EXHIBIT (8)(i)
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (hereinafter called "Agreement") dated December 1,
1995, by and between AMERICAN ANNUITY GROUP, INC.(hereinafter called "AAG") and
ANNUITY INVESTORS LIFE INSURANCE COMPANY (hereinafter called "AILIC").
WHEREAS, AAG has extensive experience in the administration of annuity
business; and
WHEREAS, AILIC is a subsidiary of AAG, and desires that AAG perform certain
administrative, accounting and other services (hereinafter called "Services")
for AILIC in its business operations and desires further to make use in its
day-to-day operations of certain property, equipment, and facilities
(hereinafter called "Facilities") of AAG and its subsidiaries as AILIC may
request; and
WHEREAS, AAG and AILIC contemplate that such an arrangement will achieve
certain operating economies and improve Services to the benefit of AAG, AILIC
and AILIC's policyholders; and
WHEREAS, AAG and AILIC wish to assure that all charges for Services and the
use of Facilities incurred hereunder are reasonable and in accordance with the
requirements of applicable law and regulations and to the extent practicable
reflect actual costs and are arrived at in a fair and equitable manner, and that
estimated costs, whenever used, are adjusted periodically, to bring them into
alignment with actual costs; and
WHEREAS, AAG and AILIC wish to identify the Services to be rendered to
AILIC and AAG and its subsidiaries and the Facilities to be used by AILIC and to
provide a method for determining the charges to be made to AILIC.
NOW, THEREFORE, in consideration of the premises and of the promises set
forth herein, and intending to be legally bound hereby, AAG and AILIC agree as
follows:
1. PERFORMANCE OF SERVICES AND USE OF FACILITIES. AAG agrees to the extent
requested by AILIC to perform such Services for AILIC as AILIC determines to be
reasonably necessary in the conduct of its business and operations.
AAG agrees to the extent requested by AILIC to make available its personnel
and Facilities to AILIC as AILIC may determine to be reasonably necessary in the
conduct of its business and operations, including but not limited to the
following functions: policy administration; accounting and auditing services;
actuarial; marketing; legal; administrative and other regulatory matters;
general corporate matters; contract matters; use of data processing and computer
equipment; use of business property, whether owned or leased; and use of
communications equipment. It is the intent of the parties that AAG will perform
all services which AILIC requires in connection with its business of marketing,
issuing and servicing fixed and variable annuities and provide all Facilities
needed in connection with such business. Notwithstanding the foregoing, this
Agreement is not intended to cover investment services or policy distribution
which may be the subject of separate agreements.
AAG agrees at all times to use its best efforts to maintain sufficient
personnel and Facilities of the kind necessary to perform the Services sent
forth in this Agreement. AAG shall have the right upon thirty (30) days prior
written notice to and non-disapproval by the Ohio Department of Insurance to
subcontract with those subsidiaries, affiliates or unrelated third parties
(hereinafter "Subcontractors") accepted in writing by AILIC to perform any
Services and provide any personnel and Facilities which AAG is obligated to
provide to AILIC pursuant to this Agreement and in strict accordance with the
terms, conditions and limitations contained in this Agreement; provided,
however, AAG shall not be relieved of its obligations, or of any liability
hereunder to AILIC arising as a result of any failures of SUBCONTRACTORS to
perform. Until changed in accordance with the foregoing, Services shall be
provided by AAG.
(a) CAPACITY OF PERSONNEL; STATUS OF FACILITIES, Whenever AAG utilizes its
personnel to perform Services for AILIC pursuant to this Agreement, such
personnel shall at all times remain employees of AAG subject solely to its
direction and control and AAG shall alone retain full liability to such
employees for their welfare, salaries, fringe benefits, legally required
employer contributions and tax obligations.
No facility of AAG used in performing Services for or subject to use by
AILIC 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 AAG, AAG shall perform any
such Services in accordance with any standards and guidelines AILIC develops and
communicates to AAG. In performing any Services hereunder, AAG shall at all
times act in a manner reasonably calculated to be in, or not opposed to, the
best interests of AILIC. AAG shall have no liability for any action taken or
omitted by it in furnishing Services and Facilities under this Agreement, in
good faith and without gross negligence or willful misconduct.
(c) CONTROL. The performance of Services by AAG for AILIC pursuant to this
Agreement shall in no way impair the absolute control of the business and
operations of AAG or AILIC by their respective Boards of Directors. AAG shall
act hereunder so as to assure the separate operating identity of AILIC as
required pursuant to the laws of the State of Ohio.
