EXHIBIT h(7)
Administrative and Shareholder Services Agreement
This Agreement is made as of the 1st day of May 2001, by and between ING Pilgrim
Group, LLC (the "Administrator") and Security Life of Denver Insurance Company
("Company"), collectively, the "Parties."
WHEREAS, the Administrator serves as the Administrator for Pilgrim Variable
Products Trust ("Trust") which currently consists of 8 separate series (the
"Portfolios"); and
WHEREAS, the Company has entered into a Participation Agreement, dated May 1st ,
2001, with the Trust (a "Participation Agreement") pursuant to which the Trust
will make shares of each Portfolio listed from time to time on Schedule A of the
Agreement available to the Company at net asset value and with no sales charges,
subject to the terms of the Participation Agreement, to fund benefits under
variable life insurance policies and variable annuity Contracts (each, a
"Contract," and collectively, the "Contracts") to be issued by the Company; and
WHEREAS, the Participation Agreement provides that the Trust will bear the costs
of preparing and filing with the Securities and Exchange Commission the Trust's
prospectus, registration statement, proxy materials and reports, setting the
prospectus and shareholder reports in type, setting in type and printing the
proxy materials, and preparing all statements and notices required by any
federal or state law to be, in each case as may reasonably be necessary for the
performance of its obligations under the Participation Agreement (collectively,
the "Trust Materials"), and providing the Company with copies of the Trust
Materials; and
WHEREAS, the Participation Agreement provides that the Trust shall pay for the
cost of typesetting, printing and distributing periodic fund reports to
shareholders, prospectuses and supplements thereto, statements of additional
information, proxy statements and other materials that are required by law to be
sent to existing owners of Contracts ("Contract owners"), as well as the cost of
distributing such materials; and
WHEREAS, the Participation Agreement makes no provision for which party shall
incur various administrative expenses in connection with the servicing of
Contract owners or Participants who have allocated Contract value to a
Portfolio, including, but not limited to, responding to various Contract owner
inquiries regarding a Portfolio; and
WHEREAS, ING Pilgrim Investments, LLC ("Pilgrim Investments"), investment
adviser to the Portfolios and a subsidiary of the Administrator, has entered
into an Expense Limitation Agreement with the Trust, a copy of which has been
provided to the Company, and which may be renewed or amended from time to time
("Expense Limitation Agreement") under which Pilgrim Investments has agreed to
limit the expenses of all of the Portfolios;
WHEREAS, the Parties wish to allocate expenses in a manner that is fair and
equitable, consistent with the best interests of Contract owners and
participants, and that does not entail the expense and inconvenience of
separately identifying and accounting for each item of Trust expenses;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained
herein, the Parties hereto agree as follows:
I. Services Provided:
The Company agrees to provide services including, but not limited to:
a) delivering and responding to inquiries respecting Trust
prospectuses, Statements of Additional Information, reports,
notices, proxies and proxy statements and other information
respecting the Portfolios (but not including services paid for
by the Trust);
b) facilitating the tabulation of Contract owners' and
participants' votes in the event of a meeting of Trust
shareholders;
c) providing and administering Contract features for the benefit
of Contract owners and participants participating in the
Trust, including fund transfers, dollar cost averaging, asset
allocation, portfolio rebalancing, earnings sweep, and pre-
authorized deposits and withdrawals;
d) responding to inquiries from Contract owners and participants
using one or more of the Portfolios as an investment vehicle
regarding the services performed by the Company as they relate
to the Trust or its Portfolios;
e) teleservicing support in connection with the Portfolios;
f) maintenance of Company records reflecting shares purchased and
redeemed and share balances held by separate accounts of the
Company and the conveyance of that information to the Trust,
its transfer agent, or the Administrator as may be reasonably
requested;
g) facilitating the printing and mailing of reports to
shareholders and other shareholder communications from the
Trust as may be required pursuant to the Participation
Agreement;
h) responding to inquiries from Contract owners or participants
concerning the Trust and its operations; and
i) providing such similar services as the Administrator or Trust
may reasonably request to the extent permitted or required
under applicable statutes, rules and regulations.
