INVESTMENT SERVICES AGREEMENT
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This Investment Services Agreement (this "Agreement") is made on this 14th
day of June, 1995, by and between ARM Financial Group, Inc., a Delaware
corporation ("Parent") and SBM Certificate Company, a Minnesota corporation (the
"Company") which is registered as a face amount certificate company under the
Investment Company Act of 1940 (the " '40 Act").
WHEREAS, Parent's management has extensive experience in asset/liability
and investment portfolio management; and
WHEREAS, Company desires that Parent provide investment services to Company
with respect to the investment portfolio maintained by Company; and
WHEREAS, Parent and Company contemplate that such an arrangement will
achieve certain operating economies and improve services to the benefit of
Parent, Company, and Company's certificateholders; and
WHEREAS, Parent and Company wish to assure that all charges incurred
hereunder are reasonable and in accordance with the requirements of the '40 Act,
and Minnesota corporate law; and
WHEREAS, Parent and Company wish to identify the services to be rendered to
Company by Parent and to provide a formula for determining the charges to be
made to Company;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
set forth herein, and intending to be legally bound hereby, Parent and Company
agree as follows.
1. PERFORMANCE OF SERVICES. Subject to the terms, conditions, and
limitations of this Agreement, Parent agrees to the extent requested by Company
to perform diligently and in a professional manner the services for Company as
Company determines to be reasonably necessary in the conduct of its investment
operations, as set forth in Appendix A, which is attached hereto and made a part
of this Agreement (collectively, "services").
Parent agrees at all times to maintain sufficient facilities and trained
personnel of the kind necessary to perform this Agreement.
(a) CAPACITY OF PERSONNEL AND STATUS OF FACILITIES. Whenever Parent
utilizes its personnel to perform services for Company pursuant to this
Agreement, such personnel shall at all times be subject to Parent's
direction and control, and Company shall have no liability to such
personnel for their welfare, salaries, fringe benefits, legally
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required employer contributions, and tax obligations. No facility of Parent
used in performing services for Company shall be deemed to be transferred,
assigned, conveyed, or leased by performance or use pursuant to this
Agreement.
(b) EXERCISE OF JUDGMENT IN RENDERING SERVICES. In providing any
services hereunder which require the exercise of judgment by Parent, Parent
shall perform such services in accordance with any standards and guidelines
Company develops and communicates to Parent. In performing any services
hereunder, Parent shall at all times act in a manner reasonably calculated
to be or not opposed to the best interests of Company.
(c) CONTROL. The performance of services by Parent for Company pursuant
to this Agreement shall in no way impair the absolute control of the
business and operations of Parent or Company by their respective Boards of
Directors. Parent shall act hereunder so as to assure the separate
operating identity of Company.
2. CHARGES. Company agrees to pay to Parent for services provided by
Parent to Company pursuant to this Agreement the fees set forth on Appendix B
attached hereto, as such Appendix may be revised by the parties from time to
time. The fees provided for in this Section 3 and Appendix B attached hereto are
exclusive of any fees charged or to be charged by any custodian under a separate
custody agreement. Company agrees that Parent may direct custodians of the
Investment Portfolio as defined in Appendix A to make direct payment of fees due
hereunder.
3. PAYMENT. Parent shall submit to Company at the beginning of each
calendar month a written statement of the amount estimated to be owed by Company
for services pursuant to this Agreement for that calendar month, and Company
shall pay to Parent within five (5) working days following receipt of such
written statement the amount set forth in the statement. The amount estimated to
be owed by Company for the partial month of June, 1995, shall be included in the
statement for July, 1995.
Within thirty (30) days after the end of each calendar quarter, Parent will
submit to Company a detailed written statement of the charges due from Company
to Parent in the preceding calendar quarter, including charges not included in
any previous statement, based on the computation of fees set forth on Appendix
B, and any balance payable or to be refunded as shown in such statement shall be
paid or refunded with fifteen (15) days following receipt of such written
statement by Company.
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4. ACCOUNTING RECORDS AND DOCUMENTS. Parent shall be responsible for
preparing, maintaining, and disseminating full and accurate accounts and records
of [all services rendered pursuant to this Agreement, as well as] the financial
data with respect to the Investment Portfolio (as defined in Appendix A) which
is necessary to prepare financial statements and reports including 10-K Annual
Reports and 10-Q Quarterly Reports, and such additional information as Company
may reasonably request for purposes of its internal bookkeeping and accounting
operations. Parent shall keep such accounts and records insofar as they pertain
to the computation of charges hereunder available at its principal offices for
audit, inspection, and copying by Company and persons authorized by it or any
governmental agency having jurisdiction over Company during all reasonable
business hours.
