EXHIBIT (c)(vi)
GENERAL AMERICAN DISTRIBUTORS
SALES AGREEMENT
TABLE OF CONTENTS
I. DEFINITIONS
II. AGREEMENTS, REPRESENTATIONS, AND COVENANTS
A. AGREEMENTS AND COVENANTS OF GAD
B. REPRESENTATIONS AND COVENANTS OF BROKER
III. COMPLIANCE WITH APPLICABLE LAWS
IV. PRINCIPLES OF ETHICAL MARKET CONDUCT
V. COMPENSATION
VI. COMPLAINTS AND INVESTIGATIONS
VII. RECORDS AND ADMINISTRATION
VIII. PRIVACY INFORMATION
A. PROPRIETARY INFORMATION
B. RECEIPT OF CUSTOMER NONPUBLIC PERSONAL INFORMATION FROM BROKER BY
GAD
C. TREATMENT OF NONPUBLIC PERSONAL INFORMATION DISCLOSED TO BROKER BY
GAD
D. CONFIDENTIAL INFORMATION
E. PROTECTED HEALTH INFORMATION
IX. INDEMNIFICATION
X. GENERAL PROVISIONS
A. TERM AND TERMINATION
B. ASSIGNABILITY
C. AMENDMENTS
D. NOTICES
E. ARBITRATION
F. GOVERNING LAW
G. ENTIRE UNDERSTANDING
H. NO THIRD PARTY BENEFICIARIES
I. NON-EXCLUSIVITY
J. WAIVER
K. COUNTERPARTS
L. SEVERABILITY
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GENERAL AMERICAN FINANCIAL
SALES AGREEMENT
This Agreement, including the Exhibits attached hereto (collectively,
the "Agreement") dated ______________________________, 2003, ("Effective Date")
by and among General American Distributors, a Missouri corporation, ("GAD") and
Equitas America, LLC, a ________________ corporation that, for the distribution
of traditional fixed rate insurance products only, is or is affiliated with one
or more validly licensed insurance agency, or for the distribution of registered
products, 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 National Association of Securities Dealers
("NASD") and is also either licensed as or is affiliated with one or more
validly licensed insurance agencies (collectively with its affiliated insurance
agency(s) "Broker").
WITNESSETH:
WHEREAS, GAD and its Affiliates issue or provide access to certain
insurance and financial products, including but not limited to, fixed rate
annuities, variable annuities, variable life insurance policies, fixed rate life
insurance policies, variable riders on such fixed rate products, and other
insurance products as identified on Exhibits A and B hereto (together, the
"Contracts"); and
WHEREAS, GAD, on behalf of itself and each Affiliate that issues or
provides access to the Contracts identified on Exhibits A and B hereto, is
authorized to enter into selling agreements with unaffiliated broker-dealers or
selling groups, as the case may be, to distribute the Contracts; and
WHEREAS, GAD proposes to compensate Broker for the sale and servicing
of Contracts in accordance with the Compensation Schedules set forth in Exhibits
A and B.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
I. DEFINITIONS
1) Affiliate - Any entity that directly or indirectly controls,
is controlled by or is under common control with GAD,
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.
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2) Agency- One or more associated insurance agencies of Broker,
identified on Exhibit D hereto, which are properly licensed to
participate in the business of insurance.
3) Applicable Laws - Shall have the meaning given to such term as
in accordance with Section II of this Agreement.
4) Confidential Information - Shall have the meaning given to
such term as described in Section VIII(D) of this Agreement.
5) Fixed Contracts - Contracts that are not variable and include,
without limitation, fixed rate annuities, fixed rate life
insurance and other fixed insurance contracts, issued by GAD,
or its Affiliates, as more fully described in Exhibit B, which
may be amended by GAD in its sole discretion from time to
time.
6) General Agent - Shall have the meaning given to such term as
described in Section III(B)(20) of this Agreement.
7) 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.
8) 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.
9) 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.
10) Variable Contracts - Variable life insurance policies,
variable annuity contracts, variable insurance riders and
other variable insurance contracts, issued by GAD, or its
Affiliates, as more fully described in Exhibit A , which may
be amended by GAD in its sole discretion from time to time.
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11) Representatives - those individuals, accepted by GAD or its
Affiliates to solicit and sell Contracts under the terms of
this Agreement, who are duly licensed and appointed as a life
insurance agent of GAD or its Affiliates, and with respect to
registered products, are also duly registered, individually,
with the NASD in compliance with 1934 Act.
12) Protected Health Information or PHI -- 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. PHI includes
demographic information about individuals, including names;
addresses; dates directly related to an individual, including
but not limited to birth date; telephone numbers; fax numbers;
E-mail addresses; Social Security numbers; policy numbers;
medical record numbers; account numbers; and any other unique
identifying number, characteristic, or code. PHI includes, but
is not limited to, information provided by an individual on an
application for a long term care insurance policy or other
health care plan issued by GAD or an affiliate of GAD;
information related to the declination or issuance of, or
claim under, a long term care insurance policy issued by GAD
or an affiliate; or information derived therefrom.
II. AUTHORIZATIONS, REPRESENTATIONS, AND COVENANTS
A. AUTHORIZATIONS, REPRESENTATIONS, AND COVENANTS OF GAD
1) GAD represents that it is duly authorized, on behalf of itself
and each Affiliate that issues or provides access to the
Contracts identified on Exhibits A and B hereto, to enter into
this Agreement with Broker to distribute such Contracts.
2) GAD, subject to the terms and conditions of the Agreement,
hereby appoints Broker, on behalf of itself and each
Affiliate, to solicit, sell and provide service to the
Contracts which are set forth on the applicable Exhibits A and
B on a non-exclusive basis.
3) GAD authorizes Broker through its Representatives to solicit
applications for the Fixed Contracts listed in Exhibit B,
provided that (a) Broker shall not solicit applications for
Fixed Contracts except in those states where it and its
Representatives are appropriately licensed and, in which, the
Fixed Contracts are qualified for sale under Applicable Laws;
and (b) Broker complies in all other
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respects with the published policies and procedures of GAD or
its Affiliates, and with the terms of this Agreement.
4) GAD authorizes Broker through its Representatives to offer and
sell the Variable Contracts listed in Exhibit A, provided that
(a) Broker shall not solicit applications for Variable
Contracts except in those states where it and its
Representatives are appropriately licensed; (b) there is an
effective Registration Statement relating to such Variable
Contracts; (c) such Variable Contracts are qualified for sale
under Applicable Laws in such state in which the sale or
solicitation is to take place; and (d) Broker complies in all
other respects with the published policies and procedures of
GAD and its Affiliates, and with the terms of the Agreement.
GAD shall notify 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 GAD or its Affiliates to offer or issue Variable Contracts
listed in Exhibit A. GAD shall advise Broker of any revision
of or supplement to any prospectus related to the Variable
Contracts or underlying investments of such Variable
Contracts.
5) 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 by its own
Board of Directors. Pursuant to the foregoing, GAD and its
Affiliates shall specifically retain ultimate authority,
including but not limited to:
a) to refuse for any reason to appoint a Representative and
cancel any existing appointment at any time;
b) to direct the marketing of its insurance products and
services;
c) to review and approve all advertising concerning, its
insurance products and services;
d) to underwrite all insurance policies issued by it;
e) to cancel risks;
f) to handle all matters involving claims adjusting and
payment;
g) to prepare all policy forms and amendments;
h) to maintain custody of, responsibility for and control of
all investments; and
i) to withdraw a Contract from sale or to change or amend a
Contract for any reason.
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6) Exhibits A and B may be amended by GAD in its sole discretion
from time to time to include additional Contracts, including
fixed rate annuities, variable annuities, variable life
insurance policies, fixed rate life insurance policies,
variable riders on such fixed rate products, and other
insurance products issued by GAD or its Affiliates. The
provisions of this Agreement shall apply with equal force to
such additional Contracts unless the context otherwise
requires. Exhibits A and B may be amended by GAD in its sole
discretion from time to time to delete one or more of the
Contracts.
