Exhibit 1.A(8)(f)
ADMINISTRATION SERVICES AGREEMENT
between
Security Life of Denver Insurance Company
and
Southland Life Insurance Company
This Agreement is made effective as of the __ day of _____________ 1999, by and
between Security Life of Denver Insurance Company ("SLD"), of 0000 Xxxxxxxx,
Xxxxxx, Xxxxxxxx, 00000-0000 and Southland Life Insurance Company ("SLIC"), of
0000 Xxxxxx Xxxxx Xxxx, XX, Xxxxxxx, XX 00000-0000.
WHEREAS, SLIC is a licensed insurance company and issuer of variable life
insurance ("Contracts"),
AND WHEREAS, ING America Equities, Inc. ("INGAE"), is a wholly-owned subsidiary
of SLD and is a registered broker-dealer and the principal underwriter and
distributor of variable life contracts for SLIC,
AND, WHEREAS SLD shall provide data processing and other administrative services
to SLIC pursuant to the terms and conditions of this Agreement and such other
terms and conditions as the parties may agree upon in written amendments to this
Agreement,
Now, therefore, in consideration of the mutual covenants herein contained, the
parties agree as follows:
SECTION 1 TERMS OF APPOINTMENT
1.1 Subject to the conditions set forth in this
Agreement, SLIC hereby appoints SLD as its
Administrative Services Agent.
1.2 SLD agrees to provide at its own expense the
necessary facilities, equipment, software and
personnel to perform its duties and obligations
hereunder in accordance with accepted industry
practice, and in full compliance with the rules and
regulations of state insurance departments, and all
other regulatory bodies with jurisdiction over SLD,
INGAE or SLIC.
1.3 SLD agrees that it will perform, at the direction of
SLIC, those Administrative Services as set forth in
Exhibit B attached hereto and incorporated herein by
reference, which may be amended by mutual agreement
from time to time. SLD shall have only the authority
necessary or incident to the performance of those
services expressly set forth in this
(April 12, 2000)
1
Agreement or in Exhibit B and shall have no other express
or implied authority or right to act on behalf of SLIC or
to bind SLIC with regard to any statement, representation
or undertaking. SLIC shall, by separate document, designate
specified individuals at SLD who shall have signing
authority on behalf of SLIC to perform necessary and
standard business functions. SLD shall not alter, amend or
waive any contractual provision on behalf of SLIC without
SLIC's express written authorization. SLD shall be limited
to act only in the capacity in which it is licensed.
SECTION 2 TERM
2.1 Unless terminated as hereinafter provided, this
Agreement shall remain in full force and effect for a
period of five (5) years, the initial term of the
Agreement. This Agreement shall be renewed
automatically for additional successive terms of
eighteen (18) months at the end of the initial term
and the end of each renewal term, subject to the
provisions of Section 9.2, unless terminated.
SECTION 3 FEES AND EXPENSES
3.1 SLIC shall pay to SLD such fees and charges as are
set forth in Exhibit A attached hereto and
incorporated herein by reference.
3.2 SLIC shall reimburse SLD for such reasonable
out-of-pocket expenses as are set forth in Exhibit A,
as may be incurred by SLD in the performance of this
Agreement.
3.3 SLD may impose a late payment charge of 1.5% per
month on undisputed balances of fees, charges or
expenses outstanding for more than 45 days.
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SLD
SLD represents and warrants to SLIC as follows:
4.1 It is a corporation duly organized and in good standing
under the laws of the State of Colorado.
4.2 It is empowered under all applicable laws to enter
into and perform the services contemplated in this
Agreement.
(April 12, 2000)
2
4.3 All requisite corporate proceedings have been taken to
authorize it to enter into and perform the services
contemplated in the Agreement.
4.4 It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
4.5 It has and will maintain a minimum capital and surplus of
at least Fifty Thousand Dollars ($50,000.00) during the
term of this Agreement. SLD will provide to SLIC no later
than 30 days after execution of this Agreement, and
thereafter upon request, a copy of its most recent audited
financial statement.
4.6 It has in place a plan and will be Year 2000 compliant in
systems and operations prior to December 31, 1999.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF SLIC
SLIC represents and warrants to SLD as follows:
5.1 It is a corporation duly organized and in good standing
under the laws of the State of Texas.
5.2 It is empowered under the applicable laws to enter into and
perform this Agreement.
5.3 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
5.4 No policy or other form will be provided by SLIC to be
administered by SLD unless it has been duly filed as
necessary and approved by all applicable state insurance
departments and other regulatory bodies with jurisdiction
over SLIC, and is in compliance with all federal and state
laws and regulations.