2. SERVICES. The performance of services by AAG under this Agreement with
respect to the business and operations of AILIC shall at all times be subject to
the direction and control of the Board of Directors of AILIC.
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Subject to the foregoing and to the terms and conditions of this Agreement,
AAG shall provide to AILIC the Services set forth below.
(a) POLICY ADMINISTRATION. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide all services in connection with policy
administration and policyholder services including: policy issuance, premium
processing, loan processing, surrender and annuity processing and policyholder
services.
(b) ACCOUNTING AND AUDITING. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide the following accounting services:
preparation and maintenance of the financial statements and reports including
annual and quarterly statements on both statutory and GAAP bases and tax
returns, and processing of the related financial records and transactions of
AILIC. AAG shall also provide such assistance as may be required with respect to
tax and auditing services.
(c) ACTUARIAL. Under the general supervision of the Board of Directors of
AILIC, AAG shall provide all actuarial services needed in connection with
AILIC's business including policy design and development and reserve valuation.
(d) MARKETING. Under the general supervision of the Board of Directors of
AILIC, AAG shall provide all marketing services needed in connection with
AILIC's business including market research, development of marketing materials
and campaigns and recruitment of agents.
(e) LEGAL. Under the general supervision of the Board of Directors of
AILIC, AAG shall provide all legal services and compliance services needed in
connection with AILIC's business including company licensing, product approval
and other regulatory matters.
(f) ADMINISTRATIVE AND OTHER REGULATORY MATTERS. Under the general
supervision of the Board of Directors of AILIC, AAG shall provide all
administrative and regulatory services needed in connection with AILIC's
business.
(g) CORPORATE MATTERS. Under the general supervision of the Board of
Directors of AILIC, AAG shall provide services with respect to general corporate
matters involving AILIC.
(h) POLICY MATTERS. Under the general supervision of the Board of Directors
of AILIC, AAG shall provide all services in connection with the development of
policies and products to be marketed by AILIC.
(i) DATA PROCESSING AND COMPUTER EQUIPMENT. Under the general supervision
of the Board of Directors of AILIC, AAG shall provide telecommunications
services and electronic data processing services, Facilities and integration,
including software programming and documentation and hardware utilization.
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3. CHARGES. AILIC shall not be charged by AAG for the Services and Facilities
provided by AAG until such time as AILIC becomes an operating entity issuing
annuity contracts. All expenses incurred prior to such time in the development
of the annuity contracts shall be borne by AAG under the general supervision of
the Board of Directors of AILIC.
After such time, the charge to AILIC for such Services and Facilities shall
be at a rate as mutually agreed upon plus a reasonable charge for direct
overhead, the amount of such charge for overhead to be agreed upon by the
parties from time to time and reported annually.
The bases for determining such charges for Services and Facilities to AILIC
shall be those used by AAG for internal cost distribution including, where
appropriate, Activity Based Costing records. Such bases shall be modified and
adjusted by mutual agreement where necessary or appropriate to reflect fairly
and equitably the actual incidence of cost incurred by AAG and/or SUBCONTRACTORS
on behalf of AILIC.
4. PAYMENT. AAG and/or SUBCONTRACTORS shall submit to AILIC within thirty (30)
days of the end of each calendar month a written statement of the amount
estimated to be owed by AILIC for Services and the use of personnel or
Facilities pursuant to this Agreement in that calendar month and AILIC shall pay
to the party rendering the statement within thirty (30) days following receipt
of such written statement the amount set forth in the statement.
Within thirty (30) days after the end of each calendar quarter, AAG and/or
SUBCONTRACTORS will submit to AILIC a detailed written statement of the charges
due from AILIC to AAG and/or SUBCONTRACTORS in the preceding calendar quarter,
including charges not included in any previous statements, and any balance
payable as shown in such statement shall be paid within fifteen (15) days
following receipt of such written statement by AILIC.
