PRINCIPAL UNDERWRITER AND SERVICING AGREEMENT
AGREEMENT made this 1st day of January, 1994 by and between Fortis
Investors, Inc., a corporation organized and existing under the laws of the
State of Minnesota, (the "Distributor") and Fortis Benefits Insurance Company,
an insurance company organized and existing under the laws of the State of
Minnesota (the "Company").
WITNESSETH:
WHEREAS, the Company, in some instances through its Variable Accounts C and
D (the "Accounts"), proposes to offer certain fixed and variable life insurance
contracts, and fixed and variable annuity contracts, together with certificates
under group contracts and any riders, (hereafter, the "Contracts"); and
WHEREAS, the Accounts will invest in shares of Fortis Series Funds, Inc.
("Shares"); and
WHEREAS, the Distributor is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934 (the "1934 Act") and is a member of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, certain personnel of the Company or its affiliates may engage, or
may be deemed to be engaged, directly or indirectly, in the offering, selling,
advertising or marketing of Contracts and Shares; confirming transactions as
required by 1934 Act Rule 10b-10; maintenance of records required by 1934 Act
Rules 17a-3 and 17a-4 or other SEC or NASD rules applicable to registered
broker-dealers; and payment of commissions with respect to Contracts (all
Company personnel engaged in these activities, as well as all other persons who
Section 3(a)(18) of the 1934
1
Act defined as associated persons of the Distributor, are referred to herein as
"Associated Persons," a term which as used in this Agreement does not include
persons associated with other broker-dealer firms or banks that are engaged by
the Distributor to offer and sell Contracts);
NOW, THEREFORE, in consideration of the covenants and mutual promises
herein contained and of other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the Distributor and the
Company agree as follows:
I. APPOINTMENT OF DISTRIBUTOR. The Distributor will act as the exclusive
principal underwriter for the Contracts during the term of this Agreement in
each state or jurisdiction where the Contracts may legally be sold. The
Distributor shall at all times function as, and be deemed to be, an independent
contractor and will be under no obligation to effectuate any particular amount
of sales of Contracts or to promote or make sales, except to the extent the
Distributor deems advisable. Anything in this Agreement to the contrary
notwithstanding, the Company retains the ultimate right to control the sale of
the Contracts, including the right to suspend sales in any jurisdiction or
jurisdictions, to appoint and discharge agents of the Company, or to refuse to
sell a Contract to any applicant for any reason whatsoever.
II. RESPONSIBILITIES OF THE DISTRIBUTOR.
A. SUPERVISION AND COMPLIANCE. The Distributor will assume full
responsibility for securities law compliance by the Associated Persons with
respect to Contracts and Shares, including, as applicable, compliance with the
NASD Rules of Fair Practice and Federal and state securities laws and
regulations. The Distributor, directly or through the Company as its agent, will
(1) make timely filings with the SEC, NASD, and any other
2
securities regulatory authorities of any sales literature or materials relating
to the Contracts, Accounts or the Shares, as required by law to be filed, (2)
make available to the Company copies of any agreements or plans intended for use
in connection with the sale of the Contracts in sufficient numbers and in
adequate time for clearance by the appropriate regulatory authorities before
they are used, and (3) train the Associated Persons, use its best efforts to
prepare them to complete satisfactorily any and all applicable NASD and state
securities examinations, register the Associated Persons as its registered
representatives or principals to the extent legally required before they engage
in securities activities, and diligently supervise and control them in the
performance of such activities. The parties agree to use their best efforts to
obtain any required clearances by regulatory agencies as expeditiously as
reasonably possible and shall not use any materials, plan or agreement in any
jurisdiction unless all filings have been made and approvals obtained that are
necessary to make said use proper and legal therein.
B. ADMINISTRATIVE FUNCTIONS AND SERVICES. Completed applications for
the Contracts shall be transmitted directly to the Company whereupon they shall
be reviewed by an agent for the Distributor and if approved by such agent, the
applications shall proceed to be processed by the Company for acceptance or
rejection in accordance with rules and procedures established by the Company.
Initial and subsequent premium payments under the Contracts shall be made
payable to the Company and shall be forwarded by the Distributor to the Company
promptly after receipt by the Distributor, less any amounts the parties may
agree that the Distributor (or other broker-dealers with whom the Distributor
has a selling agreement) may retain.