SECTION 6 COVENANTS OF SLD
6.1 SLD shall maintain secure facilities and procedures for the
safekeeping of check forms and facsimile signature
imprinting devices, and all other documents, reports,
records, books, files, and other materials relative to this
Agreement.
(April 12, 2000)
3
6.2 It is expressly understood and agreed that all documents,
reports, records, books, files and other materials relative
to this Agreement shall be the sole property of SLIC and
INGAE and that such property shall be held by SLD, only as
agent.
6.3 SLD shall maintain back-up computer files, as necessary.
The purpose of back-up and recovery is to permit file
recovery in the event of destruction of normal processing
files. SLIC may review the procedures in effect and inspect
the storage facility upon demand. A copy of SLD's current
procedures is attached hereto and incorporated by reference
as Exhibit D.
6.4 All charges or premiums received by SLD on behalf of SLIC
shall be promptly remitted to the person entitled to it or
deposited in a fiduciary account. Any payments received by
SLD for insurance on behalf of SLIC shall be deemed
received by SLIC, shall be held in a separate SLIC trust
account and shall be administered as set out in Exhibit B.
Premium bills shall direct premium payors to send premiums
to a lock box as stated in Exhibit B.
6.5 No advertising or sales literature shall be utilized by SLD
in connection with the Contracts unless it has been
approved in writing by SLIC and INGAE prior to such use.
6.6 Except as specifically provided to the contrary in this
Agreement, SLD shall be responsible for providing all
technical and operational support, office space, equipment,
and paying all costs and expenses associated with its
provision of administration services to SLIC hereunder,
including, but not limited to, all rents, salaries and
other overhead expenditures.
6.7 If SLD receives any notice from any source (including, but
not limited to, the policy owner or any regulatory agency)
of a lawsuit or other legal or administrative complaint or
proceeding being brought against SLIC or involving the
business administered for SLIC by SLD, or the threat of any
such lawsuit, hearing or proceeding, SLD shall immediately
notify SLIC and send a copy of all documents,
correspondence and other relevant material to which SLD
reasonably has access to SLIC. Further, SLD agrees to
cooperate fully with SLIC in connection with any suit,
hearing or proceeding and shall provide SLIC with all
books, records, documents and data requested by SLIC in
connection therewith; provided, however, SLD shall be
entitled to review such requests with its counsel prior to
furnishing SLIC with such materials so long as such review
is done in a timely manner.
(April 12, 2000)
4
6.8 SLD will conduct its business and perform its obligations
in accordance with all applicable federal and state laws,
rules and regulations and in a manner which will not put
SLIC's or INGAE's registrations and licenses in any
jeopardy of revocation or suspension or cause SLIC or any
of its affiliates to sustain any disciplinary action of any
nature.
6.9 SLD acknowledges, covenants and agrees that all books and
records maintained by SLD in connection with the Contracts
shall be maintained and preserved in conformity with the
requirements of Rules 17a-3 and 17a-4 of the Securities
Exchange Act of 1934 (the "1934 Act"), to the extent that
such requirements are applicable to the Contracts; that all
such books and records are maintained and held by SLD on
behalf of SLIC and INGAE, whose property they are and shall
remain. SLD further acknowledges and agrees that all such
books and records are subject to inspection by the
Securities and Exchange Commission ("SEC") in accordance
with Section 17(a) of the 1934 Act, and undertakes to
permit examination of such books and records at any time
and from time to time during business hours by
representatives or designees of the SEC or National
Association of Securities Dealers, Inc., and to provide
true, correct, complete and current copies of any or all or
any part of such books and records.
6.10 SLD acknowledges, covenants and agrees that it shall issue
payments, including commission payments to retail
broker-dealers, on behalf of and on the account(s) of SLIC,
as a purely ministerial service for and on behalf of INGAE,
and that the records in respect of such payments shall be
properly reflected by SLD on the books and records
maintained by it for SLIC and INGAE.
6.11 SLD acknowledges, covenants and agrees that it will send a
confirmation for each transaction which constitutes the
sale or redemption of a security to or by the contract
owner as required by applicable law, regulation or rule in
such form as required by applicable law, regulation or rule
as approved and agreed to by SLIC and INGAE.
6.12 SLD shall provide SLIC with full and free access as
reasonably requested, during ordinary business hours, to
all documents, records, reports, books, files and other
materials relative to this Agreement which are maintained
by SLD for SLIC.
