EXHIBIT 10
ADMINISTRATIVE SERVICE AGREEMENT
THIS ADMINISTRATIVE SERVICE AGREEMENT (this "Agreement") is made this
_______ day of _________________, 1995, by and among First Fortis Life Insurance
Company ("FFLIC"), a New York corporation, and Fortis Benefits Insurance Company
("FBIC"), a Minnesota corporation.
FBIC has extensive experience in the operations of its business and has
trained personnel, equipment, and facilities for conducting its present and
future operations. FFLIC herein is contracting with FBIC to perform services
related to FFLIC's production of the following types of insurance products:
Group: Group Life and AD&D; Group Long and Short Term Disability;
Dental; Self Funded Life, Dental and Disability; and other employee
benefit related products as developed.
Individual: Variable Annuity and Market Value Adjusted Variable
Annuity; and other annuity and life products as developed.
1. RELATIONSHIP OF PARTIES
Neither FBIC nor FFLIC shall act or hold itself out as the agent of
the other. Employees of FBIC providing services to FFLIC pursuant to
this Agreement shall provide such services as employees of FBIC. The
facilities used by FBIC in providing such services shall be deemed to
be owned and operated by FBIC and, unless otherwise provided in
writing, shall not be considered as being leased to FFLIC.
Employees, officers and directors of FFLIC, who are also employees,
officers and directors of FBIC, shall serve without personal
compensation from FFLIC. The cost of these services will be billed to
FFLIC as provided in paragraph 4.A.
2. USE OF THIRD PARTIES
FBIC and FFLIC each retain the right to contract with any unaffiliated
third party for the performance of services or use of facilities.
3. PERFORMANCE OF ADMINISTRATIVE SERVICES AND JOINT USE OF FACILITIES
A. SERVICES
Pursuant to guidelines established by FFLIC's Board of Directors and
pursuant to FFLIC's direction, FBIC may from time to time perform
services for FFLIC hereunder of a type similar to that which FBIC
customarily performs in the course of its own insurance operations.
The services which FBIC may perform in whole or in part for FFLIC
include, without limitation:
(a) Legal and actuarial services needed by FFLIC to assist it in
qualifying to conduct its business in such jurisdictions as
FFLIC shall select, including the requisite policy and contract
filings for approval, reinsurance agreements and other requisite
contracts that may be necessary for operations.
(b) Advice and counsel with respect to complex cases where FFLIC's
underwriters lack sufficient expertise. Advice and counsel will
be in accordance with FFLIC underwriting standards and final
decision authority rests with FFLIC.
(c) Advice and counsel with respect to complex cases where FFLIC's
claims personnel lack sufficient expertise. Advice and counsel
will be in accordance with FFLIC claims standards and final
decision authority rests with FFLIC.
(d) Actuarial services which may include product development,
pricing, valuation and compliance.
(e) Assist FFLIC in the design of marketing materials and developing
product and training materials and programs, subject to final
approval by FFLIC.
(f) Electronic information processing services as necessary or
appropriate in connection with the other services provided
hereunder.
(g) Legal support services customarily performed by in-house legal
counsel.
(h) Accounting services necessary to support preparation of
customary financial reporting, including preparation of
financial statements on both STAT and GAAP bases and tax
returns.
(i) Auditing services which may include review of financial records
and a review of specific functions and activities in order to
ensure compliance with FFLIC's established policy. This
auditing provision shall not apply to FFLIC's audit of FBIC's
services performed pursuant to this Agreement.
(j) Assist FFLIC in the design and printing of general use forms
including, but not limited to, policy/certificate, claim,
policyholder service, accounting and other forms used in the
normal course of business. Final approval of such forms is the
responsibility of FFLIC.
(k) Provision of information for preparation of financial statements
required by any properly constituted regulatory body.
FBIC may provide the above-listed services to FFLIC except for any
services which FFLIC's Board of Directors, or any authorized committee
thereof, expressly decides to have either FFLIC or another third party
perform.
