BRIGHTHOUSE SECURITIES, LLC
SALES AGREEMENT
TABLE OF CONTENTS
I. DEFINITIONS 9.1 CONFIDENTIAL INFORMATION
II. AUTHORIZATION, REPRESENTATIONS, AND 9.2 RETURN OF CONFIDENTIAL
COVENANTS OF PRINCIPAL UNDERWRITER INFORMATION
III. REPRESENTATIONS AND COVENANTS OF 9.3 DAMAGES
BROKER
X. INDEMNIFICATION
IV. COMPLIANCE WITH APPLICABLE LAW
XI. GENERAL PROVISIONS
4.1 APPLICABLE LAW
11.1 TERM AND TERMINATION
4.2 ANTI-MONEY LAUNDERING AND
CUSTOMER IDENTIFICATION 11.2. ASSIGNABILITY
V. COMPENSATION 11.3 AMENDMENTS
VI. COMPLAINTS AND INVESTIGATIONS 11.4 NOTICES
VII. RECORDS AND ADMINISTRATION 11.5 ARBITRATION
VIII. CUSTOMER INFORMATION AND PROTECTED 11.6 GOVERNING LAW
HEALTH INFORMATION
11.7 ENTIRE UNDERSTANDING
8.1 CUSTOMER INFORMATION
11.8 THIRD PARTY BENEFICIARIES
8.2 PROTECTED HEALTH INFORMATION
("PHI") 11.9 NON-EXCLUSIVITY
8.3 ADDITIONAL BROKER 11.10 NON-SOLICITATION OF EMPLOYEES
RESPONSIBILITY WITH RESPECT TO AND AGENTS
PHI
11.11 WAIVER
8.4 PRIVACY NOTICES AND
AUTHORIZATION 11.12 COUNTERPARTS
IX. CONFIDENTIAL INFORMATION 11.13 SEVERABILITY
11.14 TRADEMARKS
11.15 PREPARATION OF CERTIFICATES
11.16 PARTIES' CONTROL OF BUSINESS
AND OPERATIONS
Enterprise Selling Agreement 5-17
BRIGHTHOUSE SECURITIES, LLC
SALES AGREEMENT
This agreement, including the exhibits attached hereto (collectively the
"Agreement") is made, entered into and effective as of________, ("Effective
Date") by and among Brighthouse Securities, LLC, a Delaware corporation (the
"Principal Underwriter"), and ________ (the "Broker") that 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 a member of
the Financial Industry Regulatory Authority ("FINRA") and is also either
licensed as an insurance agency or is affiliated with one or more validly
licensed insurance agencies.
WITNESSETH:
WHEREAS, Principal Underwriter and its Affiliates (as hereafter defined) issue
or provide access to certain insurance and financial products;
WHEREAS, Broker sells and services insurance and financial products and wishes
to sell and service certain of Principal Underwriter's and its Affiliates
insurance and financial products;
WHEREAS, Principal Underwriter proposes to compensate Broker for such sales and
servicing;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
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Section 1.1. The following terms, when used in this Agreement, shall have the
meanings set forth in this Article I. Other terms may be defined throughout
this Agreement. Definitions shall be deemed to refer to the singular or plural
as the context requires:
(a) Affiliate - Any entity that directly or indirectly controls, is
controlled by or is under common control with Principal
Underwriter or Broker, as applicable, including, without
limitation, any entity that owns 25% or more of the voting
securities of any of the foregoing and any entity that is a
subsidiary of any of the foregoing.
(b) Agency - Those agencies identified in Exhibit C hereto, which are
properly licensed to participate in the business of insurance.
(c) Applicable Law - Shall have the meaning given to such term in
Article IV of this Agreement.
(d) Business Day - Any day other than a Saturday, Sunday or a federal
legal holiday.
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(e) Confidential Information - Includes without limitation,
(i) statistical, premium rate and other information that is
identified by Principal Underwriter as commercially valuable,
confidential, proprietary or a trade secret, including but not
limited to information regarding Principal Underwriter's systems
and rating methodology; and (ii) any information identified in
writing by a party as confidential at the time the information is
divulged to the other party.
Confidential Information does not include any information, written
or oral, which (i) at the time of disclosure or thereafter is
generally available in the public domain (other than as a result
of a disclosure in violation of this Agreement), (ii) has been
received, obtained, developed or created by the receiving party
independently from the performance of its obligations under this
Agreement, or (iii) was made available to the receiving party on a
non-confidential basis from a source other than the disclosing
party, provided that such source is not and was not bound by an
independent obligation of confidentiality.
(f) Contracts - Those contracts and policies that are identified on
Exhibits A and B attached hereto, which Exhibits may be amended at
any time by Principal Underwriter in its sole discretion.
(g) Customer Complaint - Shall have the meaning given to such term in
Section 6.2 of this Agreement.
(h) Customer Information - Information in electronic, paper or any
other form that Broker or its representatives obtained, had access
to or created in connection with its obligations under this
Agreement regarding individuals who applied for or purchased
Principal Underwriter's products. Customer Information includes
Nonpublic Personal Information, as defined below in paragraph (j),
and Protected Health Information, as defined in paragraph (m).
Customer Information may also include, but is not limited to,
information such as the individual's name, address, telephone
number, social security number, as well as the fact that the
individual has applied for, is insured under, or has purchased a
Principal Underwriter product. Customer Information does not,
however, include information that is (i) generally available in
the public domain (other than as a result of a disclosure in
violation of this Agreement) and is derived or received from such
public sources by Broker; (ii) received, obtained, developed or
created by the Broker independently from the performance of its
obligations under this Agreement; (iii) disclosed to the Broker by
a Third Party, provided such disclosure was made to Broker without
any violation of an independent obligation of confidentiality or
Applicable Law.
(i) HIPAA - The Health Insurance Portability and Accountability Act of
1996, as now in force or hereafter amended, and all related
regulations.
(j) Nonpublic Personal Information - Nonpublic personal information
means financial or health related information by which a financial
institution's consumers and customers are individually
identifiable, including but not limited to nonpublic personal
information as defined by Title V of the Xxxxx-Xxxxx-Xxxxxx Act
and regulations adopted pursuant to the Act.
(k) Non-variable Contracts - Those Contracts that include, without
limitation, non-variable rate annuity contracts, non-variable life
insurance policies, long term care insurance and other fixed
insurance contracts, issued by Principal Underwriter or its
Affiliates, as identified in Exhibit B, which Exhibit may be
amended at any time by Principal Underwriter in its sole
discretion.
(l) Prospectus - The prospectuses and statements of additional
information included within the Registration Statements referred
to herein or filed pursuant to the Securities Act of 1933 and the
Investment Company Act of 1940, as amended.
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Enterprise Selling Agreement 5-17
(m) Protected Health Information ("PHI") - Information related to
individuals who have applied for, have purchased or are insured
under Principal Underwriter products that are considered to be
health plans subject to HIPAA, such as Principal Underwriter's
long-term care insurance policies and riders, for the purposes of
this Agreement and, consistent with regulations issued pursuant to
HIPAA. PHI is defined as individually identifiable information
that is transmitted or maintained in any medium and relates to:
the past, present or future physical or mental health or condition
of an individual; the provision of health care to an individual;
or future payment for the provision of health care to the
individual. This definition of PHI includes demographic
information about the individual, including, but not limited to,
names, geographic subdivisions smaller than a state (including but
not limited to street addresses and ZIP codes); all elements of
dates (except year) for dates directly related to an individual,
including but not limited to birth date; telephone numbers; fax
numbers; electronic mail (E-mail) addresses; Social Security
numbers; medical record numbers; health plan beneficiary numbers;
account numbers; certificate/license numbers; vehicle identifiers
and serial numbers, including license plate numbers; device
identifiers and serial numbers; Web Universal Resource Locators;
Internet Protocol address numbers; biometric identifiers,
including finger and voice prints; full face photographic images
and any comparable images; and any other unique identifying
number, characteristic, or code.
(n) Registration Statements - Registration statements and amendments
thereto filed with the SEC relating to the Variable Contracts,
including those for any underlying investment vehicle or variable
insurance rider.
(o) Representatives - Those individuals, accepted by Principal
Underwriter or its Affiliates to solicit and sell Contracts under
the terms of this Agreement, who are licensed and appointed as a
life insurance agent of Principal Underwriter or its Affiliates,
and with respect to registered products, are also registered with
Broker in compliance with the 1934 Act.
(p) Third Party - A party that is not a signatory to this Agreement.
(q) Variable Contracts - Those Contracts that include variable life
insurance policies, variable annuity contracts, variable insurance
riders and other variable insurance contracts, issued by Principal
Underwriter or its Affiliates, as identified in Exhibit A, which
Exhibit may be amended at any time by Principal Underwriter in its
sole discretion.
(r) 1933 Act - The Securities Act of 1933, as amended.
(s) 1934 Act - The Securities Exchange Act of 1934, as amended.
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Enterprise Selling Agreement 5-17
ARTICLE II
AUTHORIZATIONS, REPRESENTATIONS, AND COVENANTS OF PRINCIPAL UNDERWRITER
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Section 2.1. Authorization. Principal Underwriter represents that it is duly
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authorized, on behalf of itself and each Affiliate that issues or provides
access to the Contracts, to enter into this Agreement with Broker to distribute
such Contracts.