6.13 SLD shall furnish to SLIC any information or reports in
connection with its services to SLIC, which any state
Commissioner of Insurance may request in order to ascertain
whether the variable life insurance operations
(April 12, 2000)
5
of SLIC are being conducted in a manner consistent
with applicable state law, regulations and rules.
6.14 SLD shall provide a written notice approved by SLIC, to
insured persons who are residents of the State of
Tennessee, advising them of the identity of and
relationship among SLD, SLIC, and the person. If SLD
collects funds directly and in its name on behalf of
residents of the State of Tennessee, it will identify and
state separately in writing to the persons paying to SLD
any charges or premiums for insurance coverage the amount
of any such charges or premiums specified by SLIC's
insurance coverage.
SECTION 7 COVENANTS OF SLIC
7.1 SLIC shall, on a reasonably prompt basis, provide SLD with
current forms of contracts, prospectuses, applications,
service forms, and names and states of licenses of all
insurance and/or broker-dealer agents and representatives
authorized to sell the Contracts.
7.2 All contracts subject to the services performed under this
Agreement are issued by SLIC.
7.3 SLIC shall immediately provide SLD with written notice of
any change of authority of persons authorized and
enumerated in Exhibit C attached hereto and incorporated
herein by reference to provide SLD with instructions or
directions relating to services to be performed by SLD
under this Agreement.
SECTION 8 INDEMNIFICATION
8.1 SLD shall not be responsible for and SLIC shall indemnify
and hold SLD harmless from and against, any and all costs,
expenses, losses, and damages, charges, including
reasonable attorney's fees, payments and liability, which
may be asserted against SLD or for which it may be held to
be liable, arising out of or attributable to:
a. SLIC's failure to comply with the terms of this
Agreement, or to act in a reasonable or customary
manner in connection with this Agreement, or which
arise out of SLIC's negligence or misconduct or the
breach of any representation or warranty of SLIC
hereunder;
(April 12, 2000)
6
b. Reliance on or use by SLD of such information and
materials provided by or at the direction of SLIC and
instructions or directions given by the authorized
individuals described in Exhibit C for purposes of
providing services under this Agreement;
c. Any failure by SLIC to comply with federal, state or
local laws or regulations with respect to the offering
and/or sale of any insurance products or securities; or
d. Any matters associated with SLIC or its Contracts or
the sale of such Contracts which are unrelated to the
services provided by SLD.
8.2 SLD shall be responsible for and shall indemnify and hold
SLIC harmless from and against any and all losses, damages,
costs, charges, reasonable attorney's fees, payments,
expenses and liability which may be asserted against SLIC,
or for which it may be held liable arising out of or
attributable to SLD's failure to comply with or perform
under the terms of this Agreement, SLD's failure to act in
a reasonable manner in connection with this Agreement, any
failure by SLD to comply with federal, state or local
regulations with respect to the books and records
maintained by SLD, or which arise out of SLD's negligence
or misconduct or which arise out of the breach of any
representation or warranty of SLD hereunder.
8.3 As needed, SLD may apply to a person indicated on SLIC's
"Schedule of Authorized Personnel" set forth in Exhibit C
as a person authorized to give instructions under this
Section 8 with respect to any matter arising in connection
with this Agreement. SLD shall not be liable for any action
taken or omitted by SLD in good faith and in the exercise
of due care and diligence in reliance upon such
instructions.
8.4 In the event malfunction of any SLD system causes an error
or mistake in any record, report, data, information or
output under the terms of this Agreement, SLD shall at its
expense correct and reprocess such records.
8.5 If either party believes it is entitled to indemnification
hereunder, it shall, within five business (5) days of the
commencement of any action or threat of any action, give
written notice to the other party of any claim for which it
believes it is entitled to indemnification; provided,
however, that the failure to provide timely notice shall
not relieve the indemnifying party of any liability which
it may have to the other party as long as such notice is
not unreasonably withheld.
(April 12, 2000)
7
8.6 Subject to the provisions of this Section 8.6, the parties
shall cooperate with each other concerning any defense and
give each other all information and assistance which either
may reasonably request in defending any matter hereunder.
Each party shall exchange information subject to the
protection of the attorney-client, work product and other
applicable privileges. Any information derived therefrom
shall be used solely for purposes of developing joint
positions and strategies concerning issues that may
ultimately be resolved through arbitration or litigation.