3
C. APPOINTMENT OF AGENTS. The Distributor shall be responsible for
ensuring that Associated Persons will engage in the offer and sale of Contracts
only if properly qualified under the insurance laws of all relevant
jurisdictions. Although the Distributor may assist other broker-dealers and
banks or their representatives or principals in qualifying under relevant
insurance laws to sell Contracts, the responsibility for ensuring that all such
requirements have been met is that for such other broker-delaers or banks and
not the Distributor.
D. SUITABILITY. The Distributor shall take reasonable steps to ensure
that the various representatives and principals appointed by it shall not make
recommendations to an applicant to purchase a Contract in the absence of
reasonable grounds to believe that the purchase of the Contract is suitable for
said applicant. While not limited to the following, a determination of
suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant (and any other information known about the
applicant) concerning the applicant's retirement and investment objectives and
financial situation and needs.
E. SALES PRACTICES. No person shall use any sales aids, promotional
material, or sales literature with respect to Contracts or Shares which have not
been specifically approved in advance by the Distributor and the Company. No
person shall, in connection with the offer or sale of the Contracts, make any
representations regarding the Contracts, the Accounts, the Shares, the Company,
Fortis Advisers, Inc., or the Distributor, which are not authorized by the
Company and the Distributor or contained in a then-effective Registration
Statement of the Account or Fortis Series Fund, Inc. under the 1933 Act
("Registration Statement").
4
F. RECORDS AND CONFIRMATION. The Distributor, directly or through
the Company as its agent (but at the Distributor's expense), will (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 in connection with the offer and
sale of the Contracts being distributed pursuant to this Agreement, which books
and records shall be the joint property of the Distributor and the Company and
shall be subject to inspection by the Securities and Exchange Commission to
accordance with Section 17(a) of the 1934 Act and (b) upon or prior to
completion of each Contract transaction for which a confirmation is legally
required, send a written confirmation for each such transaction reflecting the
facts of the transaction. Copies of all records maintained hereunder by the
Company as the Distributor's agent will be promptly surrendered by the Company
at the request of the Distributor and will be available at any time during
business hours to properly-constituted governmental authorities and furnished to
them in true, correct and current hard copy form, should the same be required by
said authorities.
G. SECURITIES LAW REGISTRATION. The Distributor will execute such
papers and do such acts and things as shall from time to time be reasonably
requested by the Company for the purpose of (a) maintaining the registration of
the Contracts under the 1934 Act and the Accounts under the 1940 Act and (b)
qualifying and maintaining qualification of the Contracts for sale under the
applicable laws of any state.
III. RESPONSIBILITIES OF THE COMPANY.
A. DISTRIBUTION. The Company will be responsible for obtaining and
maintaining the necessary authority to issue the Contracts in the various
states, and for filing the Contracts with and obtaining all necessary approvals
thereof from state insurance regulatory authorities.
5
B. ADMINISTRATIVE FUNCTIONS AND SERVICES. The Company will perform all
administrative functions and services in connection with the issuance and
maintenance of the Contract, including but not limited to: underwriting,
policyholder services, actuarial services, claims, accounting, and computer
systems management.
C. APPOINTMENT OF AGENTS. The Company shall undertake to appoint as
life insurance agents of the Company the Distributor's qualified representatives
and principals and, as appropriate upon the request of the Distributor, those of
other broker-dealers or banks who enter into sales agreements with the
Distributor.
D. SALES PRACTICE. The Company will be responsible for filing of sales
literature, as necessary, with any insurance regulatory authorities, and when
necessary, obtaining approvals of said authorities.
E. RECORDS AND CONFIRMATIONS. The Company (or the Distributor at the
Company's expense), will maintain and preserve all records in connection with
the Contracts and the Accounts in accordance with Rules 31a-1 and 31a-2 under
the 1940 Act. To the extent maintained and preserved by the Distributor, such
records shall be the property of the Company and shall be returned to the
Company upon request.
F. SECURITIES LAW REGISTRATION. The Company will register and maintain
the registration of the Contracts under the 1933 Act and the Accounts under the
1940 Act as necessary until such time as the Company determines that the
Contracts will be withdrawn from sale and such registration is no longer
required.