Section 2.2. Solicitation of Applications.
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(a) Solicit Non-variable Contract Applications. Principal Underwriter
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authorizes Broker through its Representatives to solicit
applications for the Non-variable Contracts, provided that
(i) Broker shall not solicit applications for Non-variable
Contracts except in those states where it and its Representatives
are appropriately licensed; (ii) in which the Non-variable
Contracts are qualified for sale under Applicable Law; and
(iii) Broker complies in all other respects with the published
policies and procedures of Principal Underwriter or its
Affiliates, as applicable, and with the terms of this Agreement.
(b) Solicit Variable Contract Applications. Principal Underwriter
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authorizes Broker through its Representatives to offer and sell
the Variable Contracts, provided that (i) Broker shall not solicit
applications for Variable Contracts except in those states where
it is and its Representatives are appropriately licensed;
(ii) there is an effective Registration Statement relating to such
Variable Contracts; (iii) such Variable Contracts are qualified
for sale under Applicable Law in such state in which the sale or
solicitation is to take place; and (iv) Broker complies in all
other respects with the published policies and procedures of
Principal Underwriter and its Affiliates, and with the terms of
the Agreement.
Section 2.3. Required Notices to Broker. Principal Underwriter shall notify
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Broker or its designee of the issuance by the SEC of any stop order with
respect to a Registration Statement or the initiation of any proceeding by the
SEC relating to the registration and/or offering of Variable Contracts and of
any other action or circumstances that makes it no longer lawful for Principal
Underwriter or its Affiliates to offer or issue one or more of Variable
Contracts. Principal Underwriter shall advise Broker of any revision of or
supplement to any Prospectus related to the Variable Contracts or underlying
investments of such Variable Contracts.
Section 2.4. Rights of Principal Underwriter. Without limiting Principal
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Underwriter and its Affiliates absolute control of their business and
operations or other rights under this Agreement, Principal Underwriter and its
Affiliates shall specifically retain authority to:
a) refuse for any reason to appoint a Representative and cancel any
existing appointment at any time;
b) direct the marketing of its financial and insurance products and
services;
c) refuse to issue any Product;
d) underwrite all insurance policies issued by it;
e) cancel risks;
f) handle all matters involving claims adjusting and payment;
g) prepare all policy forms and amendments;
h) maintain custody of, responsibility for and control of all
investments; and
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Enterprise Selling Agreement 5-17
i) withdraw a Contract from sale or change or amend a Contract at
Principal Underwriter's discretion.
Section 2.5. Broker's Access to Copies of Documents. During the term of this
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Agreement, Principal Underwriter shall provide Broker, without charge and when
applicable, with as many copies of the Contract prospectus(es), current
underlying mutual fund prospectus(es), statements of additional information and
applications for the Contracts, as Broker may reasonably request. Upon receipt
from Principal Underwriter of updated copies of the Contract prospectus(es),
current underlying mutual fund prospectus(es), statements of additional
information and applications for the Contracts, Broker shall promptly discard
or destroy all copies of such documents previously provided to them, except
such copies as are needed for purposes of maintaining records as may be
required in Article VII and by Applicable Law. Upon termination of this
Agreement, Broker shall promptly return to Principal Underwriter all Contract
prospectus(es), current underlying mutual fund prospectus(es), statements of
additional information, Contract applications and other materials and supplies
furnished by Principal Underwriter to Broker or to its Representatives, except
for copies required for maintaining records as may be required in Article VII
and by Applicable Law.
Section 2.6. Advertising Material. During the term of this Agreement, Principal
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Underwriter or its Affiliates shall be responsible for providing and approving
all promotional, sales and advertising material to be used by Broker. Principal
Underwriter shall file such materials or shall cause such materials to be filed
with the SEC, FINRA, and any state securities or insurance regulatory
authorities, as required by Applicable Law.
Section 2.7. Marketing Reports. Principal Underwriter or its Affiliate shall
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compile periodic marketing reports summarizing sales results to the extent
reasonably requested by Broker.
ARTICLE III
REPRESENTATIONS AND COVENANTS OF BROKER
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Section 3.1. Appointment of Broker. Broker shall solicit, sell and service the
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Contracts and shall use commercially reasonable efforts to find suitable
purchasers for the Contracts. Broker represents and warrants that it shall only
offer Contracts in those states where it or its Agency is appropriately
licensed and has obtained any other appointments, approvals, licenses,
authorizations, orders or consents which are necessary to enter into this
Agreement and to perform its duties hereunder.
Section 3.2. Licenses, Appointments and Approvals. Broker represents and
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warrants that it is a registered broker-dealer under the 1934 Act, has all
necessary broker-dealer licenses, is a member in good standing with the FINRA,
and is licensed as an insurance broker and has obtained any other approvals,
licenses, authorizations, orders or consents which are necessary to enter into
this Agreement and to perform its duties hereunder. Broker further represents
that its Representatives who shall be soliciting applications for the
Contracts, whether alone or jointly with representatives of Principal
Underwriter or its designee, shall at all times be appropriately registered
and/or licensed as required by Applicable Law and shall comply with all
requirements of Applicable Law. Broker further represents that neither it nor
any of its Representatives are currently under investigation by any insurance
regulator, FINRA, any other self-regulatory organization or other governmental
authority, including but not limited to the SEC and Departments of Insurance
(except for any investigations of which it has notified Principal Underwriter
in writing). Broker further represents that it shall notify Principal
Underwriter of the existence and subject matter of any formal or informal
investigation of Broker or any of its agents that is commenced by any insurance
regulator, FINRA or SEC, any other self regulatory organization or other
governmental authority, in connection with the sale of the Contracts. Broker
further represents that it shall immediately notify Principal Underwriter in
writing if it or any of its Representatives have any of their respective
licenses, which are required under this Agreement for the solicitation of, sale
of or provision of services to the Contracts, surrendered, removed, revoked,
cancelled or suspended, whether voluntarily or involuntarily.
Section 3.3. Policies and Procedures. Broker shall comply with the policies and
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procedures of Principal Underwriter and its Affiliates with respect to the
solicitation, sales and administration of Contracts and services Broker and
Representatives are authorized to sell and service under the Agreement,
including, but not limited to,
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Enterprise Selling Agreement 5-17
privacy policies and procedures, as those policies and procedures may be
provided to Broker by Principal Underwriter from time to time.
Section 3.4. Disclosure of Relationship with Principal Underwriter and
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Disclosure of Compensation. If and as required by Applicable Law, Broker shall
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disclose in writing to each applicant for a Contract Broker's relationship with
Principal Underwriter and the compensation, and anything of value, Broker
receives from Principal Underwriter for the services performed under this or
any other Agreement. Principal Underwriter reserves the right to disclose to
its purchasers of Contracts, and potential purchasers of Contracts, details
regarding compensation, and anything of value, it, and any Principal
Underwriter affiliate, may pay to Broker, or any of its affiliates, under this
Agreement and any other agreement.
Section 3.5. Education, Training, Supervision and Control of Representatives.
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Broker shall train, supervise and be solely responsible for the conduct of its
Representatives in their solicitation and servicing activities in connection
with the Contracts, and shall supervise Representatives' strict compliance with
Applicable Law, as well as the rules and procedures of Principal Underwriter
pertaining to the solicitation, sale and submission of applications for the
Contracts and the provision of services relating to the Contracts. Broker shall
conduct background investigations of its current and proposed new
Representatives to determine their qualifications, good character and moral
fitness to sell the Contracts and shall provide Principal Underwriter with
copies of such investigations upon Principal Underwriter's written request.
Likewise, Broker is solely liable for the acts and omissions of its
Representatives in the course of conducting its business.
Section 3.6. Broker/Representative Communications. Neither Broker nor any of
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its Representatives, are authorized by Principal Underwriter or its Affiliates
to give any information or make any representation in connection with this
Agreement or the offering of the Contracts other than those contained in the
Contract, Prospectus, or promotional material authorized for use in writing by
Principal Underwriter or its Affiliates. Broker shall not make any
representations or give information that is not contained in the Contract,
Prospectus or promotional material of the Contracts.
Section 3.7. Suitability Requirements. Broker shall establish and maintain a
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system to supervise its Representatives reasonably designed to ensure that, in
making a recommendation to purchase a Contract (including as a part of an
exchange), the Representative has reasonable grounds to believe that, based on
facts disclosed by the purchaser, the purchase of the Contract is suitable for
the purchaser as and to the extent required by Applicable Law. As part of the
supervisory system, Broker shall maintain written procedures and conduct
periodic reviews of its records that are reasonably designed to achieve
compliance with these requirements. Broker shall be solely responsible for
determining the suitability of recommendations to purchase a Contract made by
its Representatives in accordance with Applicable Law, and shall, upon a
reasonable written request from Principal Underwriter, provide written
documentation of such process, including without limitation the certifications
required in Section 4.3. To the extent required by Applicable Law and upon
written request from Principal Underwriter, Broker shall promptly provide
documentation and other information reasonably necessary to allow Principal
Underwriter or its Affiliates to determine that Broker is performing the
required functions described above.