7) During the term of this Agreement, GAD will provide Broker,
without charge, 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
GAD of updated copies of the Contract prospectus(es), current
underlying mutual fund prospectus(es), statements of
additional information and applications for the Contracts,
Broker will promptly discard or destroy all copies of such
documents previously provided to them, except such copies as
are needed for purposes of maintaining proper records. Upon
termination of this Agreement, Broker will promptly return to
GAD all Contract prospectus(es), current underlying mutual
fund prospectus(es), statements of additional information and
applications for the Contracts and other materials and
supplies furnished by GAD to Broker or to its Representatives,
except for copies required for maintenance of records.
8) During the term of this Agreement, GAD or its Affiliates will
be responsible for providing and approving all promotional,
sales and advertising material to be used by Broker. GAD will
file such materials or will cause such materials to be filed
with the SEC, NASD, and any state securities regulatory
authorities, as appropriate.
B. REPRESENTATIONS AND COVENANTS OF BROKER
1) Broker represents and warrants that it will only offer
Contracts in those states where it or its Agency is
appropriately licensed and that it 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. Broker further represents
that its Representatives who will be soliciting applications
for Contracts will at all times be appropriately licensed
under Applicable Laws and such solicitation is in accordance
with Applicable Law, including without limitation the
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NASD Rules of Fair Practice, and all insurance replacement
regulations and regulations prohibiting the rebating of
commission.
2) Broker represents and 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
NASD, 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 will be soliciting applications
for Variable Contracts, whether alone or jointly with
representatives of GAD or its designee, will at all times as
required by Applicable Laws be appropriately registered and/or
licensed under such laws and shall comply with all
requirements of the NASD, the 1934 Act and all other federal
and/or state laws applicable to the solicitation and service
of the Variable Contracts including without limitation the
NASD Rules of Fair Practice.
3) Broker represents that neither it nor any of its
Representatives are currently under investigation by any
insurance regulator, the NASD or SEC, any other
self-regulatory organization or other governmental authority
(except for any investigations of which it has notified GAD in
writing). Broker further agrees that, if a formal or informal
investigation of Broker or any of its agents is commenced by
any insurance regulator, the NASD or SEC, any other self
regulatory organization or other governmental authority, in
connection with the sale of the Contracts, Broker will notify
GAD of the existence and subject matter of such investigation.
The Agency further agrees that no subagent shall be appointed
to solicit and procure Contracts of GAD if the subagent has
been convicted of any felony prohibited by the Federal Violent
Crime Control and Law Enforcement Act of 1994.
4) Commencing at such time as GAD and Broker shall agree upon,
Broker shall find suitable purchasers for the Contracts for
which Representatives are licensed and authorized under
Applicable Laws. In meeting its obligation to solicit
applications for the Contracts, Broker agrees as follows:
a) Broker shall use only those training, sales, advertising,
and promotional materials with respect to the Contracts
that have been pre-approved in writing by GAD for use at
that time;
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b) Broker shall establish and implement reasonable
procedures for periodic inspection and supervision of
sales practices of its Representatives, and will, upon a
reasonable written request from GAD, provide a report to
GAD on the results of such inspections and the compliance
with such procedures; provided, however, that Broker
shall retain sole responsibility for the supervision,
inspection and control of its Representatives;
c) Broker shall take reasonable steps to ensure that its
Representatives shall not make recommendations to an
applicant to purchase a Contract in the absence of
reasonable grounds to believe that the purchase of a
Contract is suitable for such applicant to the extent
required by Applicable Laws. Broker shall be solely
responsible for determining the suitability of
recommendations to purchase a Contract made by its agents
or other representatives; and notwithstanding the
foregoing, Broker may offer the Contracts in addition to
offering other life insurance and annuity products to
customers of Broker. Furthermore, Broker understands that
no territory is exclusively assigned to Broker hereunder.
Broker acknowledges and agrees that GAD may distribute
the Contracts through its own employee's agent and
Representatives, including those of its Affiliates, or
through any other distribution method or system including
(but not limited to) agreements with other insurance
agencies regarding the sale of such Contracts in the
territories, markets or distribution channels covered by
this Agreement.
d) Broker shall review diligently all Contract 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 assure that
applications submitted to GAD are accurate, complete,
compliant with the conditions herein, and for Variable
Contracts, approved by a qualified registered principal.
With respect to variable Contracts distributed jointly by
Broker and representatives of GAD or its designee, Broker
shall ensure that all applications relating thereto have
been provided to Broker for its review and approval by a
qualified registered principal of Broker.
5) To the extent permitted by Applicable Laws, only the initial
purchase payments for 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 or the rules of the NASD),
together with any related application, forms and any other
required documentation to GAD or the appropriate Affiliate.
The Broker shall make such remittances in accordance with any
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and all policies and procedures described in the Contract,
insurance policy, prospectus, if appropriate, or as otherwise
adopted by GAD and its Affiliates.
6) Broker acknowledges that GAD, 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 GAD
rejects an application, GAD or its Affiliate will immediately
return any purchase payments received directly to the Broker,
and Broker will 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 Laws shall specify, will
be returned by GAD or its Affiliates to the Broker, and the
Broker will be responsible for promptly returning such
payments to the purchaser. Except as otherwise may be provided
in Exhibit A, B or the Compensation Schedules, if a purchase
payment is either refunded or returned to the purchaser, no
commission will be payable to Broker hereunder, and any
commission received by Broker will be returned promptly to
GAD. GAD may, at its option, offset any such amounts against
any amounts payable to Broker.
7) Except as otherwise required by Applicable Laws, Broker is not
a principal, underwriter or agent of GAD, or its Affiliates,
or any separate account of GAD or its Affiliates. Broker shall
act as an independent contractor, and nothing herein contained
shall constitute Broker, nor its agents or other
representatives, including Representatives as employees of GAD
or its Affiliates in connection with the solicitation of
applications for Contracts or other dealings with the public.
Broker, its agents and its other representatives, shall not
hold themselves out to be employees of GAD or its Affiliates
in this connection or in any dealings with the public.
8) Broker agrees that any material it develops, approves or uses
for sales, training, explanatory or other purposes in
connection with the solicitation of applications for the
Contracts hereunder, other than generic advertising material
which does not make specific reference to GAD, its Affiliates
or the Contracts, will not be used without the prior written
consent of GAD.
9) Broker shall ensure that solicitation and other activities
undertaken by Broker or its Representatives shall be
undertaken only in accordance with Applicable Laws. Broker
represents no commissions, or portions thereof, or other
compensation for the sale of the Contracts will be paid to any
person or entity that is not duly licensed and appointed by
GAD or its Affiliates in the appropriate states as required by
Applicable Laws. Broker shall ensure that Representatives
fulfill any training
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requirements necessary to be licensed or otherwise qualified
to sell the Contracts. Broker understands and acknowledges
that neither it, nor any of its Representatives, is authorized
by GAD 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, policy,
prospectus, or solicitation material authorized for use in
writing by GAD or its Affiliates. Broker shall not make any
representations or give information that is not contained in
the contract, policy, prospectus or solicitation material of
the Contracts.
10) Neither Broker nor its agents, designees or other
representatives shall have authority on behalf of GAD or its
Affiliates to alter or amend any Contract or any form related
to a Contract to adjust or settle any claim or commit GAD or
its Affiliates with respect thereto, or bind GAD or its
Affiliates in any way; or enter into legal proceedings in
connection with any matter pertaining to GAD's business
without its prior written consent. Broker shall not expend,
nor contract for the expenditure of, funds of GAD or its
Affiliates nor shall Broker possess or exercise any authority
on behalf of GAD other than that expressly conferred on Broker
by this Agreement.
11) Broker and Agency shall be solely responsible for the accuracy
and propriety of any instruction given or action taken by a
Representative on behalf of an owner or prospective owner of a
Contract. GAD shall have no responsibility or liability for
any action taken or omitted by it in good faith in reliance on
or by acceptance of such an instruction or action.
12) Broker shall prepare any forms necessary to comply with
Applicable Laws or otherwise required in connection with the
sale of the Contracts, either as an initial transaction or as
a replacement for other insurance or annuity products, and
Broker shall send such forms to GAD or the appropriate
Affiliate. In the alternative, if such forms are not required,
but information with respect to a transaction or replacement
is required, Broker will transmit such information in writing
to GAD or the appropriate Affiliate. Broker further shall
notify GAD or the appropriate Affiliate when sales of the
Contracts are replacement contracts. Such notification shall
not be later than the time that Broker submits applications
for such Contracts to GAD or the appropriate Affiliate.
