EXHIBIT 3(a)
UNDERWRITING AND
ADMINISTRATIVE SERVICES AGREEMENT
This UNDERWRITING AND ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is
effective as of , 2016, between and among Commonwealth Annuity and Life
Insurance Commonwealth Annuity, a Massachusetts corporation ("Commonwealth
Annuity"), on its own behalf and on behalf of each of its separate investment
Separate Accounts (collectively, the "Separate Accounts") as set forth in
Appendix A hereto; Forethought Distributors, LLC, a Delaware limited liability
corporation ("Forethought"), and Global Atlantic Financial Company ("GAFC"), a
Delaware corporation.
WHEREAS, Commonwealth Annuity and the Separate Accounts issue certain variable
annuity contracts or variable insurance policies (the "Variable Contracts"),
which may be deemed to be securities under the Securities Act of 1933, as
amended (the "1933 Act") and the laws of some states;
WHEREAS, Forethought, an affiliate of Commonwealth Annuity, is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934 as amended (the "1934 Act") and is a member of
the Financial Industry Regulatory Authority ("FINRA");
WHEREAS, Commonwealth Annuity desires Forethought to act as principal
underwriter for the Separate Accounts (the "Separate Accounts") set forth in
Appendix A, as may be amended from time-to-time by mutual consent of the
parties, to enter into selling agreements with registered independent
broker-dealers in connection with the sale of the Variable Contracts, and to
assume full responsibility for the securities activities of all "persons
associated" (as that term is defined in Section 3(a)(18) of the 0000 Xxx) with
Forethought and engaged directly or indirectly in the Variable Contract
operations (the "associated persons");
WHEREAS, Forethought desires to have Commonwealth Annuity perform certain
administrative services on behalf of Forethought in connection with the sale and
servicing of the Variable Contracts;
WHEREAS, Commonwealth, Forethought, and GAFC are members of the Global Atlantic
group of affiliated companies (collectively, "Global Atlantic");
WHEREAS, as the common employer of all employees within Global Atlantic, GAFC
seconds the services of its employees ("GAFC personnel") to entities within
Global Atlantic in order to make available various administrative, legal,
compliance, technology, operations, financial reporting, and other functions to
such entities, and allocates the common cost of certain furniture, fixtures,
equipment, leased space and improvements and services related thereto to such
entities; and
WHEREAS, Forethought and Commonwealth Annuity agree that all costs, fees, and
expenses associated with Forethought's principal underwriter and compliance
functions for the Variable Contracts under this Agreement shall be allocated to
Commonwealth Annuity;
NOW, THEREFORE, in consideration of the covenants and mutual promises of the
parties made to each other, it is hereby covenanted and agreed as follows:
1. Commonwealth Annuity hereby appoints Forethought as the principal
underwriter of the Variable Contracts and the Separate Accounts. Forethought
will promote such Variable Contracts in those states in which Commonwealth
Annuity has variable contract authority and in which the Variable Contracts are
qualified for sale under applicable state law, as Commonwealth Annuity shall so
notify Forethought from time to time. Forethought shall suspend its efforts to
effectuate sales of the Variable Contracts in such jurisdictions as Commonwealth
Annuity may request at any time. Forethought shall be responsible for compliance
with all applicable requirements of the 1933 Act, the 1934 Act and the
Investment Company Act of 1940 Act, as amended (the "1940 Act") and the rules
and regulations thereunder relating to the sales and distribution of the
Variable Contracts.
2. Forethought shall assume responsibility for the activities of all persons
engaged directly or indirectly in the promotion and the solicitation of the
Variable Contracts, including but not limited to the continued compliance by
itself and its associated persons with all the FINRA Rules applicable to its
member firms ("FINRA Rules") and federal and state securities laws, to the
extent applicable in connection with the sale of the contracts.
3. Forethought may enter into sales agreements and/or services agreements with
independent broker-dealers that are members of FINRA for the sale and/or
servicing of the Variable Contracts through their registered representatives;
provided, however, that no such registered representative shall be allowed to
participate in the solicitation of the Variable Contracts unless such person has
been appointed to solicit variable contracts by Commonwealth Annuity in any
state in which such solicitations may occur. All such agreements shall provide
that each independent broker-dealer will assume full responsibility for
continued compliance by itself and its associated persons with applicable laws
and regulations, including but not limited to the FINRA Rules, federal
securities laws, and state insurance and securities laws.