Section 3.8. Application Review. Broker shall review diligently all Contract
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applications for accuracy and completeness and for compliance with the
conditions herein, including the suitability and prospectus delivery
requirements, and shall take all reasonable and appropriate measures to ensure
that applications submitted to Principal Underwriter are accurate, complete,
compliant with the conditions herein, and approved by a qualified registered
principal.
Section 3.9. Replacement. Broker certifies on behalf of itself, its
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Representatives and its Agencies that it shall adhere to Applicable Law before
it receives or solicits any applications for Contracts. In addition to the
conditions and limitations elsewhere contained in this Agreement and the
Compensation Schedules, no first year commission shall be payable on
replacements or switches of any Contract with another Contract, which are
undisclosed, and which require disclosure by Applicable Law or Principal
Underwriter's or its Affiliates' rules on replacement transactions. Specific
replacement or switching rules of each applicable Affiliate are described in
Principal
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Underwriter's Rewritten Business Rules, which shall be made available to Broker
and which may be amended at any time by Principal Underwriter in its sole
discretion.
Principal Underwriter shall make available written guidelines of Principal
Underwriter's position with respect to the acceptability of replacements (the
"Replacement Guidelines"), which Replacement Guidelines may be amended at any
time by Principal Underwriter in its sole discretion. Broker shall provide each
of its Representatives with a copy of the Replacement Guidelines. Broker shall
establish and maintain a system to supervise its Representatives reasonably
designed to review the appropriateness of each replacement transaction and each
transaction's conformity with the Replacements Guidelines. As part of its
supervisory system, Broker shall implement procedures that are reasonably
designed to detect transactions that are replacements of existing policies or
contracts, but that have not been reported as such by the Representative making
the sale. These procedures must include, but are not limited to, systematic
customer surveys and interviews, confirmation letters and programs of internal
monitoring. Broker shall be solely responsible for determining that a
replacement transaction by any of its Representatives is in compliance with
Principal Underwriter's Replacement Guidelines and with Applicable Law. To the
extent required by Applicable Law and upon written request from Principal
Underwriter, Broker shall promptly provide documentation and other information
reasonably necessary to allow Principal Underwriter or its Affiliates to
determine that Broker is performing the required functions described in this
Section 3.9.
Section 3.10. Audit of Representatives. Broker shall maintain reasonable
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procedures for its periodic audit of its Representatives' sales practices and
shall, upon a reasonable written request from Principal Underwriter, provide a
written report to Principal Underwriter on the results of such audits;
provided, however, that Broker shall retain sole responsibility for the
supervision, inspection and control of its Representatives.
Section 3.11. Collection of Payments. Only the initial purchase payments for
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the Contracts shall be collected by Representatives of Broker. All such
purchase payments shall be remitted promptly in full (and in no event later
than the time permitted under Applicable Law) together with any related
application, forms and any other required documentation to Principal
Underwriter or the appropriate Affiliate. The Broker shall make such
remittances in accordance with any and all policies and procedures described in
the Contract, prospectus, if appropriate, or as otherwise adopted by Principal
Underwriter and its Affiliates.
Section 3.12. Contract Delivery. Unless otherwise requested by Broker and
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agreed to by Principal Underwriter, once a Contract has been issued, it shall
be delivered to Broker and, after review by Broker, shall be timely delivered
by Broker to the applicant, accompanied by any documents required to be
delivered by Applicable Law and any additional appropriate documents. In the
case of long-term care insurance, Broker shall ensure delivery of each new
long-term care insurance contract within thirty (30) days of the contract's
approval date. Principal Underwriter shall confirm or cause to be confirmed to
customers all Contract transactions, to the extent required by Applicable Law,
and shall administer the Contracts after they have been delivered, but may from
time to time require assistance from Broker. If a purchaser exercises the free
look rights under a Contract, Broker shall indemnify Principal Underwriter for
any loss incurred by Principal Underwriter or its Affiliates that results from
Broker's failure to promptly deliver such Contract to its purchaser.
Section 3.13. Rejection of Applications and Return of Contracts. Broker
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acknowledges that Principal Underwriter, on behalf of itself and its
Affiliates, shall have the unconditional right to reject, in whole or in part,
any application for a Contract. If Principal Underwriter rejects an
application, Principal Underwriter or its Affiliate shall immediately return
any purchase payments received directly to the Broker, and Broker shall be
responsible for promptly returning such payments to the purchaser. If any
purchaser of a Contract elects to return such Contract pursuant to any law or
contractual provision, any purchase payment made or such other amount, as the
Contract or Applicable Law shall specify, shall be returned by Principal
Underwriter or its Affiliates to the Broker and the Broker shall be responsible
for promptly returning such payments to the purchaser.
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Section 3.14. Independent Contractor. Except as otherwise required by
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Applicable Law, Broker is not a principal, underwriter or agent of Principal
Underwriter or its Affiliates, or any separate account of Principal Underwriter
or its Affiliates. It is understood and acknowledged that Broker, its agents,
designees or Representatives are independent contractors and not employees of
Principal Underwriter or any of its subsidiaries or affiliates. None of the
terms of this Agreement shall be construed as creating an employer-employee
relationship between Broker, its agents, designees or Representatives, on the
one hand, and Principal Underwriter, on the other hand. Broker, its agents and
its other representatives, shall not hold themselves out to be employees of
Principal Underwriter or its Affiliates in this connection or in any dealings
with the public. Neither Broker nor its agents, designees or other
representatives shall have authority on behalf of Principal Underwriter or its
Affiliates to alter or amend any Contract or any form related to a Contract to
adjust or settle any claim or commit Principal Underwriter or its Affiliates
with respect thereto, or bind Principal Underwriter or its Affiliates in any
way; or enter into legal proceedings in connection with any matter pertaining
to Principal Underwriter's business without its prior written consent. Broker
shall not expend, nor contract for the expenditure of, funds of Principal
Underwriter or its Affiliates nor shall Broker possess or exercise any
authority on behalf of Principal Underwriter other than that expressly
conferred on Broker by this Agreement.
Section 3.15. Promotional Materials. To the extent that Broker uses brochures,
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other promotional materials and literature, and training material in connection
with marketing or servicing Contracts, or that mention Principal Underwriter,
its products or services in any way (collectively referred to herein as
"Principal Underwriter Materials"), such Principal Underwriter Materials shall
only be used with the prior written approval of Principal Underwriter.
Similarly, Broker shall not use any information related to Principal
Underwriter or Contracts on any Web site without the prior written consent of
Principal Underwriter. Any requests for written approval of materials for use
by Broker shall be submitted in writing by Broker to the individual and offices
as directed by Principal Underwriter.
Section 3.16. Instructions by Representative. Broker and Agency shall be solely
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responsible for the accuracy and propriety of any (i) instruction given to
Principal Underwriter by a Representative on behalf of an owner or prospective
owner of a Contract, or (ii) action taken by a Representative on behalf of an
owner or prospective owner of a Contract. Principal Underwriter shall have no
responsibility or liability for any action taken or omitted by it in reliance
on or by acceptance of such an instruction or action.
Section 3.17. Furnishing Information. Broker shall furnish Principal
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Underwriter and any regulatory authority with jurisdiction over the subject
matter of this Agreement with any information, documentation, or reports
prepared in connection with or related to this Agreement which may be requested
by Principal Underwriter or such a regulatory authority in order to ascertain
whether the operations of Principal Underwriter or Broker related to the
Contracts are being conducted in a manner consistent with Applicable Law.
Section 3.18. Authority. Broker represents that it has full authority to enter
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into this Agreement and that by entering into this Agreement it shall not
impair any other of its contractual obligations with respect to sales of any
Contract.
Section 3.19. Insurance Coverage.
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a) Fidelity Bond. Broker shall secure and maintain a fidelity bond
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(including coverage for larceny and embezzlement), issued by a
bonding company acceptable to Principal Underwriter, covering all
of its directors, officers, agents, Representatives, associated
persons and employees who have access to funds of Principal
Underwriter or its Affiliates. This bond shall be maintained at
Broker's expense in at least the amount prescribed under Rule 3020
of the FINRA Conduct Rules or future amendments thereto. Broker
shall provide Principal Underwriter with satisfactory evidence of
said bond upon Principal Underwriter's reasonable request. Broker
hereby assigns any proceeds received from a fidelity bonding
company, or other liability coverage, to Principal Underwriter,
for itself or on behalf of its Affiliates, as their interest may
appear, to the extent of its loss due to activities covered by the
bond, policy or other liability coverage.
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b) Plan of Insurance. Broker shall maintain in full force and effect
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during the term of this Agreement a plan of insurance (which may
be a plan of self-insurance if agreed to in writing in advance by
Principal Underwriter) which shall provide coverage for errors and
omissions of Broker and its directors, officers, employees,
agents, Agencies and Representatives, in such amounts and scope of
coverage as are acceptable to Principal Underwriter in its sole
discretion. If requested by Principal Underwriter, Broker shall
provide evidence of coverage under an insurance policy, or a plan
of self-insurance, satisfactory to Principal Underwriter showing
the amount and scope of coverage provided. If such insurance plan
terminates for any reason during the term of this Agreement,
Broker shall immediately notify Principal Underwriter in writing
of such termination and Principal Underwriter shall have the right
to immediately terminate this Agreement.
c) Loss of coverage. The authority of any Representative to solicit
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and procure Contracts hereunder shall terminate automatically upon
the termination of such Representative's coverage under the
Broker's fidelity bond or plan of insurance referred to in
subsections (a) and (b) above.