13) Broker shall furnish GAD and any appropriate regulatory
authority with any information, documentation, or reports
prepared in connection with or related to this Agreement which
may be requested by GAD or an appropriate regulatory authority
in order to ascertain whether the
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operations of GAD or Broker related to the Contracts are being
conducted in a manner consistent with Applicable Laws.
14) Broker will adhere to state insurance replacement regulations,
before it receives or solicits any applications for Contracts.
15) Broker represents that it has full authority to enter into
this Agreement and that by entering into this Agreement it
will not impair any other of its contractual obligations with
respect to sales of any Contract.
16) Insurance Coverage.
a) Fidelity Bond. Broker shall secure and maintain a
fidelity bond (including coverage for larceny and
embezzlement), issued by a reputable bonding company,
covering all of its directors, officers, agents,
Representatives, associated persons and employees who
have access to funds of GAD or its Affiliates. This bond
shall be maintained at Broker's expense in at least the
amount prescribed under Rule 3020 of the NASD Conduct
Rules or future amendments thereto. Broker shall provide
GAD with satisfactory evidence of said bond upon GAD's
reasonable request. Broker hereby assigns any proceeds
received from a fidelity bonding company, or other
liability coverage, to GAD, 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.
b) Plan of Insurance. Broker shall maintain in full force
and effect during the term of this Agreement a plan of
insurance, which may be a plan of self-insurance, which
shall provide coverage for errors and omissions of the
Broker, its Agency, representatives and agents, including
Representatives in an amount reasonably acceptable to
GAD. If such insurance plan terminates for any reason
during the term of the Agreement, Broker shall
immediately notify GAD of such termination. If requested
by GAD, Broker shall provide satisfactory evidence of
coverage under such insurance policy satisfactory to GAD
showing the amount and scope of coverage provided.
c) Loss of coverage. The authority of any Representative to
solicit 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 as referenced herein.
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d) Broker represents that all of its directors, officers and
representatives are and shall be covered by blanket
fidelity bonds, including coverage for larceny and
embezzlement, issued by a reputable bonding company in an
amount reasonably acceptable to GAD. These bonds shall be
maintained at Broker's expense and shall be at least, of
the form type and amount required under the NASD Rules of
Fair Practice. Upon request, Broker shall give evidence
satisfactory to GAD that such coverage is in force.
Furthermore, Broker shall give prompt written notice to
GAD of any notice of cancellation or change of such
coverage. Broker hereby assigns any proceeds received
from a fidelity bonding company, or other liability
coverage, to GAD, for itself or its Affiliates, as their
interest may appear, to the extent of their loss due to
activities covered by the bond, policy or other liability
coverage.
16) In such cases where Broker intends to distribute the Variable
Contracts through an Agency, Broker further represents that:
a) Broker will operate and be responsible for all
securities-related services provided by Agency arising
from the offer, sale and/or servicing by its registered
Representatives of the Variable Contracts;
b) Agency will engage in the offer or sale of Variable
Contracts only through persons who are registered
Representatives of the Broker. Unregistered employees
will not engage in any securities activities, nor receive
any compensation based on transactions in securities or
the provision of securities advice;
c) Broker will be responsible for the education, training,
supervision, and control of its registered
Representatives as required under the 1934 Act and other
applicable laws, including, but not limited to, principal
review and approval of all sales literature and
advertisements, periodic compliance audits, and
maintaining ability to appoint and terminate registered
persons.
d) Registered Representatives will be licensed under the
insurance laws of the states in which they do business
and will be appointed agents by Agency for which the
representatives may solicit applications in connection
with the offer and sale of insurance securities;
e) Broker and Agency, as applicable, will maintain the books
and records relating to the sale of Variable Contracts
and the receipt and disbursement of insurance commissions
and fees
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thereon. Such books and records will be maintained and
preserved in conformity with the requirements of Section
17(a) of the 1934 Act and the Rules thereunder, to the
extent applicable, and will at all times be compiled and
maintained in a manner that permits inspection by
supervisory personnel of the Broker, the SEC, the NASD,
and other appropriate regulatory authorities; and
f) All premiums derived from the sale of the Variable
Contracts will be made payable to and sent directly to
GAD or the appropriate Affiliate or will be sent by
customers to the Broker for forwarding to GAD or the
appropriate Affiliate. Agency will not receive,
accumulate, or maintain custody of customer funds.
17) In such cases where Broker intends to distribute Fixed
Contracts through an Agency, Broker agrees that before a
subagent is permitted to solicit Contracts, Broker or its
Agency shall have entered into a written agreement with the
subagent pursuant to which the subagent: (a) is authorized to
deliver policies only upon the payment to it of the premiums
due thereon and upon compliance with the terms, conditions and
provisions of such policies; (b) shall promptly remit to the
Broker or Agency all funds collected on GAD's or its
Affiliates' behalf; (c) shall otherwise act only pursuant to
the limited authority granted to the Agency hereunder and
shall comply with all of the duties and obligations of the
Broker hereunder and the rules of GAD or its Affiliates; and
(d) agrees to GAD's right to offset from any compensation due
the subagent any indebtedness due from the subagent to GAD or
its Affiliates and to chargeback compensation under GAD's or
its Affiliates' rules. The Broker further agrees that it shall
promptly remit to GAD all funds collected on the behalf of GAD
or its Affiliates.
18) Broker agrees to comply with the policies and procedures of
GAD 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, privacy policies and
procedures, as those policies and procedures may be provided
to Broker by GAD from time to time.
19) For a period of 12 months after termination of the Agreement,
the Broker and Agency shall not, directly or indirectly, on a
systematic basis, contact the policyholders of GAD or its
Affiliates or condone such contact for the purpose of inducing
any such policyholders to lapse, cancel, and fail to renew or
replace any Contract. If the Agency, in the judgment of GAD is
determined to have engaged in such prohibited activity, then
GAD shall have the right to declare the Agency's claims
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for compensation or any other benefit under the Agreement
shall be forfeited and void. GAD, on behalf of itself and its
Affiliates, may also pursue all remedies, including
injunction, to assure compliance with the covenants in this
section and shall, if successful, be entitled to recover from
the Agency all costs and expenses incurred in pursuing such
remedies, including reasonable attorneys' fees.
20) In such cases where Broker shall distribute Contracts with the
assistance of the general agency distribution system of GAD
("General Agent"), the following additional terms shall apply:
a) Broker hereby acknowledges and consents to in advance the
participation of every General Agent, designated by GAD,
as a participating general agency under this Agreement.
b) Broker agrees that both it and its Representatives shall
work cooperatively with the General Agent(s) located in
the particular territory where a Contract is sold and
through which the sale is processed on behalf of GAD or
its Affiliates. Broker further agrees that with respect
to each such Contract, it will rely solely upon the
General Agent(s) for Contract issuance, servicing, the
forwarding of commissions, and other related matters.
Notwithstanding the foregoing, the Broker agrees that it
shall look solely to GAD and not to General Agent(s) for
payment of any commissions or other compensation payable
pursuant to the terms of this Agreement.
III. COMPLIANCE WITH APPLICABLE LAWS
1) GAD and Broker agree to 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 state and federal statutes, laws,
rules and regulations may also include, applicable rulings of
federal and state regulatory organizations, agencies and self
regulatory agencies, including without limitation state
insurance departments, the SEC and the NASD, 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 ("Applicable Laws").
2) Broker agrees to 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
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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 employees; and an independent audit function.
Further Broker certifies, and will certify to GAD 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. Broker hereby agrees that it will
verify the identity of each customer that it introduces GAD,
whether through documentary or non-documentary means, and that
GAD will rely upon such verification, as prescribed by the
regulations promulgated under Section 326 of the Act in
accordance with the safe-harbor provided in Section
103.122(b)(6) of the regulations under the Act.
IV. PRINCIPLES OF ETHICAL MARKET CONDUCT
As a member of the American Council of Life Insurance's
Insurance Marketplace Standards Association (IMSA), GAD
expects that the Agency and its subagents will abide by the
six principles of ethical market conduct set forth by IMSA in
connection with all Contracts sold pursuant to this Agreement.
