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 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 other 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.
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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 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.
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 of such other broker-dealers 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").
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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 in 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 1933 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.
B. ADMINISTRATIVE FUNCTIONS AND SERVICES. The Company will perform all
administrative functions and services in connection with the
issuance and maintenance of the Contracts, including but not limited
to: underwriting, policyholder services, actuarial and legal
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 PRACTICES. 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
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expenses of 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;
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.
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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 charges" 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 of the Company or
the Accounts or the prospectus or statement of additional information
contained therein, as from time to time amended or supplemented, or any
annual or interim reports of the Company or the Accounts to Contract owners,
include an 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 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 and hold harmless the Distributor, its agents
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 therein 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 or 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 notified 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
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 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
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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.
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.
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
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SCHEDULE A
Effective 10/01/99
Amounts payable to Fortis Investors, Inc. (the "Distributor") by Fortis Benefits
(the "Company") in connection with distribution of the Contracts:
I. FOR MASTERS, MASTERS+, OPPORTUNITY, OPPORTUNITY+, EMPOWER, AND INCOME
PREFERRED VARIABLE ANNUITY CONTRACTS
Percent of premium paid and service fees paid by the Company to the Distributer
will vary according to the commission option selection at the policy level.
Options A, B, and D are not available for EmPower.
A. PREMIUM BASED COMPENSATION
PERCENT OF PREMIUM PAID
OLDEST OWNER'S OR PARTICIPANTS
OPTION C
(1ST 3 MONTHS
AGE WHEN PREMIUM PAID* OPTION A OPTION B PREMIUM ONLY) OPTION D
---------------------------------------------------------------------------------------------------------------------------------
Ages 0-79 6.25% 4.50% 2.15% 7.25%
Ages 80-84 3.00% 2.00% 2.00% 3.25%
Ages 85+ 1.50% 1.00% 0.00% 1.75%
------------
* Based upon the age of the owner only for Opportunity, Masters and EmPower.
B. TRAIL COMMISSIONS
In addition to the compensation described in paragraph A, the following trail
commissions will be paid to the Distributor:
For Variable Policy Values:
OPTION A OPTION B OPTION D
--------------------------------------------------------------------------------------------
Trail Commissions Paid by FBIC 0.10% 0.35% -0.15%
Trail Commissions Paid by Advisers 0.15% 0.15% 0.00%
Trail Commissions Paid in Total 0.25% 0.50% -0.15%
Option C service fees are paid only when the trail commission is actually paid.
For Variable Policy Values:
OPTION C
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Trail Commissions Paid by FBIC
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 0.85%
Trail Commissions Paid by Advisers
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 0.15%
Trail Commissions Paid in Total
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 1.00%
For Fixed Policy Values:
OPTION A OPTION B OPTION D
-------------------------------------------------------------------------------------------
Trail Commissions Paid by FBIC 0.25% 0.50% 0.00%
Trail Commissions Paid by Advisers 0.00% 0.00% 0.00%
Trail Commissions Paid in Total 0.25% 0.50% 0.00%
Option D trail commissions are paid only when the trail commission is actually
paid by the Distributor.
For Fixed Policy Values:
OPTION C
-----------------------------------------------------------------------
Trail Commissions Paid by FBIC
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 1.00%
OPTION C
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Trail Commissions Paid by Advisers
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 0.00%
Trail Commissions Paid in Total
a) Year 1 0.00%
b) Year 2 (begins end of month 13) 1.00%
C. ADDITIONAL COMPENSATION
In addition, on the policies covered by paragraphs A and B, the Company agrees
to pay the Distributor an amount, mutually agreed upon between the parties, per
policy in force as of May 1st of each year. The amount will not exceed $1.35 per
policy per year.
II. FOR NORWEST PASSAGE ANNUITY
Percent of premium paid and service fees paid by the Company to the Distributer
will vary according to the commission option selection at the policy level.
A. PREMIUM BASED COMPENSATION
GROSS COMMISSION
(AS A % OF PREMIUM)
OPTION C
OLDEST OF OWNER'S OR ANNUITANT'S (1ST 3 MONTHS
AGE WHEN PREMIUM PAID OPTION A OPTION B PREMIUM ONLY) OPTION D
-------------------------------------------------------------------------------------------------------------------------
0-79 5.5% 3.5% 1.5% 7.0%
80-84 3.5% 2.5% 1.5% 4.5%
85 & later 2.0% 1.5% None 3.5%
B. TRAIL COMMISSIONS
In addition to the compensation described in paragraph A, the following trail
commissions will be paid to the Distributor:
OPTION A OPTION B OPTION C OPTION D
-----------------------------------------------------------------------------------------------------------------
0.25% 0.50% 1.0% 0%
Start of Trail Commission 1st Month 1st Month 13th Month N/A
III. FOR FEDERATED VARIABLE ANNUITY
Percent of premium paid and service fees paid by the Company to the Distributer
will vary according to the commission option selection at the policy level.
A. PREMIUM BASED COMPENSATION
GROSS COMMISSION
(AS A % OF PREMIUM)
OPTION D
(1ST 3 MONTHS
OWNER'S AGE WHEN PREMIUM PAID OPTION A OPTION B OPTION C* PREMIUM ONLY)
------------------------------------------------------------------------------------------------------------------------------
0-80 6.25% 3.50% 1.00% 4.75%
81-85 3.25% 2.00% 0.85% 2.50%
86-90 1.75% 1.00% None 1.50%
B. TRAIL COMMISSIONS
In addition to the compensation described in paragraph A, the following trail
commissions will be paid to the Distributor:
OPTION A OPTION B OPTION C OPTION D
--------------------------------------------------------------------------------------------------------------
0.00% 0.50% 0.85% 0.25% (Yrs. 1-7)
0.40% (Yrs. 8+)
Start of Trail Commission N/A 1st Month 13th Month 1 month
IV. FOR FORTUNE FIXED ANNUITY CONTRACTS
Percent of Premium Paid
All Ages 5.6%
V. FOR XXX000, XXX000 XXXXXXXXX XXX XXXX XXXXXX SERIES VUL CONTRACTS
110.5% of First Year Paid Target Premium
plus 4.0% of Excess Premium Paid in Policy Years 1-6
2.0% of Excess Premium Paid in Policy Years 7-10.
.25% of Policy Surrender Values in 11th Policy Year and later.
VI. FOR SURVIVOR CONTRACTS
90.0% of First Year Premium plus 4% of Premium Paid in Policy Years 2-6; 2%
of Excess Premium Paid in Policy Years 7-10; and .25% of Unloaned Policy
Value in Policy Years 11 forward.
VII. FOR RESERVEST VUL CONTRACTS
0.25% per annum of the average amount of assets held in the separate
account for Policies which have an M&E risk charge of .95%
0.175% per annum of the average amount of assets held in the separate
account for Policies which have an M&E risk charge of .70%
.15% per annum of the average amount of assets held in the separate account
for Policies which have an M&E risk charge of .60%
VIII. FOR ALL CONTRACTS
In addition, the company will, on a monthly basis, reimburse the Distributor for
all reasonable, documented expenses actually incurred in connection with the
performance of the Distributor's duties under this contract that are not
otherwise covered by the compensation described in Schedule A.
The Company may, under certain flexible compensation arrangements, pay the
Distributor a different selling allowance and a different service fee than as
set forth above. However, in such a case, such flexible compensation
arrangements will have actuarially equivalent present values to the amounts of
selling allowances and service fees set forth above.