Section 3.20. Agency Distribution of Variable Contracts. In such cases where
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Broker intends to distribute the Variable Contracts through an Agency, Broker
further represents that Agency shall engage in the offer or sale of Variable
Contracts only through persons who are Representatives of the Broker. Broker
shall further ensure that unregistered employees shall not engage in any
securities activities requiring registration, nor receive any compensation
based on transactions in securities or the provision of securities advice.
Section 3.21. Market Timing.
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(a) Broker shall not, and Broker shall take all steps necessary to
ensure that its Representatives and any Agency shall not
(i) solicit, offer or sell Variable Contracts in connection with
or to facilitate any program, plan or arrangement involving market
timing transactions in underlying mutual funds within Variable
Contracts, or (ii) take any other actions that would promote,
encourage or facilitate market timing transactions in the
underlying mutual funds within Variable Contracts.
(b) Notwithstanding the foregoing, Broker and its Representatives may
provide incidental services in the form of guidance to applicants
and owners of Variable Contracts regarding the allocation of
premium and Variable Contract value, provided that such services
are (i) solely incidental to Broker's activities in connection
with the sales of the Variable Contracts, (ii) subject to the
supervision and control of Broker, (iii) furnished in accordance
with any rules and procedures that may be prescribed by Principal
Underwriter, and (iv) not promoting, encouraging or facilitating
market timing transactions in the underlying mutual funds within
Variable Contracts.
Section 3.22. Prohibited Solicitation With Contract Holders. For a period of 12
----------------------------------------------
months after termination of the Agreement, the Broker and Agency shall not,
directly or indirectly, and on a systematic basis, contact the contract holders
of Principal Underwriter or its Affiliates or condone such contact for the
purpose of inducing any such contract holders to lapse, cancel, and fail to
renew or replace any Contract. If the Broker or Agency, in the judgment of
Principal Underwriter is determined to have engaged in such prohibited
activity, then Principal Underwriter shall have the right to declare the
Broker's and Agency's claims for compensation or any other benefit under the
Agreement to be forfeited and void. Principal Underwriter, on behalf of itself
and its Affiliates, may also pursue all remedies, including injunction, to
assure compliance with the covenants in this Section 3.22 and shall, if
successful, be entitled to recover from the Broker and Agency all costs and
expenses incurred in pursuing such remedies, including reasonable attorneys'
fees.
Page 9 of 21
Enterprise Selling Agreement 5-17
ARTICLE IV
COMPLIANCE WITH APPLICABLE LAW
------------------------------
Section 4.1. Applicable Law. Principal Underwriter and Broker shall comply with
---------------
all applicable state and federal statutes, laws, rules, and regulations
including without limitation, state insurance laws, rules and regulations, and
federal and state securities laws, rules and regulations ("Applicable Law").
Applicable Law also includes applicable guidelines, policies, and rulings of
federal and state regulatory organizations and agencies, including without
limitation state insurance departments, the SEC and the FINRA, consumer privacy
laws, HIPAA and any other state or federal laws, rules or regulations and
decisions, orders and rulings of state and federal regulatory agencies that are
now or may hereafter become applicable to the parties hereto and the
transactions that are the subject of this Agreement.
Section 4.2. Anti-Money Laundering and Customer Identification.
--------------------------------------------------
a) Broker shall comply with all applicable anti-money laundering
laws, regulations, rules and government guidance, including the
reporting, recordkeeping and compliance requirements of the Bank
Secrecy Act ("BSA"), as amended by The International Money
Laundering Abatement and Financial Anti-Terrorism Act of 2002,
Title III of the USA PATRIOT Act ("the Act"), its implementing
regulations, and related SEC and SRO rules. These requirements
include requirements to identify and report currency transactions
and suspicious activity, to implement a customer identification
program to verify the identity of customers, and to implement an
anti-money laundering compliance program. As required by the Act,
Broker certifies that it has: a comprehensive anti-money
laundering compliance program that includes, policies, procedures
and internal controls for complying with the BSA; policies,
procedures and internal controls for identifying, evaluating and
reporting suspicious activity; a designated compliance officer or
officers; training for appropriate persons; and an independent
audit function.
b) Further Broker certifies, and shall certify to Principal
Underwriter annually hereafter, that it has established and
implemented a training program for appropriate persons, including
appropriate employees and all Representatives registered with
Broker, and that such program includes training on the
requirements of Broker's anti-money laundering compliance program
and on the identification of "red flags" associated with money
laundering risks related to Principal Underwriter's covered
products, as they are defined in the regulations promulgated under
Section 352 of the Act in accordance with the definitions provided
in Section 103.37(a)(4).
Broker shall provide training to all appropriate persons,
including its appropriate employees and all Representatives
registered with Broker concerning their responsibilities under the
company's anti-money laundering program, and that such training
shall include instruction on the identification of "red flags"
associated with money laundering risks related to Principal
Underwriter's covered products, as they are defined in the
regulations promulgated under Section 352 of the Act in accordance
with the definitions provided in Section 103.37(a)(4).
c) Further Broker certifies, and shall certify to Principal
Underwriter annually hereafter, that it has established and
implemented a Customer Identification Program, in compliance with
applicable regulations, as part of its anti-money laundering
compliance program that, at a minimum, requires: (i) the
verification of the identity of any customer seeking to open an
account; (ii) the retention of a record of the information used to
verify each customer's identity; and (iii) the determination,
within a reasonable time before or after the account is opened, as
to whether the customer appears on any lists of known or suspected
terrorists or terrorist organizations as provided to it by any
government agency.
d) Broker shall verify the identity of each customer that it
introduces to Principal Underwriter, whether through documentary
or non-documentary means, and that Principal Underwriter shall
rely upon such verification, as prescribed by the regulations
promulgated under Section 326 of the Act
Page 10 of 21
Enterprise Selling Agreement 5-17
in accordance with the safe-harbor provided in
Section 103.122(b)(6) of the regulations under the Act.
e) Broker shall immediately notify Principal Underwriter of any
activity, behavior, or transaction that results in Broker filing a
suspicious activity report and that it shall share information to
the extent permissible under the regulations promulgated under
Section 314 of the Act in accordance with the safe harbor provided
in Section 103.110(b)(5) of the regulations under the Act.
Section 4.3. Suitability Certification. To the extent required by Applicable
--------------------------
Law and in accordance with Section 3.7, Broker hereby certifies, and shall
hereafter annually certify in writing to Principal Underwriter, to the
following:
With respect to the solicitation and sale of fixed and variable
annuity Contracts offered by Principal Underwriter and its
Affiliates, Broker has in place a system to supervise
recommendations made for the Contracts that is reasonably designed
to achieve compliance with state insurance laws or regulations
regarding suitability and, with respect to variable annuities, to
comply with applicable FINRA Conduct Rules, including Rule 2310,
regarding suitability. As part of this supervisory system Broker
maintains written procedures and conducts periodic reviews of its
records that are reasonably designed to achieve compliance with
these requirements.
Annual certificates shall be signed by an authorized senior officer or manager
of the Broker with responsibility for overseeing annuity sales practices and
who has a reasonable basis on which to make the certification on behalf of the
Broker.
Section 4.4. Department Of Labor. Broker represents that when engaged in
--------------------
selling or servicing activities involving Contracts, either directly or through
representatives or agencies, to plans, plan sponsors, participants,
beneficiaries, IRAs or XXX owners subject to Title I of the Employee Retirement
Income Securities Act of 1974, as amended ("ERISA") or Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code") it (a) is acting
independent of Principal Underwriter and the sales or servicing activities in
relation to the Contract are at arm's length (b) is an investment advisor
registered under the Investment Advisors Act of 1940 or a broker-dealer
registered under the Securities Exchange Act of 1934, (c) is capable of
evaluating investment risks independently, both in general, and with regard to
particular transactions and investment strategies, (d) will determine whether
the final investment advice regulation set forth in Department of Labor
Regulation (S)2510.3-21 ("DOL Fiduciary Rule") applies to Broker's Sales or
servicing activities or client interactions relating to the Contracts (the
"Covered Transactions"). If the Broker determines that the DOL Fiduciary Rule
applies to the Covered Transactions, and that it is required under the DOL
Fiduciary Rule to act as a fiduciary, then Broker will comply with the DOL
Fiduciary Rule and will be acting in its capacity as a fiduciary under ERISA
and/or the Code with respect to any such Covered Transactions , and (Euro) in
any case where the facts stated in (d) above apply, will be exercising
independent judgment to evaluate and determine if the best interest standard is
satisfied when investment advice is provided by the Broker relating to the
Covered Transactions. Principal Underwriter represents that (i) it is not
undertaking to provide impartial investment advice, or to give advice in a
fiduciary capacity in connection with the sale of the Contracts or the
provision of educational materials, marketing materials, interactive tools,
administrative or wholesaler support with regard to the Contracts, but is
acting for its own financial interests, (ii) it has informed Broker of the
existence and nature of the Principal Underwriter's interests in the
transaction by disclosing its fees, and (iii) Principal Underwriter will not
receive a separate fee or other compensation from Broker, affiliates of the
Broker, or the Broker's clients for the provision of investment advice, as
defined under the DOL Fiduciary Rule, in connection with Covered Transactions.