No party shall disclose any information obtained from the
other party to any third party in any negotiations,
discussions or exchange of information, without the written
consent of the other party. In addition, no party shall
disclose any information in any threatened or pending
legislative, administrative or judicial proceeding, whether
civil or criminal, unless ordered to do so by a court of
competent jurisdiction. Furthermore, any materials shared
by either party shall be returned upon request and no
copies shall be retained. The parties hereto agree that the
exchange of any information and materials will be protected
from disclosure by the attorney-client, work product or
other applicable privileges and is not intended to waive
any applicable privilege or protection. Neither party shall
have the authority to waive any applicable privilege or
doctrine on behalf of the other party; nor shall any waiver
of an applicable privilege or doctrine by the conduct of
either party be construed to apply to the other party.
8.7 The provisions of this Section 8 shall not be deemed to be
a limitation upon a party's right to injunction, specific
performance or any other legal or equitable remedy to which
either party may be entitled by virtue of this Agreement or
to prevent any breach or threatened breach of this
Agreement.
8.8 IN NO EVENT AND UNDER NO CIRCUMSTANCES, SHALL ANY PARTY TO
THIS AGREEMENT BE LIABLE TO ANY OTHER PARTIES UNDER ANY
PROVISION OF THIS AGREEMENT FOR LOST PROFITS OR FOR
EXEMPLARY, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES.
8.9 The provisions of this Section 8 shall survive termination
of this Agreement.
SECTION 9 TERMINATION OF AGREEMENT
9.1 Either party may terminate this Agreement during the
initial term or any renewal term by providing at least 180
days prior written notice to the other.
(April 12, 2000)
8
9.2 This Agreement may be terminated at any time upon the
mutual written consent of the parties hereto.
9.3 This Agreement may be terminated upon written notice of one
party to the other in the event of bankruptcy or insolvency
of such party to which notice is given.
9.4 This Agreement shall automatically be terminated in the
event of its assignment, unless such assignment is made to
an affiliate of the assigning party, subject to the
provisions of Section 10.1.
9.5 At least 30 days prior to the end of the initial or any
renewal term hereof, SLD shall give SLIC written notice if
SLD desires to increase its fees or charges to SLIC or to
change the manner of payment specified in Exhibit A. If SLD
and SLIC do not agree to fees and charges before the end of
the term during which such notice is given by SLD, this
Agreement shall terminate at the end of such term.
9.6 Additionally, this Agreement shall terminate at SLIC's
option because of:
a) fraud, misrepresentation, conversion or unlawful
withholding of funds by SLD; or
b) the dissolution or disqualification of SLD to do
business under any applicable federal, state or local
laws or regulations; or
c) the suspension or revocation of any material license or
permit held by SLD by the appropriate governmental
agency or authority; or
d) the sale (without the prior written consent of SLIC,
which consent shall not be unreasonably withheld) of
SLD's business to an unaffiliated person or entity,
whether by merger, consolidation, or sale of
substantially all of SLD's assets or stock or
otherwise, during the term of, and any extension to,
this Agreement.
9.7 This Agreement shall terminate at SLD's option because of
fraud, misrepresentation, conversion, or withholding of
funds belonging to SLD by SLIC.
9.8 If either of the parties hereto shall breach this Agreement
or be in default in the performance of any of its duties
and obligations hereunder ("the defaulting party"), the
other party hereto may give written notice thereof to the
defaulting party and if such default or breach shall not
have been
(April 12, 2000)
9
remedied within ninety (90) days after such written notice
is given, then the party giving such written notice may
terminate this Agreement by giving ninety (90) days written
notice of such termination to the defaulting party.
9.9 Termination of this Agreement by default or breach by SLIC
shall not constitute a waiver of any rights of SLD in
reference to services performed prior to such termination
of rights of SLD to be reimbursed for out-of-pocket
expenditures and to collect fees; termination of this
Agreement by default or breach by SLD shall not constitute
a waiver by SLIC of any other rights it might have under
this Agreement.
9.10 During the period between the date of any notice of
intention to terminate given pursuant to this Section 9 and
the date of actual termination of the Agreement, each party
shall continue to perform its obligations under this
Agreement.
9.11 During any transition period, SLD agrees to cooperate with
SLIC to effectuate an orderly transfer of all policy
records and materials to SLIC or its designee. For services
performed during the transition period, SLD shall be
compensated for its services pursuant to Exhibit A of this
Agreement.
9.12 The parties agree that following termination of this
Agreement, for a period reasonable to effect an orderly
transition, they will continue to perform each and every
obligation hereunder.
SECTION 10 ASSIGNMENT
10.1 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the prior
written consent of the other.