The six principles are as follows: (a) to conduct business
according to high standards of honesty and fairness and to
render that service to its customers which in the same
circumstances, it would apply to or demand for itself; (b) to
provide competent and customer focused sales and service; (c)
to engage in active and fair competition; (d) to provide
advertising and sales material that are clear as to purpose
and honest and fair as to content; (e) to provide fair and
expeditious handling of customer complaints and disputes; and
(f) to maintain a system of supervision and review that is
reasonably designed to achieve compliance with these
principles of ethical market conduct. Broker shall furnish
information, documentation and reports to GAD as it
Page 15 of 59
may reasonably request in order to permit GAD to ascertain
whether Broker is conducting its operations in accordance with
the Principles of Ethical Market Conduct.
V. COMPENSATION
1) GAD shall pay Broker compensation for the sale of each
Contract sold by Representative of Broker as set forth in
Exhibits A, B and the Compensation Schedule(s) attached
between GAD and either Broker or Agency, as the case may be.
GAD 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 will 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, GAD 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,
B or the Compensation Schedules, Exhibits A, B and the
Compensation Schedules, including the commissions and fees
therein, may be amended by GAD at any time, in any manner, and
without prior notice. Any amendment to Exhibits A, B or in the
Compensation Schedules will be applicable to any Contract for
which any application or premium is received by GAD on or
after the effective date of such amendment. However, GAD
reserves the right to amend such Exhibits and Schedules with
respect to subsequent premiums and renewal commissions and the
right to amend such Exhibits and Schedules pursuant to this
subsection even after termination of this Agreement.
2) GAD may at any time offset against any compensation payable to
(a) the Agency or its successors or assigns, any indebtedness
due from the Agency to GAD or its Affiliates, and (b) the
subagents or their successors or assigns any indebtedness due
from the subagent to GAD or its Affiliates. Nothing contained
herein shall be construed as giving Agency or representative
the right to incur any indebtedness on behalf of GAD or its
Affiliates. Any remaining indebtedness of Broker to GAD 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 GAD to offset such compensation against any such
indebtedness of the Broker to GAD or its Affiliates.
3) 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 otherwise.
Page 16 of 59
4) No compensation shall be payable, and any compensation already
paid shall be returned to GAD on request, under each of the
following conditions:
a) if GAD or its Affiliates, in their sole discretion,
determine not to issue the Contract applied for,
b) if GAD or its Affiliates refund the premium paid by the
applicant, upon the exercise of applicant's right of
withdrawal pursuant to any "free-look" privilege,
c) if GAD or its Affiliates refund the premium paid by
applicant as a result of the resolution of a consumer
complaint, recognizing that GAD and its Affiliates have
sole discretion to refund premiums paid by applicants, or
d) if GAD 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.
5) GAD shall pay the compensation to Agency for Contracts
credited prior to the termination date of this Agreement, to
the Agency under the Agreement, as set forth in Exhibit A, B
or any Compensation Schedule(s), attached, while it is in
effect. Such Compensation shall be payable when the premium is
due and paid to GAD subject to the provisions of this
Agreement and of the Schedule(s).
6) Agency and Broker hereby agree and acknowledge that
compensation attributable to the sale of any Contract issued
by an Affiliate may be payable directly by GAD, in its
discretion, to Agency or Broker where permitted, and not by
the Affiliate. Agency and Broker further agree and acknowledge
that such payment of compensation by GAD 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 V (2) and V (4) of this Agreement, or other
compensation rules as may be set forth in this Agreement,
Compensation Schedules(s), or rules of GAD or its Affiliates.
Page 17 of 59
7) GAD shall not be obligated to pay any compensation, which
would violate the applicable laws of any jurisdictions,
anything in this Agreement notwithstanding.
8) Unless otherwise agreed to by GAD, Broker, either directly or
by reimbursing GAD on request, shall pay for expenses incurred
by such Broker in connection with the solicitation, offer and
sale of the Contracts.
9) In addition to the conditions and limitations elsewhere
contained in the Agreement and the Compensation Schedule(s),
no first year commission shall be payable on replacements or
switches of any Contract with another Contract, which are
undisclosed, and which otherwise requires disclosure by either
state regulation or GAD's or its Affiliates' rules on
replacement transactions; the replacement or switching rules
of each applicable Affiliate are described on Exhibit C
attached hereto.
10) With respect to compensation under this Agreement, in the
event that anything contained in this Section V conflicts with
the terms of the compensation described in the attached
Exhibits A, B or Compensation Schedule(s), the terms contained
in such schedules attached will prevail.
VI. COMPLAINTS AND INVESTIGATIONS
1) Broker and GAD jointly agree to cooperate fully in any
regulatory investigation or proceeding or judicial proceeding
arising in connection with the offer, sale, and/or servicing
of the Contracts.
2) Both the Broker and GAD jointly agree to investigate any
customer complaint in connection with the Contracts. The term
customer complaint shall mean an oral or written communication
either directly from the purchaser of or applicant for
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.
3) Such cooperation referred to in Sections VI (1) and VI (2) of
this Agreement shall include, but is not limited to, each
party promptly notifying the other of the receipt of notice of
any such investigation or proceeding, forwarding to the other
party a copy of any written materials in connection with the
matter and such additional information as may be necessary to
furnish a complete understanding of same. In the case of a
customer complaint, promptly refer such
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complaint to the other party for handling where appropriate
and provide the other party with customer complaint
information and documentation upon request. A complaint is
defined as a written or documented verbal communication
received by a company or its distributors, which primarily
expresses a grievance.
4) GAD 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,
policyholders 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 GAD and GAD, on behalf
of itself, settles the matter, Broker shall indemnify and hold
harmless GAD from any and all claims, complaints or grievances
made by Broker or any applicant, policyholder or other made in
connection with such matter.
VII. RECORDS AND ADMINISTRATION
1) To the extent requested by Broker and agreed to by GAD, once a
Contract has been issued, it will be delivered after review by
Broker to the applicant, accompanied by any applicable Notice
of Withdrawal Right and any additional appropriate documents.
GAD will confirm or cause to be confirmed to customers all
Contract transactions, as to the extent legally required, and
will administer the Contracts after they have been delivered,
but may from time to time require assistance from Broker.
Consistent with its administrative procedures, GAD will assume
that a Contract issued by it or its Affiliate will be promptly
delivered by Broker to the purchaser of such Contract. As a
result, if a purchaser exercises the free look rights under a
Contract, Broker shall indemnify GAD for any loss incurred by
GAD that results from Broker's failure to promptly deliver
such Contract to its purchaser.
2) Broker will maintain all books and records as required by
Rules 17a-3 and 17a-4 under the 1934 Act, except to the extent
that GAD may agree to maintain any such records on Broker's
behalf. Records subject to any such agreement shall be
maintained by GAD 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 GAD's or its Affiliates'
right to ownership and control of all pertinent records and
documents pertaining to its business operations including,
without limitation, its operations relating to the Contracts,
which right is hereby recognized and affirmed.
Page 19 of 59
GAD and Broker agree that each shall 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 or regulation, as Confidential Information as described in
Section VIII(D) of this Agreement, and neither party shall
reveal or disclose such Confidential Information to any third
party unless such disclosure is authorized by the party
affected thereby or unless such disclosure is expressly
required by applicable federal or state regulatory
authorities. However, nothing contained herein shall be deemed
to interfere with any document, record or other information,
which by law, is a matter of public record.
VIII. PRIVACY INFORMATION
A. PROPRIETARY INFORMATION
Any and all account records developed by GAD or its
Affiliates, or provided to GAD or its Affiliates by Broker or
Broker's affiliates, including but not limited to customer
files, sales aides, computer software, customer names,
addresses, telephone numbers and related paperwork,
literature, authorizations, manuals and supplies of every kind
and nature relating to the Contracts and the servicing of the
Contracts are and shall remain the property of GAD or its
Affiliates. Such proprietary information and materials shall
be treated as nonpublic personal information and/or
confidential information, as appropriate pursuant to Sections
VIII(A), (B), (C), and (D) of this Agreement.