This independent fiduciary exception is effective as of the date the selling
agreement is executed and applies to each ERISA plan or XXX on whose behalf
Broker will be acting regarding the purchase of the Contracts. This Section 4.4
documents the fiduciary roles with respect to this Agreement between Principal
Underwriter and Broker, and the reliance and utilization of the "transactions
with independent fiduciaries with financial expertise" exception found in
Department of Labor Regulation (S)2510.3-21(c)(1).
Page 11 of 21
Enterprise Selling Agreement 5-17
ARTICLE V
COMPENSATION
------------
Section 5.1. Payment Under Compensation Schedules. Principal Underwriter shall
-------------------------------------
pay Broker compensation for the sale of each Contract sold by Representatives
of Broker as set forth in Exhibits A and B. Principal Underwriter shall
identify to Broker with each such payment the name or names of the
Representative(s) of Broker who solicited each Contract covered by the payment.
Broker shall be responsible for issuing checks, statements or forms for tax
purposes and other administrative duties connected with compensation of such
Representatives. Unless otherwise agreed upon by the parties, Principal
Underwriter shall have no obligation to any of the employees, agents or
Representatives of Broker or Agency for the payment of any compensation. Unless
otherwise provided in Exhibits A and B, compensation on the Contracts,
including the commissions and fees therein, may be amended by Principal
Underwriter at any time, in any manner, and without prior notice. If Broker or
its Representatives replace an existing Product issued by any of Principal
Underwriter's Affiliates in whole or in part, the compensation set forth in
Exhibits A or B is inapplicable and Principal Underwriter, in its sole
discretion, shall determine what, if any, commissions shall be payable in
accordance with Principal Underwriter's Rewritten Business Rules in effect at
the time of such replacement.
Section 5.2. Sole Discretion to Refund Premiums. Broker recognizes that
-----------------------------------
Principal Underwriter and its Affiliates have sole discretion to refund or
return purchase payments paid by applicants.
Section 5.3. Chargeback of Compensation. Except as otherwise may be provided in
---------------------------
Exhibit A and B, no compensation shall be payable in connection with a purchase
payment, and any compensation already paid shall be promptly returned to
Principal Underwriter on request, under each of the following conditions:
a) if Principal Underwriter or its Affiliates, in their sole
discretion, determine not to issue the Contract applied for;
b) if Principal Underwriter or its Affiliates refund or return the
purchase payment paid by the applicant for any reason, in whole or
in part; or
c) Principal Underwriter or its Affiliates determine that any person
signing an application who is required to be registered and/or
licensed or any other person or entity receiving compensation for
soliciting purchases of the Contracts is not duly registered
and/or licensed to sell the Contracts in the jurisdiction of such
attempted sale.
Section 5.4. Offset. When commission has been paid to a Broker hereunder for a
-------
purchase payment that has since been refunded or returned to the purchaser,
Principal Underwriter may, at its option, offset the amount of that commission
against any other amounts payable to Broker by Principal Underwriter or any one
or more of its Affiliates. In addition, Principal Underwriter may at any time
offset against any compensation payable to the Agency or its successors or
assigns, any indebtedness due from the Agency to Principal Underwriter or its
Affiliates. Nothing contained herein shall be construed as giving Broker,
Agency or Representative the right to incur any indebtedness on behalf of
Principal Underwriter or its Affiliates. Any remaining indebtedness of Broker
to Principal Underwriter or its Affiliates arising under this Agreement shall
be a first lien against any monies payable hereunder. The right of Broker, or
any person claiming through Broker to receive any compensation provided by this
Agreement shall be subordinate to the right of Principal Underwriter to offset
such compensation against any such indebtedness of the Broker to Principal
Underwriter or its Affiliates.
Section 5.5. No Right to Withhold. Neither Broker nor any of its
---------------------
Representatives shall have any right to withhold or deduct any part of any
premium or other purchase payment it shall receive with respect to the
Contracts covered by this Agreement for purposes of payment of commission or
for any other purpose.
Section 5.6. Impact on Termination. Principal Underwriter shall pay
----------------------
compensation to Broker for Contracts credited to an Agency prior to the
termination date of this Agreement, as set forth in Exhibits A and B. Such
Page 12 of 21
Enterprise Selling Agreement 5-17
compensation shall be payable when the premium is due and paid to Principal
Underwriter subject to the provisions of this Agreement and of the Compensation
Schedule(s).
Section 5.7. Principal Underwriter Payment of Compensation; Discharge of
-----------------------------------------------------------
Obligation. Agency and Broker hereby acknowledge that compensation attributable
-----------
to the sale of any Contract issued by an Affiliate may be payable directly by
Principal Underwriter, in its discretion, to Agency or Broker where permitted,
and not by the Affiliate. Agency and Broker further acknowledge that such
payment of compensation by Principal Underwriter attributable to the sale of
such Contracts shall constitute a complete discharge of the obligation to pay
compensation by the Affiliate issuer under this Agreement. The foregoing manner
of payment shall not affect the right of offset or chargeback as referred to in
Sections 5.3 and 5.4 of this Agreement, or other compensation rules as may be
set forth in this Agreement, Exhibits A and B, or rules of the Principal
Underwriter or its Affiliates.
Section 5.8. Expenses. Broker is responsible for all expenses incurred by the
---------
Broker, except as may be agreed to in writing by Principal Underwriter prior to
the Broker incurring such expenses. Additionally, Principal Underwriter shall,
at its expense, provide its standard advertising and promotional material to
the Broker when deemed appropriate by Principal Underwriter.
Section 5.9. Conflict. With respect to compensation under this Agreement, in
---------
the event that anything contained in this Article 5 conflicts with the terms of
the compensation described in the attached Exhibits A and B, the terms
contained in Exhibits A and B shall prevail.
ARTICLE VI
COMPLAINTS AND INVESTIGATIONS
-----------------------------
Section 6.1. Investigation by Regulator. Broker and Principal Underwriter shall
---------------------------
cooperate fully in any regulatory investigation or proceeding or judicial
proceeding arising in connection with the offer, sale, and/or servicing of the
Contracts.
Section 6.2. Customer Complaints. The term Customer Complaint shall mean an
--------------------
oral or written communication either directly from the purchaser of or
applicant for a Contract covered by this Agreement or his/her legal
representative, or indirectly from a regulatory agency to which he/she or
his/her legal representative has expressed a grievance.
Section 6.3. Notice and Handling of Customer Complaints.
-------------------------------------------
a) Principal Underwriter shall promptly notify Broker of Principal
Underwriter's receipt of notice of any Customer Complaints
relating to sales practices or marketing issues relating to the
Contracts by forwarding to Broker a copy of any written materials
in connection with such Customer Complaint and any additional
information as may be necessary to furnish a complete
understanding of same. Broker shall be responsible for resolving
Customer Complaints involving sales practices or marketing issues.
Principal Underwriter shall cooperate with Broker and provide
information to Broker related to sales practices and marketing
Customer Complaints that is reasonably required by Broker to
facilitate the resolution of such Customer Complaints. During the
resolution of a sales practices or marketing related Customer
Complaint, Broker shall provide Principal Underwriter with a copy
of all correspondence sent and received regarding that Customer
Complaint. Nothing contained in this Section 6.3 (a) shall limit
Principal Underwriter's right to settle as described in
Section 6.4.
b) Broker shall promptly notify Principal Underwriter of Broker's
receipt of notice of any Customer Complaint by forwarding to
Principal Underwriter a copy of any written materials in
connection with the Customer Complaint and such additional
information as may be necessary to furnish a complete
understanding of same. Principal Underwriter shall be responsible
for resolving Customer Complaints involving administrative issues.
Broker shall cooperate with Principal
Page 13 of 21
Enterprise Selling Agreement 5-17
Underwriter and provide information to Principal Underwriter
related to administrative Customer Complaints that is reasonably
required by Principal Underwriter to facilitate the resolution of
such Customer Complaints.
Section 6.4. Right to Settle. Principal Underwriter reserves the right to
----------------
settle on behalf of itself, and on behalf of itself and Broker collectively if
Broker agrees, any claims, complaints or grievances made by applicants,
contract holders or others in connection with the Contracts, and concerning any
conduct, act or omission by the Broker or its agents or representatives with
respect to the Contracts or any transactions arising out of this Agreement. If
Broker does not agree to a collective settlement with Principal Underwriter and
Principal Underwriter, on behalf of itself, settles the matter, Broker shall
indemnify and hold harmless Principal Underwriter from any and all claims,
complaints or grievances made by Broker or any applicant, contract holder or
other person or entity made in connection with such matter.
ARTICLE VII
RECORDS AND ADMINISTRATION
--------------------------
Section 7.1. Books and Records. Broker shall maintain all books and records as
------------------
required by Rules 17a-3 and 17a-4 under the 1934 Act, except to the extent that
Principal Underwriter may agree in writing to maintain any such records on
Broker's behalf. Records subject to any such agreement shall be maintained by
Principal Underwriter as agent for Broker in compliance with said rules, and
such records shall be and remain the property of Broker and be at all times
subject to inspection by the SEC in accordance with Section 17(a) of that Act.