10.2 This Agreement shall inure to the benefit of and be binding
upon the parties hereto, INGAE, and their respective
successors and assigns, provided that any assignment is
performed in accordance with Section 10.1 above.
SECTION 11 CONFIDENTIALITY
11.1 The parties hereto agree that all tapes, books, reference
manuals, instructions, records, information and data
pertaining to the business of the
(April 12, 2000)
10
other party, SLD's systems, and the policyowners serviced
by SLD hereunder, which are exchanged or received pursuant
to the negotiation of and/or the carrying out of this
Agreement, shall remain confidential and shall not be
voluntarily disclosed to any other person, except to the
extent disclosure thereof may be required by law. All such
tapes, books, reference manuals, instructions, records,
information and data in the possession of each of the
parties hereto shall be returned to the party from whom it
was obtained upon the termination or expiration of this
Agreement.
11.2 SLD shall maintain the confidentiality of all trade secrets
and other confidential information obtained from SLIC and
its affiliates, (collectively "SLIC" for purposes of this
Section 11). SLD will use all reasonable precautions and
take all necessary steps to prevent any information
provided to SLD hereunder from being acquired by any
unauthorized persons. SLD acknowledges that such
information has been disclosed by SLIC only to enable SLD
to provide the services hereunder and that disclosure
thereof would be damaging to SLIC if such information were
obtained by any competitor of SLIC.
11.3 SLIC shall maintain the confidentiality of all trade
secrets and other confidential information obtained from
SLD. SLIC will use all reasonable precautions and take all
necessary steps to prevent any information obtained by SLIC
provided to it hereunder from being acquired by any
unauthorized persons. SLIC acknowledges that such
information has been disclosed by SLD only to enable SLD to
provide the services hereunder and that disclosure thereof
would be damaging to SLD if such information were obtained
by any competitor of SLD.
SECTION 12 INSURANCE
12.1 Errors and Omissions Insurance. SLD, as a member of the ING
Group, is currently self-insured for errors and omissions
coverage. Such coverage is for amounts up to and in excess
of One Million Dollars ($1,000,000.00) per claim.
12.2 Survival. If this Agreement terminates for any reason, SLD
shall use its best efforts to keep the insurance required
by this Section 12 in force for three (3) years following
termination. SLD shall give SLIC at least thirty (30) days
prior written notice of any change or cancellation of such
insurance.
(April 12, 2000)
11
SECTION 13 ARBITRATION
13.1 Any dispute which arises between the parties with respect
to any of the terms of this Agreement, whether such dispute
arises during the term of the Agreement or after
termination, shall be resolved through binding arbitration.
Arbitration shall be conducted in accordance with the
commercial rules of the American Arbitration Association
("AAA"). Each party agrees to waive its right, if any, to a
jury trial. Each party shall bear its own cost in the
arbitration proceedings. The judgment of the AAA may be
entered in and enforced by any court of competent
jurisdiction. The judgment of the AAA shall be final and
binding and there shall be no appeal therefrom. This
arbitration provision shall survive the termination or
cancellation of this Agreement.
SECTION 14 MISCELLANEOUS
14.1 SLIC and its duly authorized independent auditors have the
right under this Agreement to perform on-site audits of
records and accounts directly pertaining to the Contracts
serviced by SLD at SLD's facilities in accordance with
reasonable procedures and at mutually agreeable dates and
times, but at least once annually. At the request of SLIC,
SLD will make available to SLIC's auditors and
representatives of regulatory agencies all reasonably
requested records and data.
14.2 This Agreement constitutes the entire agreement between the
parties hereto and may not be modified except by written
instrument executed by both parties hereto. If any section
herein contained shall be found to be unenforceable as
contrary to the current law, that section shall be severed
and the remaining sections of this Agreement shall continue
to be enforceable.
14.3 Neither party shall be liable for damages due to delay or
failure to perform any obligation under this Agreement if
such delay or failure results directly or indirectly from
circumstances beyond the control and without the fault or
negligence of such party.
14.4 It is understood and agreed that all services performed
hereunder by SLD shall be as an independent contractor and
not as an employee of SLIC.
14.5 This Agreement shall be governed by the laws of the State
of Texas.
(April 12, 2000)
12
14.6 Notices under this Agreement to either party must be in
writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt),
(b) sent by facsimile (with written confirmation of
receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the
location identified in the preamble to this Agreement,
Attn: Office of the General Counsel, or to such other
address as supplied in writing by either party.
(April 12, 2000)
13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate, in their names and on their behalf by and through their duly
authorized officers as of the day and year first above written.