II. Expense Allocations:
Subject to Section III, the Company or its affiliates shall bear the
costs of:
a) printing and distributing all Trust Materials to be
distributed to prospective Contract owners as discussed in the
Participation Agreement as being distributed at the Company's
expense;
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b) printing and distributing all sales literature or promotional
material developed by the Company or its affiliates and
relating to the Contracts; and
c) servicing Contract owners who have allocated Contract value to
a Portfolio, which servicing shall include, but is not limited
to, the items listed above
III. Payment of Expenses:
a) The Administrator shall pay to the Company a quarterly fee
("Service Fee") equal to a percentage of the average daily net
assets of the Portfolio, due to investment in a class of the
Portfolio attributable to Contracts issued by the Company at
the annual rates shown in the attached Schedules A (for Class
R Shares of the Portfolios).
b) Administrator represents that under the terms of the Expense
Limitation Agreement, Pilgrim Investments has agreed that to
the extent that ordinary operating expenses incurred by a
class of a Portfolio in any fiscal year, including, but not
limited to, investment management fees payable to Pilgrim
Investments, but excluding interest, taxes, brokerage
commissions and extraordinary expenses, exceed the operating
expense limits specified in that agreement (the "Excess
Amount"), Pilgrim Investments shall waive or reduce its fee
and/or promptly remit to the Portfolio an amount that is equal
to the Excess Amount.
In the event that Pilgrim Investments pays Administrator an
Excess Amount under the terms of the Expense Limitation
Agreement, Company agrees that any Service Fee owed by
Administrator to the Company pursuant to Section III(a) above
may be reduced by an amount that is equal to the Company's pro
rata portion of 50% of such Excess Amount, based on its
investments in each class of a Portfolio attributable to
Contracts issued by the Company in relation to the total
assets of such class of a Portfolio. However, any reduction of
the Service Fee shall not exceed an amount equal to an annual
rate of .04% of the average daily net assets of any class of a
Portfolio attributable to Contracts issued by the Company.
Administrator agrees that any recoupment of the Excess Amount
by Pilgrim Investments under the terms of the Expense
Limitation Agreement shall be paid to the Company commensurate
with Company's share of the Excess Amount described above.
c) For purposes of calculating the amount of the Service Fee,
reduction or recoupment thereof as described in Sections
III(a) and (b) above respectively, the "average daily net
assets" of a class of a Portfolio for any calendar quarter
shall be equal to the quotient produced by dividing (i) the
sum of the net assets of such class of a Portfolio
attributable to Contracts sold by the Company, for each
calendar month as determined in accordance with the procedures
established from time to time by or under the direction of the
Trust's Board of Trustees for each business day of such month,
by (ii) the number of such business days;
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d) The Company will provide Administrator with reports for each
calendar month indicating the net assets in each class of a
Portfolio at the end of the month attributable to Contracts
issued by the Company.
e) The Administrator will calculate the Service Fee contemplated
by this Section at the end of each calendar month and will
make such payment, as appropriate, to the Company within
thirty (30) days after the last business day of each calendar
quarter thereafter. Each payment will be accompanied by a
statement showing the calculation of the Service Fee payable
by the Administrator, if any, and any reduction thereto
pursuant to Section III(b) above, and such other supporting
data as may be reasonably requested by the Company.
f) The Company agrees to make appropriate disclosure in its
prospectus and registration statement as to the payments for
services provided pursuant to this Agreement as required by
the federal securities laws or other applicable law.
g) From time to time, the Parties hereto shall review the Service
Fee to determine whether it reasonably approximates the
incurred and anticipated costs, over time, of the Company in
connection with its duties hereunder. The Parties agree to
negotiate in good faith any change to the Service Fee proposed
by one of the Parties in good faith.
h) The Parties agree that the Administrator's payments to the
Company are for administrative services only and do not
constitute payment in any manner for investment advisory
services or costs of distribution.
i) This Agreement shall not modify any of the provisions of the
Participation Agreement, but shall supplement those
provisions.