Nothing contained herein shall be construed to affect Principal Underwriter's
or its Affiliates' right to ownership and control of all records and documents
pertaining to its business operations including, without limitation, its
operations relating to the Contracts. Principal Underwriter and Broker shall
each retain all records related to this Agreement as required by the 1934 Act,
and the rules and regulations thereunder and by any other Applicable Law, as
Confidential Information.
ARTICLE VIII
CUSTOMER INFORMATION AND PROTECTED HEALTH INFORMATION
-----------------------------------------------------
Section 8.1. Treatment of Customer Information. Broker shall treat Customer
----------------------------------
Information confidentially as required by Applicable Law and by Principal
Underwriter, as described in Principal Underwriter's privacy notices and in
accordance with Principal Underwriter policies and procedures. Broker shall
also establish and implement administrative, physical and technical procedures
to ensure the confidentiality, security and integrity of Customer Information
in accordance with Applicable Law. Broker shall comply with Principal
Underwriter's terms of use, policies and procedures with respect to use of
Principal Underwriter electronic systems and databases providing access to
Customer Information by Broker, its employees and Representatives, and shall
promptly report to Principal Underwriter any actual or suspected breach of
security related to such systems and databases of which it becomes aware. To
the extent that Broker becomes aware of any actual or suspected security breach
or unauthorized use, disclosure, acquisition or access to any Customer
Information, Broker shall: (i) promptly notify Principal Underwriter, (ii) take
all necessary and advisable corrective actions, and (iii) cooperate fully with
Principal Underwriter in all reasonable and lawful efforts to prevent, mitigate
or rectify such security breach or unauthorized use, disclosure, acquisition,
or access to the Customer Information. Broker may use Customer Information only
for the purpose of fulfilling its obligations under the Agreement. Broker shall
limit access to Customer Information to its employees, Representatives and
other Third Parties who need to know such Customer Information to permit Broker
to fulfill its obligations under this Agreement and who have agreed to treat
such Customer Information in accordance with the terms of this Agreement.
Broker shall not disclose or otherwise make accessible Customer Information to
anyone other than to the individual to whom the information relates (or to his
or her legally authorized representative) or to other persons pursuant to a
valid authorization signed by the individual to whom the information relates
(or by his or her legally authorized representative), except as required for
Broker to fulfill its obligations under this Agreement, as otherwise directed
by Principal Underwriter, or as expressly required by Applicable Law. Principal
Underwriter and its Affiliates may market, offer, sell or distribute insurance
products, including, but not limited to, the Contracts, or any of their other
products and related services, outside of this Agreement to customers of Broker
provided they do not use Nonpublic Personal Information
Page 14 of 21
Enterprise Selling Agreement 5-17
regarding Broker's customers provided by Broker to specifically target those
customers, and such marketing, offering, selling or distributing by Principal
Underwriter and its Affiliates of insurance (including but not limited to the
Contracts) or any of their other products or services shall not be subject to
the terms of this Agreement.
Section 8.2. Protected Health Information ("PHI"). Notwithstanding anything to
----------------------------
the contrary in this Agreement, in order to comply with HIPAA requirements,
Broker agrees with respect to any PHI received, obtained or created by Broker,
or disclosed or made accessible to Broker, that Broker: (a) shall not use or
disclose PHI except to provide services pursuant to this Agreement and
consistent with Applicable Law; (b) shall limit the use of, access to and
disclosure of PHI to the minimum required to perform services or by Applicable
Law; (c) shall use appropriate safeguards to prevent use or disclosure of PHI
except as permitted by this Agreement; (d) shall promptly report to Principal
Underwriter any use or disclosure of Principal Underwriter PHI not permitted by
this Agreement of which it becomes aware; (e) shall take reasonable steps to
mitigate any harmful effect of any use or disclosure of PHI by Broker in
violation of the terms of this Agreement or Applicable Law; (f) shall require
that any of its Representatives and independent contractors to whom PHI is
disclosed or made accessible or who uses PHI has agreed to the same
restrictions and conditions that apply to Broker with respect to PHI pursuant
to this Agreement; (g) shall, within fifteen (15) days of Principal
Underwriter's request, provide to Principal Underwriter any PHI or information
relating to PHI as deemed necessary by Principal Underwriter to provide
individuals with access to, amendment of, and an accounting of disclosures of
their PHI, and to incorporate any amendments of the PHI as requested by
Principal Underwriter; (h) shall make its internal practices, books and records
relating to its use or disclosure of PHI available to the Secretary of the
United States Department of Health and Human Services at his/her request to
determine Principal Underwriter's compliance with Applicable Law; (i) agrees
that upon termination of this Agreement it shall, if feasible, return to
Principal Underwriter or destroy all PHI it maintains in any form and retain no
copies, and if such return or destruction is not feasible, to extend the
protections of this Agreement to the PHI beyond the termination of this
Agreement and for as long as Broker has PHI, and further agrees that any
further use or disclosure of the PHI shall be solely for the purposes that make
return or destruction infeasible. Destruction without retention of copies is
not deemed feasible if prohibited by the terms of this Agreement or by
Applicable Law, including record retention requirements under state insurance
laws. With respect to PHI received made accessible, maintained or transmitted
electronically in the performance of its obligations under this Agreement,
Broker further agrees that it shall (1) implement administrative, physical, and
technical safeguards that reasonably and appropriately protect the
confidentiality, integrity, and availability or any such electronic PHI;
(2) ensure that its Representatives agree to implement reasonable and
appropriate safeguards to protect such electronic PHI; and (3) report to the
Principal Underwriter any security incident related to Electronic PHI of which
the Broker becomes aware. In this context, the term "security incident" means
the attempted or successful unauthorized access, use, disclosure, modification
or destruction of information or interference with system operations in
information systems such as hardware, software, information, data applications,
communications and people.
Section 8.3 Additional Broker Responsibility With Respect To PHI. The Broker
-----------------------------------------------------
agrees and acknowledges that the Broker is directly subject to HIPAA as amended
by the Health Information Technology for Economic and Clinical Health Act
("HITECH Act"), including its provisions relating to security and privacy of
PHI as well as its enforcement and penalty provisions. The Broker agrees to:
(a) comply with all applicable security and privacy provisions of HIPAA as
amended by the HITECH Act and as it may be amended from time to time; (b) not
act in any way to interfere with or hinder the Principal Underwriter's ability
to comply with HIPAA as amended by the HITECH Act and as it may be amended from
time to time; and (c) notify the Principal Underwriter within five (5) business
days of discovering a "breach" as that term is defined in Section 13400 of the
HITECH Act at the following e-mail address:
xxxxxxxxxxxxxx@xxxxxxxxxxxxxxxxxxxx.xxx. In the event Broker learns of a
-----------------------------------
pattern of activity or practice of Principal Underwriter that constitutes a
material breach or violation of its obligations relating to PHI under the
Agreement, Broker will take reasonable steps to work with Principal Underwriter
to cure the breach or end the violation. If such steps are unsuccessful, Broker
will terminate the Agreement, if feasible, or, if termination is not feasible,
report the problem to the Secretary of Health and Human Services.
Section 8.4. Privacy Notices and Authorization. Broker shall provide to
---------------------------------
customers and prospective customers who apply for or purchase Principal
Underwriter products, and shall ensure that its Representatives provide to such
customers and prospective customers, Principal Underwriter privacy notices as
required by Applicable Law and by
Page 15 of 21
Enterprise Selling Agreement 5-17
Principal Underwriter. Broker shall also ensure that its Representatives obtain
signed authorizations from customers and prospective customers who apply for
Principal Underwriter products, as required by Principal Underwriter, and
provide upon request of such customers and prospective customers, copies of
their signed authorizations as required by Applicable Law and Principal
Underwriter policy. In the event that a customer or prospective customer has
signed a Principal Underwriter authorization and subsequently informs Broker or
Representatives that he or she is revoking that authorization, Broker shall
promptly inform Principal Underwriter in writing of such revocation.
ARTICLE IX
CONFIDENTIAL INFORMATION
------------------------
Section 9.1. Treatment of Confidential Information. Principal Underwriter and
--------------------------------------
Broker and their respective Affiliates each shall keep confidential all
Confidential Information of the other. Without limiting the generality of the
foregoing, Principal Underwriter and Broker and their respective Affiliates
shall not disclose any Confidential Information to any Third Party without the
prior written consent of the other; provided, however, that each may disclose
Confidential Information (a) to those of its Representatives who have a need to
know the Confidential Information in the ordinary course of business and who
are informed of the confidential nature of the Confidential Information, and
(b) as and to the extent required by Applicable Law or by legal process or
requested by an insurance regulatory or administrative body. However, in the
event that clause (b) of the preceding sentence is applicable, the party
required or requested to disclose Confidential Information shall give prompt
written notice thereof to the other party and shall reasonably cooperate in the
other party's efforts to obtain an appropriate remedy to prevent or limit such
disclosure. It is understood by Principal Underwriter and Broker that this
Section 9.1 shall not prevent Broker from quoting Principal Underwriter premium
rates in the ordinary course of business.
Section 9.2. Return of Confidential Information. Promptly upon the termination
-----------------------------------
of this Agreement or the request of the providing party, the receiving party
shall return to the providing party all Confidential Information furnished by
the providing party or its Representatives. Neither the receiving party nor any
of its Representatives shall make any copies in any form of any documents
containing Confidential Information of the providing party without the prior
written consent of an officer of the providing party, except such copies as
need to be made in the ordinary course of business by Principal Underwriter or
Broker to fulfill their respective obligations under this Agreement.