5. OTHER RECORDS AND DOCUMENTS. All books, records, and files established
and maintained by Parent by reason of its performance under this Agreement
which, absent this Agreement, would have been held by Company, shall be deemed
the property of Company, and shall be subject to examination during all
reasonable business hours by Company and persons authorized by it or any
governmental agency having jurisdiction over Company.
With respect to original documents other than those provided for in Section
5 hereof which would otherwise be held by Company and which may be obtained by
Parent in performing under this Agreement, Parent shall deliver such documents
to Company within thirty (30) days of their receipt by Parent except where
continued custody of such original documents is necessary to perform hereunder.
6. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed
to grant Parent an exclusive right to provide services to Company, and Company
retains the right to contract with any third party, affiliated or unaffiliated,
for the performance of services as are available to or have been requested by
Company pursuant to this Agreement.
It is also understood and agreed that Parent's services are not exclusively
for Company. Parent shall remain free to provide services to other clients or
for its own account, pursuant to objectives which may or may not be similar to
the strategy adopted as appropriate for Company.
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It is also understood and agreed that Parent has the right to subcontract
with any third party, affiliated or unaffiliated, for services Parent is
obligated to provide to Company pursuant to this Agreement.
7. CONTACT PERSONS. Company and Parent each shall appoint one or more
individuals who shall serve as contact persons for the purpose of carrying out
this Agreement. Such contact persons shall be authorized to act on behalf of
their respective parties as to the matters pertaining to this Agreement.
Effective upon execution of this Agreement, the initial contact persons shall be
those set forth in Section 16 of this Agreement. Each party shall notify the
other, in writing, as to the name, address, and telephone number of any
replacement for any such designated contact person.
8. TERMINATION. This Agreement shall remain in effect until terminated by
either Parent or Company upon giving thirty (30) days or more advance written
notice. Upon termination, Parent shall promptly deliver to Company all books and
records that are, or are deemed by this Agreement to be, the property of
Company.
9. SETTLEMENT ON TERMINATION. Not later than sixty (60) days after the
effective date of termination of this Agreement, Parent shall deliver to Company
a detailed written statement for all fees due and not included in any previous
statement to the effective date of termination. The amount owed shall be due and
payable within thirty (30) days of receipt of such statement.
10. INDEPENDENT CONTRACTOR. In rendering its services hereunder, Parent
shall act as an independent contractor, and any duties of Parent arising
hereunder shall be owed exclusively to Company.
11. ASSIGNMENT. This Agreement and any rights pursuant hereto shall not
be assignable by either party hereto without the prior written consent of the
other party, except as set forth herein or by operation of law. Except as and to
the extent specifically provided in this Agreement, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto, or their respective legal successors, any rights, remedies, obligations,
or liabilities, or to relieve any person other than the parties hereto, or their
respective legal successors, from any obligations or liabilities that would
otherwise be applicable. The representations, warranties, covenants, and
agreements contained in this Agreement shall be binding upon, extend to and
inure to the benefit of the parties hereto, their, and each of their, successors
and assigns respectively.
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12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Minnesota
applicable to contracts made and to be performed entirely within that State.
13. CONFIDENTIALITY. Company agrees to give Parent any information in its
possession which Company deems relevant to the suitability of the investment
strategy implemented by Parent, including information on Company's liabilities,
whether this information becomes known before or after the adoption of the
strategy. Parent shall keep any information it obtains about Company's business
or investment objectives and results in confidence.
14. ARBITRATION. In the event of any irreconcilable dispute between the
parties in connection with this Agreement, the dispute shall be submitted to
arbitration. Either party may submit the dispute to arbitration by notifying the
other of his submission and naming its arbitrator. The other party shall name
its arbitrator within 30 days after receiving such notice. The arbitrators shall
choose an umpire through the nomination of three persons by each arbitrator, the
declination by each arbitrator of two of the nominees named by the other
arbitrator, and the drawing of lots to choose between the two arbitrators within
thirty days after the arbitrators and umpire, if any, are chosen. The
arbitrators and umpire shall be disinterested insurance Company executives. The
arbitrators are relieved from judicial formalities and may refrain from
following strict rules of evidence. The decisions of the arbitrators and umpire,
or the majority of them, shall be final and binding upon the parties. Each party
shall bear the expense of its own arbitrator and one-half the other expenses of
the arbitration proceedings. Any arbitration shall take place in Louisville,
Kentucky, unless otherwise mutually agreed.
15. NOTICE. All notices, statements or requests provided for hereunder
shall be deemed to have been duly given when delivered by hand to an officer of
the other party, or when deposited with the U.S. Postal Service, as first class
certified or registered mail, postage prepaid, overnight courier services, telex
or telecopier, addressed
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(a) If to Parent to:
ARM Financial Group, Inc.
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
(b) If to Company to:
SBM Certificate Company
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Telecopier: (000) 000-0000
Attention: Xxxx X. XxXxxxxx
or to such other persons or places as each party may from time to time designate
by written notice sent as aforesaid.