4. Forethought agrees that it will utilize the then currently effective
prospectus relating to the Variable Contracts in connection with its selling
efforts. Forethought agrees that it will not use any sales literature, as
defined under FINRA Rules or by the statutes or regulations of any state in
which the Variable Contracts may be solicited, unless such material has received
prior written approval by Commonwealth Annuity. Forethought, directly or through
Commonwealth Annuity as its agent, will make timely filings of all reports and
any sales literature relating to the Separate Accounts and/or the Variable
Contracts as may be required to be filed by the principal underwriter by
statutes or regulations of the SEC, FINRA, and any other securities regulatory
authorities.
5. On behalf of the Separate Accounts, Commonwealth Annuity will prepare and
submit (a) all registration statements and prospectuses (including amendments)
and all reports required by law to be filed by the Separate Accounts with
federal and state securities regulatory authorities, and (b) all notices,
proxies, proxy statements, and periodic reports that are to be transmitted to
persons having voting rights with respect to the Separate Accounts. Commonwealth
Annuity agrees to be responsible to the Separate Accounts for all sales and
administrative expenses incurred in connection with the administration of the
Variable Contracts and the Separate Accounts other than applicable taxes arising
from income and capital gains of the Separate Accounts and any other taxes
arising from the existence and operation of the Separate Accounts.
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6. Commonwealth Annuity shall, as agent for Forethought, and at Commonwealth
Annuity's expense:
(a) maintain and preserve in accordance with Rules 17a-3 and 17a-4 under
the 1934 Act all books and records required to be maintained by
Forethought in connection with the offer and sale of the Variable
Contracts to the extent that such requirements are applicable to
Variable Contract Operations, which books and records shall be
maintained and held by Commonwealth annuity on behalf of and as agent
for Forethought whose property they shall remain, and shall at all
times be subject to inspection by the SEC in accordance with Section
17(a) of the 1934 Act and by all other regulatory bodies having
jurisdiction over the Variable Contracts; and
(b) send a written confirmation for each contract transaction reflecting
the facts of the transaction and showing that it is being sent by
Commonwealth Annuity on behalf of Forethought acting in the capacity
of agent for Commonwealth Annuity, ( and Forethought, acting in the
capacity of principal underwriter for the Separate Accounts), in
conformance with the requirements of Rule 10b-10 of the 1934 Act; and
(c) transmit all sales commissions and other compensation to
broker-dealers having a sales agreement with Forethought with respect
to the Variable Contracts in compliance with all applicable laws and
FINRA Rules.
7. Commonwealth Annuity will bear the costs of all functions and services,
expenses, and other fees incurred in connection with the distribution of the
Variable Contracts and with the variable contracts compliance functions
("Covered Expenses") in a manner consistent with regulatory guidance, including
NASD Notice to Members 03-63. To the extent that Forethought incurs
out-of-pocket Covered Expenses in connection with the distribution of the
Variable Contracts and the Variable Contracts compliance functions, Commonwealth
Annuity shall reimburse Forethought for such expenses.
The "Covered Expenses" shall include, but not be limited to the costs of:
(a) registering the Separate Accounts and contracts and qualifying the
contracts for sale in the various states;
(b) preparing, printing, and distributing all registration statements and
prospectuses (including amendments), contracts, notices, periodic
reports, and proxy solicitation material, and confirmations;
(c) preparing, printing and distributing advertising and sales literature used
by Forethought or furnished by Forethought to broker-dealers in connection
with offering the variable contracts;
(d) fees and expenses associated with qualifying and licensing associated
persons with federal and state regulatory authorities and the FINRA
and with performing compliance-related administrative services;
(e) sales commissions and other compensation, if any, due to broker-dealers for
the sale of the Variable Contracts or to other persons for activities
relating to the sale of the contracts;
(f) maintaining and preserving in accordance with Rules 17a-3 and 17a-4 under
the 1934 Act all books and records required to be maintained by Forethought
with respect to the offer and Sale of the Variable Contracts
(g) the services of GAFC personnel sufficient for Forethought to conduct the
principal underwriter functions and services under this Agreement; and
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(h) such office and administrative facilities, including, without limitation,
furniture, fixtures leased office space, telephones, computers and other
facilities, as set forth in Appendix D (collectively, "the Facilities")
necessary for Forethought to conduct the principal underwriter functions
and services anticipated under this Agreement.