Section 9.3. Damages. Principal Underwriter and Broker each acknowledge that
--------
(a) money damages may not be a sufficient remedy for breach of this Article IX,
(b) the Party aggrieved by any such breach may be entitled to specific
performance and injunctive and other equitable relief with respect to such
breach, (c) such remedies shall not be deemed to be the exclusive remedies for
any such breach but shall be in addition to all other remedies available at law
or in equity, and (d) in the event of litigation relating to this Article IX,
if a court of competent jurisdiction determines in a final non-appealable order
that either Principal Underwriter or Broker or any of their respective
Representatives has breached this Article IX, then the party that is found (or
whose Representative is found) to have committed such breach shall be liable
for reasonable legal fees incurred by the aggrieved party or its affiliates in
connection with such litigation including, without limitation, any appeals.
Page 16 of 21
Enterprise Selling Agreement 5-17
ARTICLE X
INDEMNIFICATION
---------------
Section 10.1. Indemnification. Each party shall hold harmless, defend,
----------------
exonerate and indemnify each other party to this Agreement, as well as their
respective employees, agents, trustees, Representatives, officers or directors,
for any and all losses, claims, judgments, fines, penalties, damages, or
liabilities (or any actions or threatened actions in respect of any of the
foregoing) the other party suffers that results from the actions of the
indemnifying party or its representatives with respect to its/their obligations
under this Agreement, or breach of any representation, warranty, covenant,
condition or duty contained in this Agreement or violation of Applicable Law
with respect to its services required under this Agreement.
Section 10.2. Notice of Claim. After receipt of notice of the commencement of,
----------------
or threat of, any claim, action, or proceeding by a third party (a "Third Party
Action") by a party that believes it is entitled to indemnification under this
Article X (the "Indemnified Party"), the Indemnified Party shall notify the
party obligated to provide indemnification under this Article X (the
"Indemnifying Party") in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
Indemnifying Party shall not relieve it from any liability under this Article
X, except to the extent that the Indemnifying Party demonstrates that the
defense of such Third Party Action is materially prejudiced by the failure to
give timely notice. Such notice shall describe the claim in reasonable detail.
Section 10.3. Defense, Settlement and Subrogation.
------------------------------------
a) The Indemnifying Party shall have the right to assume control of
the defense of such Third Party Action and shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and shall pay the reasonable fees and
disbursements of such counsel related to such Third Party Action.
The Indemnified Party shall cooperate and provide such assistance
as the Indemnifying Party reasonably may request in connection
with the Indemnifying Party's defense and shall be entitled to
recover from the Indemnifying Party the reasonable out-of-pocket
costs of providing such assistance (including reasonable fees of
any counsel retained by the Indemnified Party with the consent of
the Indemnifying Party to facilitate such assistance). The
Indemnifying Party shall inform the Indemnified Party on a regular
basis of the status of any Third Party Action and the Indemnifying
Party's defense thereof.
b) In any such Third Party Action, the Indemnified Party may, but
shall not be obligated to, participate in the defense of any Third
Party Action, at its own expense and using counsel of its own
choosing, but the Indemnifying Party shall be entitled to control
the defense thereof unless the Indemnified Party has relieved the
Indemnifying Party from liability with respect to the particular
Third Party Action.
c) If notice is given to the Indemnifying Party of the commencement
of any Third Party Action hereunder and the Indemnifying Party
does not, either (i) within ten (10) Business Days after the
receipt of such notice, give notice to the Indemnified Party of
its election to assume the defense of such Third Party Action, or
(ii) give notice to the Indemnified Party that it rejects the
claim for indemnification pursuant to Section 10.5 herein, the
Indemnified Party shall have the right, at its option and at the
Indemnifying Party's expense, to defend such Third Party Action in
a manner that the Indemnified Party deems appropriate. In such a
case, the Indemnified Party shall not consent to the settlement,
compromise or entry of judgment with respect to the Third Party
Action without prior written notice to, consultation with, and
written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.
d) In any Third Party Action, the defense of which is controlled by
the Indemnifying Party: (i) the Indemnifying Party shall not,
without the Indemnified Party's prior written consent, compromise
or settle such Third Party Action, if (1) such compromise or
settlement would impose an injunction or other equitable relief
upon the Indemnified Party or (2) such compromise or settlement
does not
Page 17 of 21
Enterprise Selling Agreement 5-17
include the Third Party's release of the Indemnified Party from
all liability relating to such Third Party Action; and (ii) the
Indemnified Party shall not compromise or settle such Third Party
Action without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld, provided
that, if the Indemnified Party desires to compromise or settle
such claim, suit or proceeding and the Indemnifying Party
reasonably refuses to consent to such compromise or settlement,
the Indemnified Party may enter into a compromise or settlement
but shall be solely responsible for the cost of any compromise or
settlement amount.
Section 10.4. Claim Not Involving Third Party Action. A claim for
---------------------------------------
indemnification by a party hereunder for any matter not involving a Third Party
Action may be asserted by notice to another party.
Section 10.5. Notice of Rejection of Claim. Notwithstanding anything within
-----------------------------
this Article X to the contrary, a party who has received a notice of claim for
indemnification under this Article X, may notify the party asserting such claim
for indemnification that it rejects the claim. Such notice rejecting a claim
for indemnification must be given by the rejecting party within ten
(10) business days of its receipt of the notice of claim and shall describe the
basis for the rejection of the claim in reasonable detail.
Section 10.6. Provisions Not to Control. Notwithstanding anything in this
--------------------------
Article X to the contrary, the terms and provisions of Article VI shall control
in the event of any conflict or alleged conflict with this Article X.
ARTICLE XI
GENERAL PROVISIONS
------------------
Section 11.1. Term and Termination.
---------------------
a) Term. This Agreement shall continue in force from the Effective
-----
Date, provided that any party may unilaterally terminate this
Agreement with or without cause upon thirty (30) days prior
written notice of termination to the other parties.
b) Termination Due to Change in Status.
------------------------------------
1) Broker-Dealer Status. The Agreement shall terminate
---------------------
immediately upon Principal Underwriter or Broker ceasing to be
a registered broker-dealer or a member of the FINRA.
2) Legal Status. The Agreement shall terminate immediately upon
-------------
the termination of the legal existence of Selling
Broker-Dealer or the Agency, or the merger, consolidation,
reorganization, dissolution, receivership or bankruptcy of
either, or whenever the Agency is no longer licensed under law
to solicit and procure applications for Contracts, unless the
Agency notifies the other parties in writing at least thirty
(30) days' prior to the occurrence of any of the above events
and obtains written permission to continue on a basis approved
by the other parties.
c) Continuing Obligations. Upon termination of this Agreement, all
-----------------------
authorizations, rights and obligations shall cease except (a) the
agreements contained in Articles VI,VII, VIII, IX, and X, Sections
11.4, 11.5, 11.6 and 11.10 hereof; and (b) the obligation to
settle accounts hereunder. Except with respect to records required
to be maintained by Broker pursuant to Rules 17a-3 and 17a-4 under
the 1934 Act, Broker shall return to Principal Underwriter, within
30 days after the Effective Date of termination, any and all
records in its possession which have been specifically maintained
in connection with Principal Underwriter's operations related to
the Contracts.
Section 11.2. Assignability. This Agreement shall not be assigned by either
--------------
party without the written consent of the other; provided, however, that
Principal Underwriter may assign this Agreement to any of its Affiliates at any
time. Any purported assignment in violation of this Section 11.2 shall be void.
Page 18 of 21
Enterprise Selling Agreement 5-17
Section 11.3. Amendments. No oral promises or representations shall be binding
-----------
nor shall this Agreement be modified except by agreement in writing, executed
on behalf of the parties by a duly authorized officer of each of them.
Section 11.4. Notices. All notices, demands and other communications required
--------
or permitted to be given to any party under this Agreement shall be in writing
and any such notice, demand or other communication shall be deemed to have been
duly given when delivered by hand, courier or overnight delivery service or, if
mailed, two (2) Business Days after deposit in the mail and sent certified or
registered mail, return receipt requested and with first-class postage prepaid:
(a) If to Broker, to the address on the signature page of this
Agreement.
(b) If to Principal Underwriter:
Brighthouse Securities, LLC
Attn: Installations
00000 Xxxxx Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Either party may change its respective notice address by advance
written notice to the other.
Section 11.5. Arbitration.