IV. COSTS AND EXPENSES. Except as otherwise specifically set forth herein,
or except as may otherwise be agreed between the parties from time to time, each
party to this Agreement shall bear all costs and expenses of
6
providing the services and performing the functions it undertakes pursuant to
this agreement.
As between the Company and the Distributor, the Company will bear (or
reimburse the Distributor for) the cost of the following services and expenses:
a) Administration of the Contracts - including underwriting, issuance,
policyholder service and claims/benefits functions;
b) Registering and qualifying the Accounts and Contracts with Federal and
state regulatory registration statements and contract forms (including
amendments to any of the foregoing) and the printing of contract forms;
c) Data processing and applications systems for the Contracts - including
PRISM, Life70 and CONSY systems (or any upgrades or replacement of these
systems);
d) Audit and accounting services pertaining to the Company and the Accounts -
including preparation of and filing financial statements, Forms N-SAR, and
reports required by the Securities Act of 1934;
e) Product development services - including all actuarial and valuation costs;
f) Providing the minimum number of legally required contract statements to
contract owners.
As between the Company and the Distributor, the Distributor will bear
(or reimburse the Company for) the costs of the following services and
expenses:
a) Commissions and overrides - including amounts payable to Distributor's
registered representatives, wholesalers, and dealer concessions to other
broker/dealers;
7
b) Preparation, filing with regulatory authorities, printing and disseminating
sales literature and advertising materials, including computerized sales
illustrations;
c) Registering the Associated Persons with Federal and state securities and
insurance regulatory authorities, including the training of such persons as
required;
d) Computer processing that may be necessary for the Distributor to perform
its responsibilities, including the processing of commissions and
overrides;
e) Printing and distributing copies of prospectuses pertaining to the
Contracts and the Shares purchased by the Accounts;
f) Preparation and distribution of all periodic reports and confirmations not
required by law, including computer programming costs; and
g) Securities law compliance supervision of the Associated Persons, including
compliance with the NASD Rules of Practice and Federal and state securities
laws and regulations.
The parties hereby recognize and acknowledge that certain of the operating
expenses of Fortis Series Fund, Inc. will be borne by Fortis Series Fund, Inc.,
and Fortis Advisers, Inc. These include the costs of registering and qualifying
the Shares with state and Federal regulatory authorities; preparing, typesetting
and filing registration statements, prospectuses and statements of additional
information pertaining to the Shares; preparing, typesetting, printing, filing
and distributing to Contract owners and annuitants annual and semi-annual
reports to shareholders and proxy solicitation materials with respect to Shares;
other expenses of shareholder meetings; and preparing and filing Form N-SAR for
Fortis Series Fund, Inc.
8
V. COMPENSATION. As compensation for the Distributor's assuming the
expenses and performing the distribution services to be assumed and performed by
it pursuant to this Agreement, the Distributor shall receive from the Company
such amounts and at such times as may from time to time be agreed upon by the
Distributor and the Company as reflected in Schedule A to this Agreement.
The Company will receive all amounts charged as "sales charge" in
connection with the Contracts, and all other amounts assessed as charges under
the Contracts, subject to any retention by the Distributor pursuant to Section
II.B.
VI. INDEMNIFICATION. The Distributor shall indemnify and hold harmless the
Accounts, the Company and each of its directors and officers, and each person
who controls the Company against any loss, liability, claim, damage, or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in
connection therewith) (1) arising by reason of any person's acquiring any
Contract or interest thereunder, which may be based upon the 1933 Act, the 1940
Act, or on any other Federal or state statute, or at common law, on the ground
that any Registration Statement and the Company or the Accounts or the
prospectus or statement of additional information contained herein, as from time
to time amended or supplemented, or any annual or interim reports of the Company
or the Accounts to Contract owners, include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, but only to the extent
that such statement or omission was made in reliance upon, and in
9
conformity with, information furnished to the Company in writing in connection
therewith by or on behalf of the Distributor or (2) otherwise arising out of the
Distributor's negligence, bad faith, willful misfeasance or reckless disregard
of its responsibilities hereunder.