16. ENTIRE AGREEMENT. This Agreement, together with such amendments as
may from time to time be executed in writing by the parties, constitutes the
entire agreement and understanding between the parties in respect to the
transactions contemplated hereby and supersedes all prior agreements,
arrangements and understandings relating to the subject matter hereof.
17. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under any present or future law, and if the
rights or obligations of Parent or Company under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid, or unenforceable provision had never comprised a part hereof; (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid, or unenforceable provision or by
its severance herefrom; and (d) in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid,
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and enforceable provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible.
18. SECTION HEADINGS. Section headings contained herein are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
19. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate by their respective officers duly authorized so to do, as of the
date and year first above written.
ARM FINANCIAL GROUP, INC.
/s/Xxxx Xxxxxx
Co-Chief Executive Officer
/s/Xxxxxx X. Xxxx
Co-Chief Executive Officer
SBM CERTIFICATE COMPANY
/s/Xxxx X. XxXxxxxx
President
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APPENDIX A
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INVESTMENT SERVICES
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Parent shall provide investment services to Company as follows:
1. For purposes of this Agreement, Investment Portfolio means all assets
owned by and held in the name of the Company. Company shall retain
responsibility, authority, and control with respect to management and investment
of the Company's Investment Portfolio. Except as otherwise expressly provided
herein, Parent shall be free to buy, sell, exchange, convert, or otherwise trade
assets held in the Investment Portfolio in the exercise of its sole discretion,
provided Parent acts in a manner consistent with any and all written direction
received from Company. Parent shall acquire or dispose of any specific
investment if so directed by the Board of Directors of the Company. Parent shall
comply with the '40 Act, the applicable investment provisions of the Code of the
District of Columbia, the applicable investment provisions of the insurance laws
of Minnesota, and all other applicable laws and regulations.
2. All investments made by Parent on behalf of Company shall be in those
classes of investments prescribed by Section 35-634 of the Code of the District
of Columbia, Section 61A.28 of the Insurance Laws of Minnesota, or as otherwise
permitted Company by law; provided, however, that nothing contained herein shall
authorize Parent to purchase or dispose of, without the Company's prior written
approval, any interest in real property or mortgages.
3. In the course of its investment services activity for the Company,
Parent MAY NOT pledge, mortgage or hypothecate the assets of the Company, or
enter into any investment which would violate the '40 Act, the investment
provisions of the Code of the District of Columbia, or the investment provisions
of the insurance laws of Minnesota.
4. Parent shall not have custody of any of the assets in the Investment
Portfolio. Custody of all assets of the Investment Portfolio shall at all times
be maintained in one or more custodial accounts selected by Company and held on
behalf of and in the name of Company with a qualified fiduciary agent. All
transactions authorized by this Agreement shall be carried out through such
custodial accounts. Parent shall not be responsible for any act or omission of
any custodian thereunder.
5. Parent shall keep and maintain proper books and records wherein shall
be recorded the business transacted by it on behalf of, in the name of, or on
account of Company. Any and all records maintained by Parent hereunder on behalf
of Company shall be and remain the property of Company. Parent shall make
reports to Company as requested, including, but not limited to:
(a) delivery on the tenth working day of each month of all investment
accounting data for the previous month, in an electronic format suitable for use
in updating Company's computerized accounting records; and
(b) delivery within 30 days of the end of each calendar quarter of all
investment-related data required for completion of Company's 10-Q Quarterly
Reports and 10-K Annual Report, in an
electronic format suitable for use in Company's filings of such Reports with the
Securities and Exchange Commission without modification.
6. Parent does not warrant any rate of return on all or any segment of the
Investment Portfolio. Parent will endeavor to select the most favorable prices
and timing of assets purchases and sales. Parent will select brokers and dealers
on a basis which is favorable to Company, taking into account research services
provided, ability to execute orders promptly and correctly, fees charged, and
any other factors which Parent deems relevant, and such brokers and dealers may
include affiliates of Parent. Parent will pass along to Company the cost of any
and all brokers' fees, commissions, taxes, and other custodial charges related
to services provided in connection with the Accounts.
7. In the event Parent receives and collects monies for the accounts of
Company, Parent will not commingle such monies with its own, but will deposit
such monies in an appropriate account in the name of Company.
APPENDIX B
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SCHEDULE OF FEES
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COMPUTATION OF FEES. The annual charge to Company for investment services
shall be twenty one hundredths of one percent (.20%) of Invested Assets as
herein defined. Invested Assets is defined as the arithmetic average of the sum
of total qualified assets for the current calendar year and the immediately
preceding calendar year as reported in the 10-K Annual Report for the Company.
For 1995, the annual charge as calculated pursuant to this Schedule of Fees
shall be adjusted on a pro rata basis to reflect the June 15, 1995 effective
date of the Agreement.