Any and all proprietary information and material developed and
provided by GAD and its Affiliates shall be returned to GAD
(including all copies made by the Broker or its affiliates)
upon termination of this Agreement. Any materials developed by
the Broker or its affiliates in support of the marketing,
sales, advertising or training related to GAD or its Contracts
shall be destroyed upon the termination of the Agreement.
B. RECEIPT OF CUSTOMER NONPUBLIC PERSONAL INFORMATION FROM BROKER
BY GAD
1) GAD and its Affiliates will treat Nonpublic Personal
Information regarding Broker's customers provided to it by
Broker under this Agreement as Confidential Information under
Section VIII(D) of this Agreement, except that such provisions
shall not apply to such information regarding customers of
Broker who were, are or become policyholders or customers of
GAD or its Affiliates other than by reason of the services
provided by Broker under this Agreement.
Page 20 of 59
2) Notwithstanding the foregoing, GAD and its Affiliates shall
have the right to use or disclose such nonpublic personal
information: (a) to the full extent required to comply with
Applicable Laws or requests of regulators; (b) as necessary in
connection with any of GAD and its Affiliates' audit, legal,
compliance or accounting procedures; (c) as necessary or
permitted by Applicable Laws in the ordinary course of
business, for example to administer Contracts and provide
customer service to purchasers of Contracts under this
Agreement; (d) as authorized by such customer; and (e) to
protect against or prevent fraud.
3) GAD 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
regarding Broker's customers provided by Broker to
specifically target customers, and such marketing, offering,
selling or distributing by GAD 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.
C. TREATMENT OF NONPUBLIC PERSONAL INFORMATION DISCLOSED TO
BROKER BY GAD
Broker will treat Nonpublic Personal Information regarding
Broker's customers provided to it by GAD or its Affiliates
under this Agreement as Confidential Information and shall use
such information only to solicit sales of and to provide
service with respect to Contracts sold pursuant to this
Agreement. Notwithstanding the foregoing, Broker shall have
the right to use or disclose Nonpublic Personal Information
provided to it by GAD or its Affiliates to the extent
permitted by Applicable Laws and GAD or its Affiliate's
privacy policy, for example, to comply with Applicable Laws or
requests of regulators, in connection with Broker's audit
procedures, as authorized by such customers, and to protect
against or prevent fraud.
D. CONFIDENTIAL INFORMATION
1) GAD and its Affiliates and Broker will maintain the
confidentiality of Confidential Information disclosed by
either party to the other party under the terms of this
Agreement. Except as otherwise provided in Sections VIII(A)
and VIII(B), neither GAD and its Affiliates nor Broker shall
disclose any Confidential Information that is covered by this
Agreement, and shall only disclose such information if
authorized in writing by the affected party or if expressly
required under the terms of a valid subpoena or order issued
by a court of competent jurisdiction or regulatory body or
Page 21 of 59
applicable laws and regulations. "Confidential Information"
means: (a) any information that this Agreement specifies will
be treated as "Confidential Information" under this Section
VIII(D); (b) any information of Broker and its affiliates
disclosed by Broker to GAD or its Affiliates through the
course of business during the term of this Agreement, or any
information of GAD and its Affiliates that is disclosed by GAD
or its Affiliates to Broker through the course of business
during the term of this Agreement, in each such case if such
information is clearly identified as and marked "confidential"
by the disclosing party, such information includes, but is not
limited to, new products, marketing strategies and materials,
development plans, customer information, client lists, pricing
information, rates and values, financial information and
computer systems; (c) Nonpublic Personal Information; and (d)
information required to be treated as confidential under
Applicable Laws.
2) "Confidential Information" does not include (i) information
which is now generally available in the public domain or which
in the future enters the public domain through no fault of the
receiving party; (ii) information that is disclosed to the
receiving party by a third party without violation by such
third party of an independent obligation of confidentiality of
which the receiving party is aware; or (iii) information that
the disclosing party consents in writing that the receiving
party may disclose.
3) The disclosing party warrants that it has the right to provide
access to, disclose and use, the Confidential Information to
be provided hereunder. The receiving party shall not be liable
to the other for:
a) inadvertent use, publication, or dissemination of the
Confidential Information received hereunder provided
that: (i) it uses the same degree of care in safeguarding
such information as it used for its own information of
like importance; (ii) it has complied with Applicable
Laws; and (iii) upon discovery of such, it shall take
steps to prevent any further inadvertent use,
publication, or dissemination; and/or
b) unauthorized use, publication or dissemination of the
Confidential Information received hereunder by persons
who are or have been in its employ unless it fails to
safeguard such information with the same degree of care
as it uses for its own proprietary information of like
importance and provided that the receiving party uses
such Confidential Information in accordance with
Applicable Laws.
Page 22 of 59
4) Any similarity between the Confidential Information and any
other information, regardless of medium, whether verbal or
written, as well as contracts and/or services acquired from
third parties or developed by the receiving party, or
Affiliates independently through its or their own efforts,
thought, labor and ingenuity shall not constitute any
violation of this Agreement and shall not subject the
receiving party to any liability whatsoever.
5) The receiving party shall use the Confidential Information
solely for purposes contemplated by this Agreement and shall
not disclose the Confidential Information except as expressly
provided herein.
6) The receiving party understands that neither the disclosing
party nor any of its representatives or designees have made or
make any representation or warranty as to the accuracy or
completeness of the Confidential Information.
E. PROTECTED HEALTH INFORMATION
To the extent that Broker and its Representatives receive, create,
has access to or uses PHI, as that term is defined in Section I of
the Agreement, regarding individuals who are applicants for, owners
of or eligible for benefits under certain health insurance products
and optional riders offered by or through GAD or any of its
Affiliates, in accordance with the requirements of the federal
Health Insurance Portability and Accountability Act of 1996 and
related regulations ("HIPAA"), as may be amended from time to time,
Broker agrees:
1) Not to use or disclose PHI except (i.) to perform functions,
activities, or services for, or on behalf of, GAD or its
Affiliates as specified in the Agreement and consistent with
applicable laws, or (ii.) to the extent that such use or
disclosure is required by law. Any such use or disclosure
shall be limited to that required to perform such services or
to that required by relevant law.
2) To use appropriate safeguards to prevent use or disclosure of
PHI other than as permitted by this Agreement.
3) To promptly report to GAD any use or disclosure of PHI not
permitted by this Agreement of which Broker becomes aware and
to mitigate any harmful effect of any use or disclosure that
is made by Broker or its Representatives in violation of the
requirements of this Agreement.
Page 23 of 59
4) To ensure that any third party with whom Broker contracts or
is hired under that arrangement, receives or has access to PHI
agrees to the same restrictions and conditions that apply to
Broker with respect to PHI under this Agreement.
5) To, within 15 days of GAD's request, provide GAD with any PHI
or information relating to PHI as deemed necessary by GAD to
provide individuals with access to, amendment of, and an
accounting of disclosures of their PHI.
6) To make Broker's records relating to 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
GAD's, or one of its Affiliate's, compliance with HIPAA.
7) To, upon termination of this Agreement, in accordance with
GAD's wishes either return or destroy all PHI Broker maintains
in any form and retain no copies. If GAD agrees that such
return or destruction is not feasible, Broker shall extend
these protections to the PHI beyond the termination of the
Agreement, in which case any further use or disclosure of the
PHI will be solely for the purposes that make return or
destruction infeasible. Destruction without retention of
copies is deemed "infeasible" if prohibited by the terms of
the Agreement or by applicable law, including record retention
requirements of various state insurance laws.