8. The parties anticipate that the GAFC personnel described in Section 7(g),
above, shall be from the departments identified on Appendix B hereto, and
anticipate that the GAFC personnel made available to Forethought with respect to
Forethought's principal underwriter activities related to the Variable
Contracts, will dedicate the percentage of their professional time indicated on
Appendix B, as may be amended from time-to-time. The parties agree that a
reasonable allocation of the cost of providing the Facilities to Forethought
should be based upon an average of the estimated time the GAFC personnel devote
to Forethought's principal underwriter activities related to the Variable
Contracts, as set forth in Appendix B, as the parties believe that this will
most closely approximate the actual use of the Facilities by Forethought.
9. The Covered Expenses incurred by Commonwealth Annuity under this Agreement,
including all costs attributable to or allocated to Forethought under Appendix
B, shall be the sole obligation of and shall be paid by Commonwealth Annuity.
Commonwealth Annuity and GAFC agree that Forethought has no obligation, directly
or indirectly, to compensate or reimburse Commonwealth Annuity or GAFC,
respectively for any costs and expenses incurred by Commonwealth Annuity or
reimbursed by Commonwealth Annuity in connection with this Agreement.
Commonwealth Annuity represents and warrants to Forethought that it has adequate
resources independent of Forethought to assume the obligations of Forethought as
contemplated herein. Commonwealth Annuity agrees to make available to
Forethought upon request financial information to demonstrate the adequacy of
its resources.
Notwithstanding the foregoing, in the event that Commonwealth Annuity fails
to pay a Covered Expense, Forethought will include that expense in its net
capital computation by adjustments which reduce net capital and increase
aggregate indebtedness by the amount of such unpaid expense.
10. As set forth above, Commonwealth Annuity shall reimburse Forethought fully
and completely for all expenses incurred by Forethought for distribution
services, administration services, and other services in connection with the
Variable Contracts; provided, however, if Forethought receives compensation from
any unaffiliated third party in connection with such services, and such services
have been or will be directly or indirectly provided by Commonwealth Annuity,
Forethought shall pay such compensation to Commonwealth Annuity.
11. To the extent that Commonwealth Annuity or Forethought provide additional
services to the other party that are not in connection with the distribution or
administration of the Variable Contracts, the actual costs and expenses for such
additional services shall be allocated as may be mutually agreed upon by the
parties. Any costs and expenses allocated to Forethought will be captured by the
categories and reflected as expenses of Forethought on its financial statements
and reports that are submitted to the Securities and Exchange Commission, FINRA,
and state regulatory authorities.
12. Sales commissions and other compensation, if any, due to broker-dealers
for the sale of the Variable Contracts shall be paid by Commonwealth Annuity
through Forethought, as described
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briefly above in Section 6(c). Forethought will reflect such commissions and
other compensation on its books and records, or as otherwise required or
permitted by applicable statutes or regulations. Commonwealth Annuity, as agent
for Forethought, agrees to transmit all sales commissions and other compensation
to broker-dealers having a sales agreement or services agreement with
Forethought with respect to the Variable Contracts. Forethought or Commonwealth
Annuity, as agent for Forethought, shall pay all other remuneration due any
other persons for other activities relating to the sale of the Variable
Contracts. Commonwealth Annuity shall reimburse Forethought fully and completely
for all amounts, if any, paid by Forethought to any person pursuant to this
Section.
13. As compensation for services performed and expenses incurred under this
Agreement, Commonwealth Annuity will receive the charges and deductions as
provided in each outstanding series of the Variable Contracts. Forethought will
be reimbursed by Commonwealth Annuity for the costs and expenses it incurs, as
set forth in Section 7 above, and may receive additional compensation, if any,
as may be agreed upon by the parties from time-to-time. If Forethought receives
compensation from any unaffiliated third party in connection with services
related to the Variable Contracts, and such services have been or will be
directly or indirectly provided by Commonwealth Annuity, Forethought shall pay
such compensation to Commonwealth Annuity.
14. Each party hereto shall advise the others promptly (a) of any action of
the SEC or any state or federal authorities that affects the registration or
qualification of the Separate Accounts or the Variable Contracts, or the right
to offer the contracts for sale, (b) of any fact or event which makes untrue any
statement in the registration statement or prospectus, or which requires the
making of any change in the registration statement or prospectus, in order to
make the statements therein not misleading, (c) of any complaint or of any
threatened, pending, or completed action, suit or proceeding that relates to the
Variable Contracts or the matters covered by this Agreement.