5. ACCOUNTING RECORDS AND DOCUMENTS. AAG and/or SUBCONTRACTORS shall be
responsible for maintaining full and accurate accounting records of all Services
rendered and Facilities used pursuant to this Agreement and such additional
information as AILIC may reasonably request for purposes of its internal
bookkeeping and accounting operations. The accounting records to be maintained
by AAG shall include any records required to be maintained by AILIC under
applicable laws. AAG and/or SUBCONTRACTORS shall keep such accounting records
insofar as they pertain to the computation of charges hereunder available at its
principal offices for audit, inspection and copying by AILIC or any governmental
agency having jurisdiction over AILIC during all reasonable business hours. With
respect to accounting and statistical records prepared by AAG by reason of its
performance under this Agreement, summaries of such records shall be delivered
to AILIC within thirty (30) days from the end of the month to which the records
pertain.
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6. OTHER RECORDS AND DOCUMENTS. All books, records, and files established and
maintained by AAG and/or SUBCONTRACTORS by reason of its performance under this
Agreement which, absent this Agreement, would have been held by AILIC shall be
deemed the property of AILIC, and shall be subject to examination by AILIC and
persons authorized by it at all times, and shall be delivered to AILIC at least
quarterly. With respect to original documents other than those provided for in
Section 5 hereof which would otherwise be held by AILIC and which may be
obtained by AAG in performing under this Agreement, AAG shall deliver such
documents to AILIC within thirty (30) days of their receipt by AAG except where
continued custody of such original documents is necessary to perform hereunder
7. LICENSING. AAG shall be responsible for obtaining any licenses or permits
needed to provide the services described herein and shall be responsible for
providing personnel who have any required license or permit.
8. RIGHT TO CONTRACT WITH THIRD PARTIES. Nothing herein shall be deemed to grant
AAG an exclusive right to provide Services to AILIC, and AILIC retains the right
to contract with any third party, affiliated or unaffiliated, for the
performance of Services or for the use of Facilities as are available to or have
been requested by AILIC pursuant to this Agreement. Similarly, AAG retains the
right to contract with any third party, affiliated or unaffiliated, to perform
services or to provide facilities, identical or similar to those being performed
or provided herein.
9. TERMINATION AND MODIFICATION. This Agreement shall remain in effect until
terminated by either AAG or AILIC upon giving thirty (30) days or more advance
written notice, provided that AILIC shall have the right to elect to continue to
receive data processing Services and/or to continue to utilize data processing
Facilities and related software for up to one year from the date of such notice.
Upon termination, AAG shall promptly deliver to AILIC all books and records that
are, or are deemed by this Agreement to be, the property of AILIC.
10. SETTLEMENT ON TERMINATION. No later than ninety (90) days after the
effective date of termination of this Agreement, AAG shall deliver to AILIC a
detailed written statement for all charges incurred and not included in any
previous statement to the effective date of termination. The amount owned
hereunder shall be due and payable within thirty(30) days of receipt of such
statement.
11. EFFECTIVE DATE. This Agreement shall become effective upon the later of (i)
the date hereof, or (ii) the receipt of any required approval of the Ohio
Department of Insurance or the expiration of any waiting period provided for by
the laws or regulations of the State of Ohio.
12. ASSIGNMENT. This Agreement and any rights pursuant hereto shall not be
assignable by either party hereto, except as set forth herein or by operation of
law. Except as and to the extent specifically provided in this Agreement,
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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 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.
13. GOVERNING LAW. This Agreement is made pursuant to and shall be governed by,
interpreted under, and the rights of the parties determined in accordance with,
the laws of the State of Ohio.
14. ARBITRATION. Any unresolved difference of opinion between the parties
arising out of or relating to this Agreement, or the breach thereof, except as
provided in Section 3, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and the
Expedited Procedures thereof, and judgment upon the award rendered by the
Arbitrator may be entered in any Court having jurisdiction thereof. The
arbitration shall take place in Cincinnati, Ohio.
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 certified or
registered mail, postage prepaid, addressed or to such other person or place as
each party may from time to time designate by written notice sent as aforesaid.
If to AAG:
AMERICAN ANNUITY GROUP, INC.
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Phone Number (000) 000-0000
Fax Number (000) 000-0000
If to AILIC:
ANNUITY INVESTORS LIFE INSURANCE COMPANY
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Phone Number (000) 000-0000
Fax Number (000) 000-0000
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 between the parties with respect to the subject matter hereof.
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In witness whereof, the parties hereunto set their hands as of the date
first above written.
AMERICAN ANNUITY GROUP, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Its: Senior Vice President
ANNUITY INVESTORS LIFE INSURANCE
COMPANY, INC.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------
Its: Senior Vice President
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