IV. Term of Agreement:
This Agreement shall continue in effect for so long as the Company or
its successor(s) in interest, or any affiliate thereof, continues to
hold shares of the Trust or its Portfolios, and continues to perform in
a similar capacity for the Company and Trust.
V. Indemnification:
a) The Company agrees to indemnify and hold harmless the
Administrator and its officers and directors, from any and all
loss, liability and expense resulting from the gross
negligence or willful wrongful act of the Company under this
Agreement, except to the extent such loss, liability or
expense is the result of the willful misfeasance, bad faith or
gross negligence of the Administrator in the performance of
its duties, or by reason of the reckless disregard of its
obligations and duties under this Agreement.
b) The Administrator agrees to indemnify and hold harmless the
Company and its officers and directors from any and all loss,
liability and expense resulting from the gross negligence or
willful wrongful act of the Administrator under this
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Agreement, except to the extent such loss, liability or
expense is the result of the willful misfeasance, bad faith or
gross negligence of the Company in the performance of its
duties, or by reason of the reckless disregard of its
obligations and duties under this Agreement.
VI. Amendment
This Agreement may be amended only upon mutual agreement of the Parties
hereto in writing.
VII. Standard of Care
The Parties shall exercise reasonable care in the performance of their
duties under this Agreement.
VIII. Confidentiality
The terms of this arrangement will be held confidential by each Party
except to the extent that either Party or the Trust may deem it
necessary to disclose this arrangement.
IX. Notices:
Notices and communications required or permitted hereby will be given
to the following persons at the following addresses, or such other
persons as the Party receiving such notices or communications may
subsequently direct in writing:
If to the Trust:
Pilgrim Variable Products Trust
0000 Xxxx Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx
If to the Administrator:
ING Pilgrim Group, LLC.
0000 Xxxx Xxxxxxxxxx Xxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx
If to the Company:
ING Life Companies
0000 Xxxxxxxx
Xxxxxx, XX 00000
Attn: Variable Counsel
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X. Applicable Law:
Except insofar as the Investment Company Act of 1940 or other federal
laws and regulations may be controlling, this Agreement will be
construed and the provisions hereof interpreted under and in accordance
with Delaware law, without regard for that state's principles of
conflict of laws.
XI. Execution in Counterparts:
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the
same instrument.
XII. Severability:
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby.
XIII. Cumulative Rights:
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, that the Parties are entitled to
under federal and state laws.
XIV. Headings
The headings used in this Agreement are for purposes of reference only
and shall not limit or define, the meaning of the provisions of this
Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
ING PILGRIM GROUP, LLC SECURITY LIFE OF DENVER INSURANCE COMPANY
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxx Xxxxxxxxxx
------------------------- -------------------------------------
Name: Xxxxxxx Xxxxxx Name: Xxx Xxxxxxxxxx
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SCHEDULE A FOR CLASS R SHARES
PILGRIM VARIABLE PRODUCTS TRUST
ANNUAL RATE PORTFOLIOS
----------- ----------
0.375% Pilgrim VP MagnaCap Portfolio
0.275% Pilgrim VP Research Enhanced Index Portfolio
0.375% Pilgrim VP Growth Opportunities Portfolio
0.375% Pilgrim XX XxxXxx Opportunities Portfolio
0.20% Pilgrim VP Growth + Value Portfolio
0.375% Pilgrim VP SmallCap Opportunities Portfolio
0.25% Pilgrim VP International Value Portfolio
0.375% Pilgrim VP High Yield Bond Portfolio
Schedule dated: May 1, 2001
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