15. Each party hereto shall each comply with all applicable provisions of the
1933 Act, 1934 Act, 1940 Act and all federal and state securities and insurance
laws, rules and regulations governing the issuance and sale of the Variable
Contracts. Each party hereto agrees to furnish any state insurance commissioner
or regulatory authority with jurisdiction over the Variable Contracts with any
information or reports in connection with services provided under this Agreement
which may be requested in order to ascertain whether the variable insurance
product operations of Commonwealth Annuity or the principal underwriter
functions of Forethought are being conducted in a manner consistent with
applicable statutes, rules and regulations.
16. Forethought shall reimburse, indemnify and hold harmless GAFC,
Commonwealth Annuity, the Separate Accounts and their respective affiliates and
their partners, directors, officers and employees, for, from and against any or
all expenses, losses, damages, liabilities, demands, charges, and claims
(collectively, "Losses"), to the extent that such Losses are the direct result
of an act or omission by Forethought that constitutes gross negligence in the
performance of its duties, willful misconduct, willful misfeasance, bad faith,
or reckless disregard of its obligations and duties under the Agreement.
Commonwealth Annuity shall reimburse, indemnify and hold harmless GAFC,
Forethought, and their respective affiliates and their partners, directors,
officers and employees, for, from, and against any and all Losses relating to
this Agreement to the extent that such Losses are the direct result of an act or
omission by Commonwealth Annuity that constitutes gross negligence in the
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performance of its duties, willful misconduct, willful misfeasance, bad faith,
or reckless disregard of its obligations and duties under the Agreement.
GAFC shall reimburse, indemnify and hold harmless Forethought, Commonwealth, and
their respective affiliates and their partners, directors, officers and
employees, for, from, and against any and all Losses relating to this Agreement
to the extent that such Losses are the direct result of an act or omission by
GAFC that constitutes gross negligence in the performance of its duties, willful
misconduct, willful misfeasance, bad faith, or reckless disregard of its
obligations and duties under the Agreement.
17. This Agreement shall upon execution become effective as of the date first
above written, and
(a) unless otherwise terminated, this Agreement shall continue in effect
from year-to-year;
(b) this Agreement may be terminated by any party at any time upon
giving 60 days' written notice to the other parties hereto; and
(c) this Agreement shall automatically terminate in the event of its
assignment.
18. The initial Separate Accounts and Contracts covered by this Agreement are
set forth in Appendix A. This Agreement, including Appendix A, may be amended at
any time by mutual consent of the parties.
19. This Agreement shall be governed by and construed in accordance with the
laws of Massachusetts.
20. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall be deemed one
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first written above.
COMMONWEALTH ANNUITY FORETHOUGHT DISTRIBUTORS LLC
AND LIFE INSURANCE COMPANY
By: ---------------------------------------------- By: ----------------------------------------------
Name: ---------------------------------------------- Name: ----------------------------------------------
Title: ---------------------------------------------- Title: ----------------------------------------------
Date: ---------------------------------------------- Date: ----------------------------------------------
GLOBAL ATLANTIC FINANCIAL COMPANY
By: ----------------------------------------------
Name: ----------------------------------------------
Title: ----------------------------------------------
Date: ----------------------------------------------
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APPENDIX A
SEPARATE ACCOUNTS
Commonwealth Annuity Separate Account A
Commonwealth Select Separate Account
Commonwealth Select Separate Account II
Commonwealth Select Separate Account III
Separate Accounts DEF
Fulcrum Separate Account
Separate Accounts VA-A, VA-B, VA-C, VA-G, VA-H
Separate Account VA-K
Separate Account VA-P
Separate Account KG
Separate Account KGC
Separate Account FUVUL
Group VEL Account
Inheiritage Account
VEL Account
VEL II Account
VEL Account III
Separate Account IMO
CONTINUED
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VARIABLE LIFE CONTRACTS*
CONTRACT FORM MARKETING NAME
----------------------------------- -----------------------------------------------------------------------
1018-87 VEL 87
1018-91 XXX 00
0000-00 XXX 00
0000-00 XXX PG/VEL Plus
1026-94 Variable Inheiritage Select Variable Inheiritage
1027-95 Select Life
1029-94 Group VEL
1029C-94 Group VEL
1030-96 Agency SPVUL 2nd-to-die, Agency SPVUL Single Life, Agency SPL II
Select SPVUL 2nd to-die, Select SPVUL Single Life, SPL II (Select),
Fulcrum
1033-99 IMO, VEL 2001 (Agency), CPA, Xxxxxxx XXX, Select Life Plus, VEL 2001
(Select)
1034-99 Survivorship VUL ,Survivorship VUL (Select)
--------
*This list shall be deemed to include riders, endorsements, applications,
specification pages, state variations, certificates, binders and administrative
forms (and all state variations thereof) that are issued with or used with the
Contracts.