IX. INDEMNIFICATION
1) Except with respect to matters relating to the joint
distribution of Contracts, the following indemnification
provisions shall apply:
a) GAD will indemnify and hold harmless Broker and Agency
from any and all losses, claims, damages or liabilities
(or actions in respect thereof), to which Broker may
become subject, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Prospectus, Registration Statements or any other sales or
offering materials furnished or approved in writing by
GAD for any of the Contracts or any relevant funding
vehicle or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading; and will reimburse Broker for any
legal or other expenses reasonably incurred by it in
connection with investigating or defending against such
loss, claim, damage, liability or action in respect
thereof; provided, however, that
Page 24 of 59
GAD shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action
arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission
made by Broker when referring to or explaining such
Prospectus, amendment, Registration Statement or any
other sales or offering materials. GAD shall not
indemnify Broker for any action where an applicant for
any of the Contracts was not furnished or sent or given,
at or prior to written confirmation of the sale of a
Contract, a copy of the appropriate Prospectus (es), any
Statement of Additional Information, if required or
requested, and any supplements or amendments to either
furnished to Broker by GAD. The forgoing indemnities
shall, upon the same terms and conditions, extend to and
inure to the benefit of each director, trustee and
officer of Broker and any person controlling it.
b) Broker will indemnify and hold harmless GAD and its
Affiliates against any losses, claims, damages or
liabilities (or actions in respect thereof), to which GAD
or its Affiliates may become subject, insofar as such
losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any
negligent, improper, fraudulent or unauthorized acts or
omissions by Broker, its employees, agents,
representatives, officers or directors, including but not
limited to improper or unlawful sales practices, any
statement or alleged untrue statement of any material
fact, any omission or alleged omission, any unauthorized
use of sales materials or advertisements, and any oral or
written misrepresentations; and will reimburse GAD or its
Affiliates for any legal or other expenses reasonably
incurred by them in connection with investigating or
defending against any such loss, claim, damage, liability
or action. The foregoing indemnities shall, upon the same
terms and conditions, extend to and inure to the benefit
of each director, trustee and officer of GAD and its
Affiliates, and any person controlling either GAD or its
Affiliates.
c) Broker shall indemnify and hold harmless GAD and its
Affiliates from any and all losses, claims, damages or
liabilities (or actions in respect thereof) to which GAD
or its Affiliates may be subject, insofar as such losses,
claims, damages or liabilities (or actions in respect
thereof) arise out of or result from any breach of any
representation or warranty, covenant, agreement,
obligation or undertaking in this Agreement by Broker or
its directors, officers, employees or other
representatives or by any other person or entity acting
on behalf of or under control of Broker; and will
reimburse GAD or its Affiliates for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending against any such loss, claim,
damage, liability or action. The foregoing indemnities
shall, upon the same terms and
Page 25 of 59
conditions, extend to and inure to the benefit of each
director, trustee and officer of GAD and its Affiliates,
and any person controlling either GAD or its Affiliates.
d) Broker shall indemnify and hold GAD and its Affiliates
harmless for any penalties, losses or liabilities
resulting from GAD improperly paying any compensation
under this Agreement, unless such improper payment was
caused by GAD's or its Affiliates' negligence or willful
misconduct; and will reimburse GAD or its Affiliates for
any legal or other expenses reasonably incurred by them
in connection with investigating or defending against any
such loss, claim, damage, liability or action. The
foregoing indemnities shall, upon the same terms and
conditions, extend to and inure to the benefit of each
director, trustee and officer of GAD, its Affiliates, and
any person controlling either GAD or its Affiliates.
2) With respect to matters relating to the joint distribution of
Contracts, the following indemnification provision shall
apply:
a) GAD, and General Agent, where applicable, jointly and
severally, agree to indemnify Broker and Agency against
and hold them harmless from any and all claims, damages,
lawsuits, administrative proceedings, liabilities and
expenses (including reasonable attorneys' fees) against
Broker or Agency arising or resulting directly or
indirectly from acts or omissions of GAD or General
Agent(s), including, but not limited to, breach of any
representation, warranty, covenant or obligation of GAD
or General Agent(s) under the Agreement, or of any of
their officers or employees in connection with
performance under the Agreement. For purposes of this
Section only, Broker shall be deemed to include its
"controlling persons" as defined in Section 15 of the
1933 Act and Section 20(a) of the 1934 Act.
b) Broker and Agency, where applicable, jointly and
severally, agree to indemnify GAD, its Affiliates and
General Agent(s) against and hold them harmless from any
and all claims, damages, lawsuits, administrative
proceedings, liabilities and expenses (including
reasonable attorneys' fees) against GAD, its Affiliates
or General Agent(s) arising or resulting directly or
indirectly from acts or omissions of Broker or Agency,
including, but not limited to, breach of any
representation, warranty, covenant or obligation of
Broker or Agency under the Agreement, or of any of their
officers or employees in connection with performance
under the Agreement. For purposes of this Section only,
GAD shall be deemed to include its "controlling persons"
as defined in Section 15 of the 1933 Act and Section
20(a) of the 1934 Act.
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3) Promptly after receipt by an indemnified party of notice of
the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the
indemnifying party, notify the indemnifying party in writing
of the commencement thereof; but the omission to notify the
indemnifying party shall not relieve it from any liability
which it may otherwise have to any indemnified party. In case
any such action shall be brought against any indemnified
party, it shall notify the indemnifying party of the
commencement thereof. The indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party, similarly notified,
to assume the defense thereof, with counsel satisfactory to
such indemnified party. After notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation.
X. GENERAL PROVISIONS
A. TERM AND TERMINATION
1) This Agreement shall continue in force for a term of one year
from the Effective Date and thereafter shall automatically be
renewed each year for a further one-year period, 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.
2) Change in Status.
a) Broker-Dealer Status. The Agreement shall terminate
immediately upon GAD or Broker ceasing to be a registered
broker-dealer or a member of the NASD.
b) Legal Status. The Agreement shall terminate immediately
upon the termination of the legal existence of Broker or
the Agency, or the merger, consolidation, reorganization,
dissolution, receivership or bankruptcy of either, or
whenever the Broker or 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.
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3) Upon termination of this Agreement, all authorizations, rights
and obligations shall cease except (a) the agreements
contained in Sections, VI, VIII, IX, X(E), X(F), and X(J)
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 GAD, within 30 days after the Effective
Date of termination, any and all records in its possession
which have been specifically maintained in connection with
GAD's operations related to the Contracts.
B. ASSIGNABILITY
This Agreement shall not be assigned by either party without
the written consent of the other; provided, however, that GAD
may assign this Agreement to its Affiliates at any time. Any
purported assignment in violation of this Section shall be
void.
C. 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.
D. NOTICES
Notices to be given hereunder shall be addressed to:
General American Distributors, Inc. Equitas America, LLC
Attn: Law Department ________________________
00000 Xxxxxx Xxxxx Xxxx ________________________
Xx. Xxxxx, XX 00000 ________________________
E. ARBITRATION
1) All disputes and differences between the parties, other than
those arising with respect to the use of nonpublic personal
information under Section VIII must be decided by arbitration,
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.
2) 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.
Page 28 of 59
3) 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.
4) 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 will 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.
5) The arbitrators shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall
consider practical business and equitable principles as well
as industry custom and practice regarding the applicable
insurance and securities business. The arbitrators are
released from judicial formalities and shall not be bound by
strict rules of procedure and evidence.
6) The arbitrators shall determine all arbitration schedules and
procedural rules. Organizational and other meetings will be
held in Missouri, unless the arbitrators select another
location. The arbitrators shall decide all matters by majority
vote.
7) 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.
8) Unless the arbitrators shall provide otherwise, each party
will 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)
one-half (1/2) of the expenses of the arbitration, including
the fees and expenses of the arbitrators
Page 29 of 59
F. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri without
regard to Missouri choice of law provisions.
G. 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.
H. NO THIRD PARTY BENEFICIARIES
GAD'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. Except as otherwise provided
in the preceding sentence, nothing in the Agreement shall
convey any rights upon any person or entity, which is not a
party to the Agreement.
I. NON-EXCLUSIVITY
Broker and Agency agree that no territory or product is
assigned exclusively hereunder and that GAD 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.
J. 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.
K. COUNTERPARTS
This Agreement may be executed in counterparts, with the same
force and effect as if executed in one complete document.
L. SEVERABLITY
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
Page 30 of 59
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.
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract and
agree.
