC; (b) has met and will continue to
meet all of the requirements to participate in Fund/SERV and Networking;
(c) intends to remain at all times in compliance with the then current
rules and procedures of NSCC, all to the extent necessary or appropriate to
facilitate such communications, processing, and settlement of share
transactions; and (d) will notify the other parties to this Agreement if
there is a change in or a pending failure with respect to its agreement
with NSCC."
4. A new Section 6.7 is hereby added to the Agreement as follows:
"6.7 You agree that any posting of Portfolio prospectuses on your
website will result in the Portfolio prospectuses: (i) appearing identical
to the hard copy printed version; (ii) being clearly associated with the
particular Contracts in which they are available and posted in close
proximity to the applicable Contract prospectuses; (iii) having no less
prominence than prospectuses of any other underlying funds available under
the Contracts; and (iv) being used in an
7
authorized manner. Notwithstanding the above, you understand and agree that
you are responsible for ensuring that participation in the Portfolios, and
any website posting, or other use, of the Portfolio prospectuses is in
compliance with this Agreement and applicable state and federal securities
and insurance laws and regulations, including as they relate to paper or
electronic use of fund prospectuses. The format of such presentation, the
script and layout for any website that mentions the Trust, the Underwriter,
an Adviser or the Portfolios shall be routed to us as sales literature or
other promotional materials, pursuant to Section 6 of this Agreement.
In addition, you agree to be solely responsible for maintaining and
updating the Portfolio prospectuses' PDF files (including prospectus
supplements) and removing and/or replacing promptly any outdated
prospectuses, as necessary, ensuring that any accompanying instructions by
us, for using or stopping use are followed. You agree to designate and make
available to us a person to act as a single point of communication contact
for these purposes. We are not responsible for any additional costs or
additional liabilities that may be incurred as a result of your election to
place the Portfolio prospectuses on your website. We reserve the right to
revoke this authorization, at any time and for any reason, although we may
instead make our authorization subject to new procedures."
5. A new Section 6.8 is hereby added to the Agreement as follows:
"6.8 Each of your and your distributor's registered representatives,
agents, independent contractors and employees, as applicable, will have
access to our websites at xxxxxxxxxxxxxxxxx.xxx, and such other URLs
through which we may permit you to conduct business concerning the
Portfolios from time to time (referred to collectively as the "Site") as
provided herein: (i) upon registration by such individual on a Site; (ii)
if you cause a Site Access Request Form (an "Access Form") to be signed by
your authorized supervisory personnel and submitted to us, as a Schedule
to, and legally a part of, this Agreement; or (iii) if you provide such
individual with the necessary access codes or other information necessary
to access the Site through any generic or firm-wide authorization we may
grant you from time to time. Upon receipt by us of a completed registration
submitted by an individual through the Site or a signed Access Form
referencing such individual, we shall be entitled to rely upon the
representations contained therein as if you had made them directly
hereunder and we will issue a user identification, express number and/or
password (collectively, "Access Code"). Any person to whom we issue an
Access Code or to whom you provide the necessary Access Codes or other
information necessary to access the Site through any generic or firm-wide
authorization we may grant you from time to time shall be an "Authorized
User."
We shall be entitled to assume that such person validly represents you
and that all instructions received from such person are authorized, in
which case such person will have access to the Site, including all services
and information to which you are authorized to access on the Site. All
inquiries and actions initiated
8
by you (including your Authorized Users) are your responsibility, are at
your risk and are subject to our review and approval (which could cause a
delay in processing). You agree that we do not have a duty to question
information or instructions you (including Authorized Users) give to us
under this Agreement, and that we are entitled to treat as authorized, and
act upon, any such instructions and information you submit to us. You agree
to take all reasonable measures to prevent any individual other than an
Authorized User from obtaining access to the Site. You agree to inform us
if you wish to restrict or revoke the access of any individual Access Code.
If you become aware of any loss or theft or unauthorized use of any Access
Code, you agree to contact us immediately. You also agree to monitor your
(including Authorized Users') use of the Site to ensure the terms of this
Agreement are followed. You also agree that you will comply with all
policies and agreements concerning Site usage, including without limitation
the Terms of Use Agreement(s) posted on the Site ("Site Terms"), as may be
revised and reposted on the Site from time to time, and those Site Terms
(as in effect from time to time) are a part of this Agreement. Your duties
under this section are considered "services" required under the terms of
this Agreement. You acknowledge that the Site is transmitted over the
Internet on a reasonable efforts basis and we do not warrant or guarantee
their accuracy, timeliness, completeness, reliability or non-infringement.
Moreover, you acknowledge that the Site is provided for informational
purposes only, and is not intended to comply with any requirements
established by any regulatory or governmental agency."
6. A new paragraph is added at the end of Section 10.8 of the Agreement as
follows:
"Each party to this Agreement agrees to limit the disclosure of
nonpublic personal information of Contract owners consistent with its
policies on privacy with respect to such information and Regulation S-P of
the SEC. Each party hereby agrees that it will comply with all applicable
requirements under the regulations implementing Title V of the
Xxxxx-Xxxxx-Xxxxxx Act and any other applicable federal and state consumer
privacy acts, rules and regulations. Each party further represents that it
has in place, and agrees that it will maintain, information security
policies and procedures for protecting nonpublic personal customer
information adequate to conform to applicable legal requirements."
9
IN WITNESS WHEREOF, each of the parties has caused its duly authorized officers
to execute this Amendment.
The Trust: FRANKLIN XXXXXXXXX VARIABLE INSURANCE
PRODUCTS TRUST
ONLY ON BEHALF OF
EACH PORTFOLIO LISTED
ON SCHEDULE C OF
THE AGREEMENT. By: /s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Assistant Vice President
The Underwriter: FRANKLIN/XXXXXXXXX DISTRIBUTORS, INC.
By: /s/ Xxxxx X. Xxx
----------------------------------
Name: Xxxxx X. Xxx
Title: Senior Vice President
The Company: EQUITRUST LIFE INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name:
Title: VP - INVESTMENT ADMIN
10