Security Life of Denver Insurance Company
By: /s/ Xxxxx X. Xxxxxxxxxx, Xx.
--------------------------------
Name: Xxxxx X. Xxxxxxxxxx, Xx.
-----------------------------
Title: Executive Vice President
-----------------------------
Southland Life Insurance Company
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxx
-----------------------------
Title: Chief Legal Officer
-----------------------------
(April 12, 2000)
14
EXHIBIT A
FEE SCHEDULE
Contracts:
Variable Life Insurance products of Southland Life Insurance Company ("SLIC").
Fees:
A.
2000
Plan Denver
Exposure Factor
PREMIUM SOLD (IN MILLIONS)
General Agency 42.1 20.94%
Low Load 21.5 2.81%
BOLI (large case) - 3.12%
------------
Total 63.6
FACE AMOUNT SOLD (IN 000'S)
Non GI/SI Face Sold 3,876 $ 1.11
Survivor Face Sold 68 $ 1.41
Total
POLICIES SOLD
Single Life 12,021 $ 141.11
BOLI (large case) - $ 74.27
Survivor Life 452 $ 980.36
------------
Total 12,472
AVERAGE POLICIES INFORCE
UL & trad 104,244 $ -
Term 14,588 $ -
VUL 7,641 $ 118.83
Paid up 23,602 $ -
------------
Total 150,075
% OF ANNUITY CV 28,800,000 0.07%
(April 12, 2000)
15
B. Out-of-Pocket Expenses:
In addition to the fees set forth above, SLD will xxxx out-of-pocket
expenses as they are incurred. Out-of-pocket expenses are expenditures
for the items such as those listed below and any other items agreed to
by the parties:
1. Costs of telephone lines installed for network communications
between SLD and SLIC, including CRT's and related computer
equipment. Costs of telecommunication lines and equipment
installed to provide primary and back-up support for on-line
access to the administrative system, including transmission
capabilities between SLD and SLIC.
2. Cost of printing blank stock and the cost of set-up and printing
(including per impression costs) confirmation statements, contract
file folders, checks, tax reporting forms, contract pages,
specification pages, envelopes, proxy or voting instruction cards,
periodic policyowner statements, separate account statements,
individual and list bills, and any other required formats or
reports. Cost of labor for folding, inserting and mailing
functions.
3. Cost of microfilm and microfiche supplies and the cost of
transferring all necessary information to microfilm, microfiche or
such other document imaging and record system as may be used.
4. Costs involved with on- or off-site storage for SLIC records,
documents, correspondence and other items.
5. Custom programming (including additional upgrades or improvements
or customization required by SLIC) and new product implementation
at actual costs per hour. Custom programming needs are to be
submitted in writing to SLD.
6. Normal and reasonable travel, meal and lodging expenses incurred
during SLD's performance of its duties and obligations under this
Agreement, if any.
(April 12, 2000)
16
EXHIBIT B
OPERATIONAL PLAN
A. Systems
1. Produce the Contract data page, standard Contract pages, state
variation pages.
2. Calculate and process periodic charges as specified in product
prospectuses.
3. Calculate and process applicable valuations as specified by
product prospectus(es).
4. Calculate and process withdrawals (partial, full) as specified.
5. Calculate and process payout amounts.
6. Calculate and process periodic transactions, including dollar cost
averaging, and automatic rebalance transfers, as specified in the
appropriate product prospectus.
7. Produce reporting including confirmations, client statements,
daily transactions, notification of upcoming maturities, lapse
notification, billing notices, and COLI reporting; and reports on
activities such as trades, lapses, terminations, loans, and agent
licensing.
8. Produce required extract files or reports including accounting,
tax reporting, production, electronic funds transfer, check
writing, reinsurance, valuation, inforce illustration, client
alpha index, proxy solicitation.
9. Produce reports required to transact daily business with the
mutual funds underlying the Contracts and for periodic
reconciliations.
10. Accept import of unit values (accumulation) from prior
administrative system.
11. Accommodate other product features described in prospectus as may
be updated from time to time.
12. Maintain current information and procedures on the administrative
system for state approvals by product, by company. SLIC will do
the actual product filings; and information regarding approvals
will be provided to SLD.
13. SLIC will provide access to agent licensing information and actual
agent appointments to SLD.
(April 12, 2000)
1
14. Accommodate SLIC and regulatory audit requirements.
15. Maintain client account history as required to process
transactions and administer contract provisions.
16. Systems will automatically interface with SLIC and SLD systems. A
scheduled time for data transmission will be determined and daily
user involvement will not be required.