The Company shall indemnify an hold harmless the Distributor, its agent
and employees, and each person, if any, who controls the Distributor against
any loss, liability, claim, damage, or expense described in part (1) of the
foregoing indemnity, except as to statements (or omissions) made (or not
made) in reliance upon, and conformity with, information furnished to the
Company in writing by or on behalf of the Distributor for use in connection
with the Registration Statement of the Company or the Account, or the
prospectus or statement of additional information contained herein as from
time to time amended and supplemented, or in connection with any annual or
interim reports to Contract owners; provided, however, that in no case is the
indemnity of the Company in favor of the Distributor and any such controlling
persons to be deemed to protect the Distributor and any such controlling
persons against any liability to the Company or its Contract owners to which
the Distributor or any such controlling person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the
performance of their duties or by reason of reckless disregard of their
obligations and duties under this Agreement.
No person from whom indemnity may be sought under this Section VII
("Indemnitor") shall be liable to indemnify or hold harmless any person
("Indemnitee") pursuant to this Section VII, unless the Indemnitee shall have
noticed the Indemnitor in writing of the nature of the claim as to which
indemnity is being sought hereunder within a reasonable time after the
Indemnitee shall have been served with a summons or other first legal
10
process giving notice thereof (or shall have received notice of such service on
any designated agent), such notice giving information of the nature of the claim
as to which indemnity is sought hereunder, but failure to notify the Indemnitor
of any such claim shall not relieve it from any such claim shall not relieve it
from any liability which it may have to the Indemnitee otherwise than on account
of its indemnity agreement contained in Section VII. The Indemnitor will be
entitled to participate at its own expense in the defense, or, if it so elects,
to assume the defense of any suit brought to enforce any such claim, but if the
Indemnitor elects to assume the defense, such defense shall be conducted by
counsel chosen by it and satisfactory to the Indemnitee. In the event the
Indemnitor elects to assume the defense of any such suit and retain such
counsel, the Indemnitee shall bear the fees and expenses of any additional
counsel retained by it. In case the Indemnitor does not elect to assume the
defense of any such suit, it will reimburse the Indemnitee for the reasonable
fees and expenses of any counsel retained by the Indemnitee.
VII. NOTICE. Each party hereto shall advise the other promptly of (a) any
action of the SEC or any authorities of any state or territory, of which it has
knowledge, affecting the registration or qualification of the Account or the
Contracts, or the right to offer the Contracts for sale or (b) the happening of
any event which makes untrue any statement, or which requires the making of any
change in any Registration Statement or any current prospectus or statement of
additional information, in order to make the statements therein not materially
misleading.
VIII. MISCELLANEOUS. This Agreement shall become effective as of the
date of its execution, shall continue in full force and effect until
terminated; may be amended at any time by mutual agreement of the parties
hereto; and may be terminated at any time without penalty on sixty days'
written notice by either party to the other.
11
The Distributor will not assign or delegate its responsibilities under this
Agreement, except with the consent of the Company.
This Agreement shall be construed in accordance with the laws of the State
of Minnesota.
The Distributor shall keep confidential any information obtained pursuant
to this Agreement and shall disclose such information only if the Company has
authorized such disclosure, or if such disclosure is expressly required by
applicable Federal or state authorities.
The Distributor and the Company agree to cooperate fully in any insurance
regulatory examination, investigation, or proceeding or any judicial proceeding
arising in connection with the Contracts. The Distributor and the Company
further agree to cooperate fully in any securities regulatory examination,
investigation or proceeding or any judicial proceeding with respect to the
Company, the Distributor, their affiliates and their agents or representatives,
to the extent that such examination, investigation or proceeding is in
connection with Contracts distributed under this Agreement. The Distributor
shall furnish applicable Federal and state regulatory authorities with any
information or reports in connection with its services under this Agreement
which such authorities may request in order to ascertain whether the Company's
operations are being conducted in a manner consistent with any applicable law or
regulations.
12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
FORTIS INVESTORS, Inc.
By: /s/ Xxxx X. Xxxxxxxx, President
-------------------------------------------
Name and Title: Xxxx X. Xxxxxxxx, President
FORTIS BENEFITS INSURANCE COMPANY
By: /s/ Xxx X. Xxxxxxxxx
-------------------------------------------
Name and Title: Xxx X. Xxxxxxxxx, Vice President
DRL254
13