CONTINUED
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VARIABLE ANNUITY CONTRACTS*
CONTRACT FORM MARKETING OR PRODUCT NAME
----------------------------------- -----------------------------------------------------------------------
AVA-FP-67 / FP-69 67 series elective pay / 69 series elective pay
AVA-SP-67 /SP-69 67 series single pay / 69 series single pay
AVA-ST-67 67 series stipulated pay
VFR - 68 67 series group elective (GA)
VFS - 68 67 series group elective (GB), Flexible Fixed(84-92)
A3001-75 75 series elective pay
A3002-75 75 series elective pay
A3003-75 75 series single pay
A3004-75 75 series single pay
X0000-00 Xxxxxxxx XXX (single pay)
A3012-79 78/79 series elective pay
A3013-79 78/79 series elective pay
A3014-79 78/79 series single pay
A3015-79 78/79 series single pay
A3018-91 Exec Annuity Plus 91
A3019-92 Delaware Medallion I
A3020-92 Select Resource I
A3021-93 ExecAnnuity Plus 93
A3022-93 Delaware Medallion II
A3023-95 Pioneer Vision 1
A3025-96 Advantage, Select Resources II, Delaware Medallion III, Pioneer
Vision 0, Xxxxxxx Xxxxxxx Xxxxx, Xxxxxxx
X0000-00 Xxxxxxx Gateway Custom
A3027-98 Xxxxxx Advisor, Pioneer C-Vision, Select Charter
A3028-99 Delaware Golden Medallion, Pioneer Xtra Vision, Xxxxxxx Gateway Plus,
Select Reward
A3029-99 Immediate Advantage
A3030-99 Value Generation, Directed Advisory Solutions
A3031-99 Select Acclaim
A3035-00 SBD with EDB, Xxxxxxx Gateway Incentive
A3036- 01 Premier Choice
A3037-02 Optim-L
A3038-02 Gateway Plus II
3038-07 Advantage IV Variable Annuity
3039-07 Preferred Plus Variable Annuity
3040-09 Horizon Variable Annuity
--------
*This list shall be deemed to include riders, endorsements, applications,
specification pages, state variations, certificates, binders and administrative
forms (and all state variations thereof) that are issued with or used with the
Contracts.
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APPENDIX B
ALLOCATION OF PERSONNEL AND FACILITIES*
1. PERSONNEL
AVERAGE TIME PERCENTAGE
ALLOCATED TO FORETHOUGHT
NUMBER OF FUNCTIONS RELATED TO VARIABLE
DEPARTMENT PERSONS INSURANCE PRODUCTS*
----------------------------------------------- ----------------------- ------------------------------------
MANAGEMENT 1 3.0%
FINANCE 7 0.5%
INTERNAL AUDIT 1 0.5%
COMPLIANCE/LEGAL 9 4.4%
OPERATIONS/MARKETING 6 1.5%
BUSINESS DEVELOPMENT, STRATEGY AND SUPPORT 4 0.5%
2. ALLOCATED FACILITIES/OVERHEAD CHARGE -- 0.4%
Third-party Servicing Agreement (TSA Charges)
Employee Benefits
Travel & Entertainment
Communication & Technology (e.g., computer/telephone support)
Occupancy (e.g., office space, office equipment, furniture/equipment, sundry
office supplies)
Amortization & Depreciation
Other Professional Fees
Printing & Postage
State/Regulatory/Licensing Fees
Other Fees (professional/legal/bank)
--------
*Percentage allocations are aggregated for Commonwealth Annuity and its
wholly-owned subsidiary, First Allmerica Financial Life Insurance Company
("FAFLIC"), as they include certain FAFLIC costs that are paid by
Commonwealth Annuity related to FAFLIC variable products pursuant to the
Core Coinsurance Agreement and the Core Administrative Services Agreement
dated December 31, 2005 and an Underwriting and Administrative Services
Agreement with FAFLIC, et al, dated xxx, 2016.
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