GENERAL AMERICAN DISTRIBUTORS
(BROKER-DEALER)
By_________________________________
___________________________________
Print Name & Title
Date________________________________
EQUITAS AMERICA, LLC
(SELLING BROKER-DEALER)
By__________________________________
____________________________________
Print Name & Title
Date________________________________
Page 31 of 59
EXHIBIT A
SCHEDULE OF VARIABLE PRODUCT AND COMPENSATION
The following GENERAL AMERICAN Variable Contracts are governed
by this Agreement:
VUL (00)
VUL 2002 **
*Offers may be made without restriction by the Broker when the non-chargeback
compensation schedule is utilized. If the chargeback compensation is desired,
pre-approval is required by General American's Executive Benefits Advisors
department
** THIS PRODUCT IS AVAILABLE AS IT IS APPROVED IN INDIVIDUAL STATES.
COMMISSION SCHEDULE
1. Broker shall be paid a commission for products listed in Schedule A
accepted by General American under an issued Contract for which Broker
solicited the business, in accordance with the schedule listed below.
2. In the event a Contract for which a commission has been paid lapses or is
surrendered by the Contract owner during the first policy year, or is
returned to General American or GAD for refund of premium within the later
of ten (10) days after the purchaser receives it or forty-five (45) days
after the application for the policy is completed, or a premium for which
commission has been paid is refunded by General American, GAD will require
reimbursement from Broker, as follows:
a. 100% if the triggering event occurs within six months of the policy
issue date;
b. 50% if the triggering event occurs during the seventh through twelfth
month of the policy issue date. If the amount to be deducted exceeds
compensation due, BD shall promptly pay back the amount of excess following
a written demand by General American or GAD.
AGENT LEVEL
VUL (00) and VUL 2002 % of 1st Year Premium % of Renewal Premium
Years 2-10 Years 11+
Target 90% 2% 1%
Excess 3% 2% 1%
% of Assets all years .10%
Page 32 of 59
The following NEW ENGLAND LIFE INSURANCE COMPANY Variable Contracts are governed
by this Agreement:
Variable Universal Life (VUL)
Variable Ordinary Life (VOL)
New England Life Insurance Company Commissions
For policies credited to the Agency under the Agreement while this Part is in
effect, commissions payable to Agency shall be payable when the premium is due
and paid to the Company subject to the provisions of the Agreement.
FIRST YEAR RENEWAL YEARS 2-10
SINGLE LIFE
- Variable Universal Life (VUL)
- Band 0 50 (3% over Target) 2.50 (1.5% over Target)
- Band 1 50 (3% over Target) 2.50 (1.5% over Target)
- Band 2 50 (3% over Target) 2.25 (1.5% over Target)
- Variable Ordinary Life (VOL)
- Band 1 50 (3% over Target) 2.50 (1.5% over Target)
- Band 2 50 (3% over Target) 2.50 (1.5% over Target)
JOINT LIFE
- Variable Universal Survivorship Life (VUSL)
- Band 1 50 (3% over Target) 2.00 (1.5% over Target)
- Band 2 50 (3% over Target) 2.00 (1.5% over Target)
(a) REDUCTIONS IN FYC FOR HIGH ISSUE AGES:
FYC decreases by the following percentage points for each year the
issue age is over 70 (joint equal age for survivorship policies):
VOL: 2%
(b) COMMISSION CHARGEBACKS:
All commissions paid on premiums which are refunded shall be charged
back to the Agency.
For variable life-type plans (VUSL, VUL, VOL), 50% of any FYC paid, net
of chargebacks premiums refunded, shall be charged back to the Broker
Dealer for any coverage which is terminated in or prior to the 13th
month.
(c) POLICY BANDS:
VUL: Band 0 - less than $250,000 face amounts
Band 1 - less than $500,000 and at least $250,000 face amounts
Band 2 - face amounts of $500,000 and above
VOL: Band 1 - less than $250,000 face amounts
Band 2 - face amounts of $250,000 and above
VUSL: Band 1 - Less than $1,000,000 face amounts
Band 2 - Face amounts of $1,000,000 and above
(d) TARGET PREMIUMS:
Are as published by the Company
Page 33 of 59
EXPENSE REIMBURSEMENT ALLOWANCES AND SERVICE FEES TO THE AGENCY
EXPENSE REIMBURSEMENT ALLOWANCE
For policies credited to the Agency while this part is in effect, an ERA amount
shall be paid to the Broker Dealer in a given month EQUAL TO A PERCENTAGE OF FYC
earned in the preceding month as follows:
50% up to target on the following policies VUL Band 0, 1 &2;
VOL Band 1 & 2 VSUL
Bands 1 &2
25% on "over the Target Premium" for all flexible premium
products (except VUL Band 2)
18% on "over the Target Premium" for VUL Band 2
SERVICE FEES
No service fees are payable on target premium or excess premium.
Page 34 of 59
The following METROPOLITAN LIFE INSURANCE COMPANY Variable Contracts are
governed by this Agreement:
Universal Life 2001 (UL (01))
Universal Life Base Policy (UL1)
Life Paid up at 98 (L98) Variable Rider and
Premium Option
METROPOLITAN LIFE INSURANCE COMPANY
% of Renewal Premium
UL (01) and UL 1 % of 1st Year Premium Years 2-10
Target 50% 3%
Excess 3% 3%
EXPENSE REIMBURSEMENT ALLOWANCES
For policies credited to the Agency while this part is in effect, an ERA amount
shall be paid to the Agency in a given month EQUAL TO A PERCENTAGE OF PREMIUM:
25% ON UL 01 AND UL1
Page 35 of 59
The following ENTERPRISE COLI Variable Contract is governed by this Agreement:
ENTERPRISE EXECUTIVE ADVANTAGE
VARIABLE UNIVERSAL SURVIVORSHIP LIFE (VUSL)
ENTERPRISE COMMISSIONS
Enterprise Executive Advantage
TARGET PREMIUM = 0 XXX
XXXXXXXXXX XXXXXXX
XXXXXX XXXXX XXX
% OF PREMIUM
Year 1 target 20.00%
Year 1 excess 1.25%
Year 2-6 target 8.00%
Year 2-6 excess 1.00%
Year 7-10 target 6.00%
Year 7-10 excess 1.00%
Year 11+ -
TRAIL COMMISSION AS A % OF ASSETS (SERVICE FEES)
Years 6-15 0.20%
Years 16-20 0.10%
Years 21+ 0.05%
NON-CHARGEBACK VERSION
STREET LEVEL GDC
% OF PREMIUM
Year 1 target 9.00%
Year 1 excess 1.25%
Year 2-5 target 12.00%
Year 2-5 excess 1.00%
Year 6-10 target 5.00%
Year 6-10 excess 1.00%
Year 11+ -
TRAIL COMMISSION AS A % OF ASSETS (SERVICE FEES)
Years 6-15 0.20%
Years 16-20 0.10%
Years 21+ 0.05%
Page 36 of 59
ESV RIDER VERSION
STREET LEVEL BROKER
% OF PREMIUM
Year 1 target 11.80%
Year 1 excess 1.25%
Year 2-6 target 9.83%
Year 2-6 excess 1.00%
Year 7+ -
TRAIL COMMISSION AS A % OF ASSETS (SERVICE FEES)
Years 7-20 0.27%
Years 21+ -
Page 37 of 59
VARIABLE UNIVERSAL SURVIVORSHIP LIFE (VUSL)
Commission Chargeback
If for any reason the policy lapses anytime prior to the 13th month,
all unearned commissions (up to the Target Premium) already received by the
agent are charged back as well as one-half of the earned commissions.
Commissions received on dump-in amounts above the Target Premium are not charged
back. Partial surrenders prior to the 13th month will result in partial
chargebacks.
% of Target Premium by Policy Year Year 1 Years 2-5 Years 6-10 Years 11+
Commission 50% 9% 4% 1%
ERA 20% 0% 0% 0%
Total to BD 70% 9% 4% 1%
% of EXCESS Premium by Policy Year Year 1 Years 2-5 Years 6-10 Years 11+
Commission 2% 2% 2% 1%
ERA 2% 2% 2% 0%
Total to BD 4% 4% 4% 1%
Page 38 of 59
EXHIBIT B
SCHEDULE OF FIXED PRODUCT AND COMPENSATION
N/A
Page 39 of 59
EXHIBIT C
REWRITTEN BUSINESS (RWB) COMMISSION RULES
(formerly, Replacement Commission Rules)
EFFECTIVE JUNE 1, 2002
REVISED MAY 9, 2003
GUIDING PRINCIPLES FOR REWRITTEN BUSINESS
The objective of this document is to provide information on MetLife's
enterprise-wide Rewritten Business (RWB) Rules. These rules were designed based
the following guiding principles:
1. Support SUITABLE CHANGE THAT IS DRIVEN BY THE BEST INTEREST AND NEEDS OF
THE CUSTOMER.