17. Provide information necessary for proxy preparation and mailings.
18. Provide interfaces, reporting requirements and special requests
from SLIC for outside broker-dealers, to include:
x. Xxxxxx
x. Xxxxxxxxxxx
19. Provide electronic funds transfer capabilities
a. Draw from accounts for premium payments
b. Deposit disbursements to accounts.
B. Contract Maintenance
1. Reviews change requests, applies criteria developed by SLIC.
Verifies license status of broker-dealers and agents based on
information supplied by SLIC.
2. Prepares a new Contract data page, issues Contract, and mails to
Contract owners or agents. Policy page production to be automated
as agreed upon by SLD and SLIC.
3. Establishes and maintains insured and owner records, as
applicable, on computer and manual systems.
4. Notifies broker-dealers and agents of any error or missing data
needed to process changes to insured or owner records.
5. Produces and mails required confirmation statements.
6. Deposits monies received into depository account.
7. For policies being exchanged from another company, SLD will
request the funds from the other insurance company using forms
supplied by SLIC. SLIC will establish signing authority for SLD
personnel.
C. Collection procedures (in-force contracts)
(April 12, 2000)
2
1. Receives from lockbox the remittance information in accordance
with processing requirements.
2. Processes payments received to customer accounts.
3. Prepares and mails required confirmation of transactions.
4. Deposits cash received directly by SLD under the policies into a
designated bank account.
5. Transmits daily accounting and bank transfer authorization
summaries prepared for each valuation period.
6. Prepares and mails refunds as appropriate (declines, free look).
D. Banking
1. Photocopies checks received directly by SLD and assigns them a
control number. Balances, edits, endorses and prepares daily
deposit. Reconciles bank lockbox deposits to applications
received.
2. Deposits are placed into a depository account.
3. Transfers funds from the depository account to one of the
following, as appropriate:
a. General Account of Southland Life
b. Mutual Fund Custodian Account(s)
c. Disbursement Account of Southland Life and INGAE
d. Separate Account L1 of Southland Life
Bank accounts and mutual fund accounts to be established by SLIC
with appropriate signing and trading authorizations established
for SLD personnel.
4. Generates from the system daily cash journal summary reports and
maintains detail of activity.
5. Processes disbursement transactions for policyowner or
beneficiary, surrenders, withdrawals, loans, and death claims.
6. SLIC will maintain balances in the appropriate SLIC bank accounts
necessary to meet administrative needs identified in the contract.
7. SLIC will obtain the appropriate authorizations to allow SLD to
transfer funds amongst SLIC accounts.
(April 12, 2000)
3
8. Reprocess dishonored items. Reverses associated transactions,
prepares reports and communicates with policyowner.
E. Accounting/Auditing
1. Generates daily accounting extracts for policies maintained on the
system.
2. Generates accounting information necessary to post entries to
ledgers.
3. Retains systems generated reports in accordance with a set
retention schedule mutually agreed upon and as required by
regulatory authorities. Provides access to such reports for
internal and external auditing.
4. Determines the "Net Amount Available for Investment" in mutual
fund and places fund purchase/redemption orders with the
designated trading broker/dealer. Receives confirmation of mutual
fund investments.
5. Maintains an inventory of all mutual fund shares owned, including
the date purchased and sold, cost, book value, gain, loss, and
other relevant information.
6. Reconciles inventory of mutual fund shares owned to reports of
mutual fund shares owned supplied by mutual funds.
7. Cooperates in annual audit of separate account financials
conducted for purposes of financial statement certification and
publication and accommodates SLIC or regulatory audits, as
required.
F. Pricing/Valuation
1. SLD will generate separate account ledger activity associated with
unit valuation. SLIC will specify the required accounting entries
based on information regarding Unit Value. SLD will be updated
with the calculated unit values.
2. Daily reconciliation of the Investment and Administrative systems.
G. Contract Owner Service/Record Maintenance
1. Receives and implements contract owner service requests including
information requests, beneficiary changes, transfer of funds
between eligible mutual funds, loan requests, payout or withdrawal
requests, exchange of policies, and changes of any other
information maintained on the system.
2. Researches owner inquiries using data stored in the system or
paper records.
(April 12, 2000)
4
Responds directly to any questions or inquiries.
3. Generate daily journals confirming financial changes made to
accounts.
4. Address changes will be coordinated between SLIC and SLD. An
interface between systems to coordinate Contract changes (name,
address, beneficiary) will be developed if needed.