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FBIC will perform the administrative services under this Agreement
with the same standards of care, prudence and diligence which it
exercises in the performance of its own administrative
responsibilities. In the performance of its duties hereunder, FBIC
will be subject always to the direction and supervision of FFLIC's
Board of Directors, or any authorized committee thereof, and the
instructions of appropriate officers of FFLIC. It is understood that
FFLIC has certain obligations under the Commitment Letter to the New
York Insurance Department dated March 23, 1989, and it is agreed that
no services will be provided under the Agreement in violation of the
aforementioned Commitment Letter.
B. ADDITIONAL SERVICES
In accordance with the waiver request to the New York Insurance
Department dated September 23, 1991, FBIC may provide FFLIC on an
ongoing basis with storage and retrieval of files closed prior to
FFLIC's purchase of certain of the Mutual Benefit Life Insurance
Company group business on October 1, 1991.
C. FACILITIES
FBIC agrees to make available its facilities to FFLIC as FFLIC may
determine to be reasonably necessary in the conduct of its insurance
operations. The facilities of FBIC which FFLIC may use in whole or in
part shall include, but need not be limited to: electronic data
processing equipment; business property, whether owned or leased;
communication equipment; security vault; and filing space.
D. BEST EFFORTS
FBIC agrees at all times to use its best efforts to maintain
sufficient personnel and facilities of the kind necessary to perform
this Agreement, in accordance with the reasonable requests of FFLIC.
If, however, FBIC determines that for any reason, including its own
needs, it is or will be unable to perform any services or provide any
facility under this Agreement, it shall immediately notify FFLIC so
that FFLIC can make other arrangements.
E. DESIGNATED PERSONNEL
Employees of FBIC who are designated by FBIC to perform services for
FFLIC pursuant to this Agreement shall at all times remain employees
of the FBIC. FBIC shall alone retain full liability to such personnel
for their welfare, salaries, fringe benefits, legally required
employee contributions and tax obligations. With regard to all of its
employees, FFLIC shall alone retain full liability to such personnel
for their welfare, salaries, fringe benefits, legally required
employee contributions and tax obligations.
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F. STATUS OF FACILITIES
No facility of FBIC used in performing services for or subject to use
by FFLIC shall be deemed to be transferred, assigned, conveyed or
leased to FFLIC by performance or use pursuant to this Agreement,
except as FBIC and FFLIC may otherwise agree in writing.
In providing any service which requires the exercise of judgment, FBIC
will endeavor to perform any such service in accordance with any
reasonable and appropriate standards and guidelines FFLIC develops and
communicates to FBIC.
G. CONTROL
The performance or receipt of services or the making available or use
of facilities pursuant to this Agreement shall in no way impair the
absolute control of the business and operations of each of the parties
by its own management.
FBIC shall not be liable for its actions or omissions in furnishing
services and facilities where FBIC acted in good faith without gross
negligence.
4. DETERMINATION OF CHARGES
Expenses incurred by FBIC, as a result of providing services to FFLIC
under this Agreement, will be determined as follows and billed
quarterly to FFLIC.
A. CHARGES
Services shall be provided by FBIC hereunder at cost, and apportioned
on a fair and equitable basis, using reasonable estimates based on
time, the salary of the individual(s) providing the service, a
reasonable charge for supporting clerical services, and overhead,
including payroll taxes, employee benefits, rent and other
administrative and operating expenses, in conformity with generally
accepted accounting principles, New York Insurance Department
Regulation 33 and Section 1505 of the New York Insurance Law.
Any controversy or claim between FBIC and FFLIC arising out of this
Agreement or its breach shall be resolved by arbitration to be held in
New York State. The arbitrators will interpret this Agreement in
accordance with the usual business practices, rather than strict
technicalities or rules of law. Three arbitrators will decide any
differences. They must be officers of life insurance companies other
than the parties to this Agreement , their parents, subsidiaries and
affiliates. One of the arbitrators is to be appointed by FBIC and one
by FFLIC and these two will select a third. If the two are unable to
agree on a third, the choice will be left to the American Arbitration
Association or its successor organization. The arbitrators' decision
will be by majority vote and no appeal will be taken from it. The
expenses of the arbitrator chosen by each of the parties shall be
borne by the respective party,
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and the expenses of the third arbitrator and the expense of arbitration
shall be borne equally by FBIC and FFLIC.