------------
a) When Arbitration Required. All disputes and differences between
--------------------------
the parties, other than those seeking injunctive relief or a
restraining order under this Agreement, or arising with respect to
the use of Customer Information, PHI or Confidential Information
under Articles VIII and IX, must be decided by arbitration in
accordance with the rules of arbitration of the American
Arbitration Association, regardless of the insolvency of either
party, unless the conservator, receiver, liquidator or statutory
successor is specifically exempted from an arbitration proceeding
by applicable state law.
b) Initiation of Arbitration. Either party may initiate arbitration
--------------------------
by providing written notification to the other party. Such written
notice shall set forth (i) a brief statement of the issue(s); (ii)
the failure of the parties to reach agreement; and (iii) the date
of the demand for arbitration.
c) Arbitration Panel. The arbitration panel shall consist of three
------------------
arbitrators. The arbitrators must be impartial and must be or must
have been officers of life insurance and or securities companies
other than the parties or their affiliates.
d) Selection of Arbitrators. Each party shall select an arbitrator
-------------------------
within thirty (30) days from the date of the demand. If either
party shall refuse or fail to appoint an arbitrator within the
time allowed, the party that has appointed an arbitrator may
notify the other party that, if it has not appointed its
arbitrator within the following ten (10) days, an arbitrator shall
be appointed on its behalf. The two (2) arbitrators shall select
the third arbitrator within thirty (30) days of the appointment of
the second arbitrator. If the two arbitrators fail to agree on the
selection of the third arbitrator within the time allowed, each
arbitrator shall submit to the other a list of three
(3) candidates. Each arbitrator shall select one name from the
list submitted by the other and the third arbitrator shall be
selected from the two names chosen by drawing lots.
e) Rules; Place for Meetings; Majority Vote. The arbitrators shall
-----------------------------------------
determine all arbitration schedules and procedural rules.
Organizational and other meetings shall be held in New York,
unless the arbitrators select another location. The arbitrators
shall decide all matters by majority vote.
Page 19 of 21
Enterprise Selling Agreement 5-17
f) Decision Final. The decisions of the arbitrators shall be final
---------------
and binding on both parties. The arbitrators may, at their
discretion, award costs and expenses, as they deem appropriate,
including but not limited to legal fees and interest. The
arbitrators may not award exemplary or punitive damages. Judgment
may be entered upon the final decision of the arbitrators in any
court of competent jurisdiction.
g) Fees and Expenses. Each party shall be responsible for (a) all
------------------
fees and expenses of its respective counsel, accountants,
actuaries and any other representatives in connection with the
arbitration and (b) unless the arbitrators shall provide
otherwise, one-half (1/2) of the expenses of the arbitration,
including the fees and expenses of the arbitrators.
Section 11.6. Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware without regard to Delaware
choice of law provisions.
Section 11.7. Entire Understanding. This Agreement and any reference
---------------------
incorporated herein constitute the complete understanding of the parties and
supersedes in its entirety any and all prior and contemporaneous agreements
among the parties with respect to the subject matter discussed herein. No oral
agreements or representations shall be binding.
Section 11.8. Third Party Beneficiaries. Nothing in the Agreement shall convey
--------------------------
any rights upon any person or entity, which is not a party to the Agreement.
Principal Underwriter's Affiliates shall be Third Party beneficiaries of this
Agreement, entitled to enforce the provision hereof as if they were a party to
this Agreement.
Section 11.9. Non-Exclusivity. No territory or product is assigned exclusively
----------------
hereunder to Broker and Agency and Principal Underwriter reserves the right in
its discretion to enter into selling agreements with other broker-dealers, and
to contract with or establish one or more insurance agencies in any
jurisdiction in which Broker transacts business hereunder.
Section 11.10. Non-Solicitation of Employees and Agents. For purposes of this
-----------------------------------------
Section 11.10 only, the term "agent" shall include all appointed agents and
Representatives. The parties to this Agreement acknowledge that each may have
access to the names and identities of agents of each party as a result of
performing their respective obligations under this Agreement, and that each may
establish close working relationships with such persons. Therefore:
a) Broker and Agency (for purposes of this Section 11.10, "Selling
Group"), shall not solicit any agent of Principal Underwriter
while an agent maintains his/ her affiliation with Principal
Underwriter and for twelve (12) months after termination of the
affiliation. In addition, Selling Group shall not interfere in any
way with the relationships, contractual or otherwise, between
Principal Underwriter and its agents. Selling Group shall not
induce or encourage, or attempt to induce or encourage, any agent
of Principal Underwriter to terminate or change his/ her
relationship with Principal Underwriter; and
b) Principal Underwriter shall not solicit any agent of Selling Group
while an agent maintains his/ her affiliation with Selling Group
and for twelve (12) months after termination of the affiliation.
In addition, Principal Underwriter shall not interfere in any way
with the relationships, contractual or otherwise, between Selling
Group and its agents. Principal Underwriter shall not induce or
encourage, or attempt to induce or encourage, any agent of Selling
Group to terminate or change his/ her relationship with Selling
Group.
Section 11.11. Waiver. The failure of either party to strictly enforce any
-------
provision of this Agreement shall not operate as a waiver of such provision or
release either party from its obligation to perform strictly in accordance with
such provision.
Page 20 of 21
Enterprise Selling Agreement 5-17
Section 11.12. Counterparts. This Agreement may be executed in counterparts,
-------------
with the same force and effect as if executed in one complete document.
Section 11.13. Severability. If any provision of this Agreement is declared
-------------
null, void or unenforceable in whole or in part by any court, arbitrator or
governmental agency, said provision shall survive to the extent it is not so
declared and all the other provisions of the Agreement shall remain in full
force and effect unless, in each case, such declaration shall serve to deprive
any of the parties hereto of the fundamental benefits of this Agreement.
Section 11.14. Trademarks. Neither party may use the other party's trademarks,
-----------
service marks, trade names, logos, or other commercial or product designations
(collectively, "Marks") for any purpose whatsoever without the prior written
consent of the other party.
Section 11.15. Preparation of Certificates. Notwithstanding anything to the
----------------------------
contrary in this Agreement, Broker and Principal Underwriter shall cooperate
fully in the preparation of and execution of any certificates that may be
required by a regulatory authority or by Applicable Law, in connection with the
offer, sale, and/or servicing of the Contracts.
Section 11.16. Parties' Control of Business and Operations. The performance or
--------------------------------------------
receipt of services pursuant to this Agreement shall in no way impair the
absolute control of the business and operations of each of the parties and
their respective Affiliates by their own Board of Directors.
Page 21 of 21
Enterprise Selling Agreement 5-17
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract and
agree.
"PRINCIPAL UNDERWRITER"
BRIGHTHOUSE SECURITIES, LLC
---------------------------------------------
By
------------------------------------------
---------------------------------------------
Date
----------------------------------------
Address:
Brighthouse Securities, LLC
---------------------------------------------
00000 Xxxxx Xxxxxxxxx Xxxxx Xxxx
---------------------------------------------
Xxxxxxxxx, XX 00000
---------------------------------------------
Fax #:
----------------------------------------
"BROKER DEALER"
---------------------------------------------
(Broker Firm)
By
------------------------------------------
---------------------------------------------
Print Name & Title
Date
----------------------------------------
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Fax #:
---------------------------------------
Page 22 of 21
Enterprise Selling Agreement 5-17
EXHIBIT A
SCHEDULE OF VARIABLE PRODUCT AND COMPENSATION
[TO BE INSERTED]
EXHIBIT B
SCHEDULE OF FIXED PRODUCT AND COMPENSATION
[TO BE INSERTED]
EXHIBIT C
ASSOCIATED INSURANCE AGENCY
The Broker/Dealer named below ("Broker"), having executed a Retail Sales
Agreement (the "Agreement") by and between Broker, and Brighthouse Securities,
LLC (the "Company") dated ________ that, among other things, provides for sales
of Company's or its Affiliates' Contracts through a designated associated
insurance agency or agencies, hereby designates the associated insurance
agency(s) (the "Associated Insurance Agency(s)") named below as its Agency (as
that term is defined in the Agreement) pursuant to Article III thereof. By
signing this Exhibit C, each of Broker and the Associated Insurance Agency(s)
hereby represents and warrants that each of the Associated Insurance Agency(s)
is and will remain qualified to serve as an Agency in accordance with the terms
of the Agreement. Each of the Associated Insurance Agency(s) hereby acknowledge
that it has received a copy of the Agreement, that it has reviewed the
Agreement and understands all of its terms, covenants and agreements, that it
has had the opportunity to consult with counsel of choice relative thereto and
that it agrees to be bound by and subject to the terms of the Agreement.
Without limiting the foregoing, Broker-Dealer and Insurance Agent represent
that they are in compliance with the terms and conditions of Xxxxxx & Xxxxxx
---------------
(sub. nom. First of America Brokerage Service, Inc.) (avail. Sept. 28, 1995)
--- --- ----------------------------------------
issued by the Staff of the SEC with respect to the non-registration as a
broker-dealer of an insurance agency associated with a registered
broker-dealer. Broker-Dealer and Insurance Agent shall notify Company
immediately in writing if Broker-Dealer and/or Insurance Agent fail to comply
with any such terms and conditions and shall take such measures as may be
necessary and as promptly as practicable under the circumstances to cure any
such non-compliance.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES
------- -------
BROKER/DEALER ASSOCIATED INSURANCE AGENCY NAME
By: By:
--------------------------------- ---------------------------------
------------------------------------ ------------------------------------
(Print Name & Title) (Print Name & Title)
Date: Date:
------------------------------- -------------------------------
Tax ID: Tax ID:
----------------------------- -----------------------------
------- -------
ASSOCIATED INSURANCE AGENCY NAME ASSOCIATED INSURANCE AGENCY NAME
By: By:
--------------------------------- ---------------------------------
------------------------------------ ------------------------------------
(Print Name & Title) (Print Name & Title)
Date: Date:
------------------------------- -------------------------------
Tax ID: Tax ID:
----------------------------- -----------------------------