5. Process reinstatements.
6. Produces owner tax reporting.
H. New Business
1. All new business services and follow-up as needed.
I. Disbursement (Surrenders, Loans, Withdrawals)
1. Receives requests for systematic, partial and full surrenders and
loans from owners. Retains and accounts for any Contract
administrative charges.
2. Processes all surrender and loan requests against the Contract
Owner files. Generates related separate account ledger accounting.
3. Produce check production extract file for surrenders and loans and
forwards checks to owners in accordance with applicable law. Check
production will be through a SLD checkwriting system.
4. Prepares and mails confirmation statements of disbursement
transactions to owners.
5. Generate a report on surrenders and loans for SLIC.
6. Reviews, causes to have printed, and maintains adequate supply of
checks.
7. Contacts policyowner regarding tax withholding procedures, if
required.
8. Backup withholding will be coordinated between SLIC and SLD.
J. Claims
1. SLIC shall be notified immediately of requests for death claims
received from owners or beneficiaries. In addition, any
notification received by SLIC regarding a policy administered by
SLD will be communicated immediately to SLD to
(April 12, 2000)
5
freeze the account.
2. If multiple policies are involved, SLIC and SLD will coordinate
sending claim forms.
3. Respond to request from SLIC for disbursement of proceeds.
Generate related separate account ledger accounting.
4. Produce check production extract file for disbursements as
directed by SLIC. Check production will be through a SLD
checkwriting system.
5. Make changes to owner and/or inured information as directed by
SLIC where no payout is required.
6. Generate reports on death claims.
7. Claims examination will be done by SLD.
K. Underwriting
1. All underwriting reviews and services as needed.
L. Commissions
1. Verifies license status of brokers/agents based on information
supplied by SLIC.
2. Produce detailed commission transactions for each policy financial
transaction processed including premium application or reversal,
cancellation, etc. for which a commission debit or credit is
required.
3. Prepares commission file for SLIC. SLIC is responsible for
broker-dealer firms. Produce check for making all commission
payments.
4. Creates tax reporting forms, if required.
M. Proxy Processing
1. Receives record date information from the underlying mutual funds.
Receives proxy solicitation material from underlying mutual funds.
2. Prepares proxy cards, if applicable.
3. Mails solicitation and resolicitations, if necessary.
(April 12, 2000)
6
4. Maintains all proxy registers and other required proxy material.
5. Provide all necessary information for preparation of proxy cards,
if applicable.
6. Tabulates returned proxy cards and transmits results to underlying
mutual funds.
N. Periodic Reports and Prospectus Materials to Contract Owners
1. Prepares and mails statement of account to each Contract Owner.
2. Inserts and mails prospectus materials, semi-annual and annual
reports to Contract Owners, as required, both underlying mutual
fund and Separate Account reports. Filing of prospectus materials
and reports with NASD and SEC, as applicable, will be done by
SLIC. Printing of all prospectus materials and reports will be
done by SLIC.
O. Regulatory/Statement Reports
1. Prepares IRS reports as needed. Mails to owners and transmits to
IRS.
P. Actuarial, Finance and Management Reports.
1. Provides, on a set schedule, extracts listed below:
a. Reserve Extracts
b. Production Extracts
c. Premium Tax Extracts
d. Loan Extracts
e. Surrender Extracts
f. Claims Report
g. Intercompany billing and expense analysis
(April 12, 2000)
7
EXHIBIT C
SCHEDULE OF AUTHORIZED PERSONNEL
The following individuals are authorized by Southland Life Insurance Company to
give instructions or direction to Security Life of Denver Insurance Company with
respect to matters arising in connection with the servicing to be performed
under this Agreement:
Xxxxx Xxxxxxxxxx, Jr.
Xxxxx Xxxxxxxx
Xxxx Xxxxx
Xxx Xxxxx
Xxxx Xxxxxxxx
Xxxx Xxxxxxxx
Xxxxx Xxxxx
Exhibit C (April 12, 2000)
EXHIBIT D
BACKUP PROCEDURES
Current backup practices and procedures are described herein and may be changed
upon mutual agreement of Southland Life Insurance Company ("SLIC") and Security
Life of Denver Insurance Company ("SLD").
o Disaster recovery will be performed in accordance with the
Security Life of Denver Insurance Company Business Continuity Plan
o Backup procedures used by SLD for SLIC business shall be:
o Full backups shall be performed nightly
o Daily backups shall be kept for five (5) weeks
o Weekly backups shall be kept indefinitely
o All backups shall be kept off-site
(April 12, 2000)