B. PAYMENT
No later than 60 days after the end of each calendar quarter, FBIC
will submit to FFLIC a written statement of the estimated amount of
the apportioned expenses for such quarterly period, showing the basis
for the estimated apportionment for each item. FFLIC will pay to FBIC
within 30 days following receipt of such statement the amount set
forth therein.
Within 120 days after the end of each calendar year, FBIC will submit
to FFLIC a written statement of actual apportioned expenses for such
preceding calendar year (including charges not included in any
previous statement) showing the basis for the apportionment of each
item. Any difference between the estimated payments made in the
preceding calendar year and the actual apportioned expenses shall be
paid or refunded within 30 days following receipt of such statement of
actual apportioned expenses.
5. RECORDS AND DOCUMENTS
FBIC will maintain its books, records and accounts so as to clearly
and accurately disclose the nature and details of the services
furnished hereunder, in keeping with prudent standards of insurance
recordkeeping and in accordance with the requirements of Section 1505
of the New York Insurance Law. FFLIC may at its own expense and at
any reasonable time audit such books, accounts and records insofar as
they relate to the determination of FBIC's charges hereunder.
All books, records and files established and maintained by FBIC by
reason of its performance under the Agreement, which absent this
Agreement would have been held by FFLIC shall be subject to
examination at all times by FFLIC and persons authorized by it or any
governmental agency having jurisdiction over FFLIC and appropriate
copies of such records shall be delivered to FFLIC at least quarterly.
With respect to accounting and statistical records prepared by FBIC
under this Agreement, summaries of such records shall be delivered to
FFLIC within 60 days from the end of the quarter to which the records
pertain.
6. COMPLIANCE WITH APPLICABLE LAW; GOVERNING LAW
FFLIC and FBIC shall comply with all applicable federal, state and
local laws and rules, regulations or rulings issued under such laws.
This Agreement is made pursuant to and shall be subject to and
interpreted under the laws of the State of New York.
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7. NOTICE
All notices, statements or requests furnished under this Agreement
shall be duly given either by FBIC or FFLIC upon delivery by hand or
by facsimile transmission to an officer of the other, or when
deposited with the U.S. Postal Service, as certified mail, postage
prepaid, addressed to the other at its principal office to the
attention of the Chief Executive Officer or to such other person or
place as that party may from time to time designate by written notice
provided in this paragraph 7.
8. EFFECTIVE DATE; TERMINATION; ASSIGNMENT
The effective date of this Agreement shall be March 1, 1994, and the
Agreement shall continue in force until terminated as provided herein.
This Agreement may be terminated by either party at any time subject
to thirty days written notice to the other party, except that, with
regard to electronic data processing operations, such written notice
shall be 180 days. Upon termination of the electronic data processing
operations provided by FBIC under this Agreement, and subject to the
terms and conditions (including any limitations and restrictions) of
any applicable software or hardware licensing agreement then in effect
between FBIC and any licensor, FBIC shall grant to FFLIC a perpetual
license to use any electronic data processing software developed by
FBIC in connection with the services provided to FFLIC hereunder, if
such software is not commercially available and is necessary, in
FFLIC's reasonable judgment, for FFLIC to perform subsequent to
termination of the functions provided by FBIC hereunder. This
Agreement may be assigned by either party only with the prior written
consent of the other party.
9. HEADINGS
The headings contained in this Agreement are inserted for convenience
and are not intended to be part of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date and year first above written.
FIRST FORTIS LIFE INSURANCE COMPANY
By: __________________________________
____________________ Name:__________________________________
Witness
Title: ________________________________
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FORTIS BENEFITS INSURANCE COMPANY
By: __________________________________
____________________ Name:__________________________________
Witness
Title: ________________________________
By: __________________________________
____________________ Name:__________________________________
Witness
Title: ________________________________
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