2. ENTERPRISE CONSISTENCY - Apply the same rules for all business done by all
producers in the MetLife family of distribution franchises.
3. Generally pay full compensation for increase in premium and reduced
compensation for replaced premium, regardless of source.
4. FAIRNESS - Provide fair compensation for internal, Enterprise-wide
replacement transactions that are done with the best interest and needs of
the client in mind and in accordance with industry practices and regulatory
requirements.
These rules were designed to provide for all known situations that an agent
might encounter with suitability and fairness for the client in mind. At the
time of the writing of this document, they are believed to cover all situations,
BUT it is recognized that our business is not static and a situation may arise
where these Rewritten Business Rules will not clearly address the issue.
These new rules apply to payment of First Year Compensation. In general, Asset
Trail, TLP and renewal commissions will not be affected.
SUITABILITY, FIRST & FOREMOST
The rules for Rewritten Business are in place to support suitable transactions
that are in the best interest of the customer. Simply stated, all Rewritten
Business must be suitable for the customer. A product replacement or switch can
only be recommended if it is in the customer's best interest. In general, when
you and your customer are considering rewriting a product to better serve the
customer's financial goals, the following guidelines should be followed. For a
detailed review of MetLife's suitability guidelines, please refer to the
Suitability Tutorial and Replacement Tutorial in the Ethics & Compliance section
of the LearnNow website, or the Suitability document posted in the Reference
Works section of the Ask Me/Tell Me/Read Me database.
- The recommendation should be supported by a thorough fact-find and needs
analysis.
- The new product should clearly meet the customer's financial and personal
goals, and this should be readily evident to the customer.
- The benefits of the new product should clearly outweigh the costs and
consequences of replacing or switching the existing product.
Page 40 of 59
- The pros and cons of the proposed transaction should be
discussed completely with the customer.
- Proper disclosure of the replacement or switch must be made to
the customer and ALL Company and state requirements must be
strictly adhered to with regard to Rewritten Business.
WHEN DO THE REWRITTEN BUSINESS RULES APPLY?
When a client gives up ALL OR PART OF THE BENEFIT PROVIDED BY AN EXISTING
PRODUCT (either by ceasing to pay required premiums or deposits on the product
or by appropriating the product's cash value) to fund the purchase of a New
Product or the rollover into an Existing Product, these Rewritten Business rules
will apply. These rules govern the commissions paid on the sale of the second
product.
These rules apply in the following circumstances as defined by key terms and
definitions presented in the following section of this document:
- When an Existing Product is rewritten by New Product; or
- When funds from an Existing Product are used to fund a deposit
into another Existing Product; or
- When an Existing Product is rewritten by a non-enterprise New
Product sponsored by, or sold through the enterprise (e.g.,
products available through the MetLife General Agency.)
For PROTECTION PRODUCTS, and INVESTMENT PRODUCTS, any transaction identified as
occurring within the respective Rewritten Business Window (see definition in
next section of this document), may trigger the application of these Rewritten
Business Rules.
Page 41 of 59
KEY TERMS & DEFINITIONS AS APPLIED TO REWRITTEN BUSINESS
RULES
EXISTING PRODUCT or PRODUCT BEING REWRITTEN is any "existing" enterprise
protection or investment product used to fund the purchase of a new enterprise
protection or investment product or to fund a deposit into an Existing
Enterprise protection or investment Product.
NEW PRODUCT is any protection or investment product, policy or contract, which
rewrites, in whole or part, an Existing Product.
NEW PREMIUM or NEW DEPOSIT is the amount of first-year premium or the initial
deposit paid on a New Product. With respect to flexible premium life products,
any amount paid in excess of the (base commissionable) premium amount -
sometimes referred to as "excess premium" - is excluded.
OLD PREMIUM LEVEL is an amount equal to the first-year premium on an Existing
Product. With respect to flexible premium life products, "Old Premium Level"
does not include any amount previously paid in excess of the (base
commissionable) premium amount - sometimes referred to as "excess premium."
OLD MONEY is the net cash value released (excluding dividend accumulations) from
an Existing Product, either as cash build up, accumulation, or policy values,
and subsequently appropriated or used to pay any part of a New Premium or
Deposit. Appropriation or use of Old Money to pay any part of a New Premium or
Deposit may be implied if the use or appropriation occurs within the Rewritten
Business Window and the criteria for deeming the money to have been used for
that purpose have been met. This will apply whether that cash value is
explicitly rolled into the new policy or not. In addition, a full or partial
surrender of PUAR/VABR values (or of a paid-up or non-forfeiture policy) on the
same life is considered rollover money if it falls within the RWB window, even
if the old policy is not otherwise changed or "rewritten."
NEW MONEY is any amount used to pay premium or deposits on a New or Existing
Product that is not Old Money. In essence, New Money is any money paid by the
client that has not come from an existing enterprise product within the
Rewritten Business Window as defined in this document.
REWRITTEN BUSINESS WINDOW is the time frame in which transactions on an Existing
Product will trigger the application of these Rewritten Business rules with
regard to the issue of a New Product or deposit into an Existing Product. If
within this time frame, an Existing Product lapses, is fully or partially
surrendered for the cash value, or the annualized premium is reduced by a policy
change, these Rewritten Business rules will apply to the commissions on the New
Product.
1) For PROTECTION PRODUCTS, the REWRITTEN BUSINESS WINDOW is 6
months prior to and 12 months after the Date of Part A of a
New Product.
2) For INVESTMENT PRODUCTS, the REWRITTEN BUSINESS WINDOW is 3
months prior to and 3 months after the issue date of a New
Product or a deposit into an Existing contract.
Page 42 of 59
RULES FOR MONEY COMING INTO A NEW LIFE POLICY
PERMANENT TO PERMANENT / TERM TO TERM / PERMANENT TO TERM LIFE
FULL FIRST-YEAR COMMISSIONS will be paid on the part of the New premium in the
New Product that exceeds the premium level of the Old Product.
- PARTIAL FIRST-YEAR COMMISSIONS will be paid on premium dollars in the
New Product up to the premium level of the Old Product. The partial
commission payable will be determined based on the age of the old
policy being rewritten. This applies to "roll-overs" directly into the
Cash Value and Paid-Up Riders. Please refer to the table below.
PERCENT OF NORMAL FYC
---------------------
YEARS
OLD POLICY HAS UP TO OLD PREMIUM ABOVE OLD PREMIUM
BEEN IN-FORCE LEVEL (1) LEVEL
------------- --------- -----
Less Than 5 0% 100%
5 but less than 6 25% 100%
6 but less than 7 30% 100%
7 but less than 8 35% 100%
8 but less than 9 40% 100%
9 but less than 10 45% 100%
10 or more 50% 100%
(1) Also applies to old money rolled over into an accumulation fund (e.g,
Excess Premium), or whole life riders (e.g, VABR).
- FOR EXISTING TERM INSURANCE SOLD AFTER 01/01/2001. When existing term
insurance that was sold AFTER 01/01/2001 is replaced by a new term
policy, the "UP TO Old Premium Level" percentages in the table above
would be doubled.
- PREMIUM DOUBLING RULE. Should the New Policy base premium at least
double that of the Old Policy base premium AND the Old Policy is at
least 5 years old, full commission will be paid on all premium dollars
related to the base premium of the New Policy. Any Old Money rolled
over into an accumulation fund (e.g, Excess Premium), or whole life
riders (e.g, VABR) will be commissioned based on the above table.
- NORMAL RENEWALS will be paid based on published schedules of renewals
for the New Policy being written.
- A PERSISTENCY ADJUSTMENT will apply to offset the "lapse" of the Old
Product that is being rewritten under the Traditional Life Persistency
(TLP) arrangement. This adjustment will apply if the Old Product being
rewritten is a traditional life policy, has been in force for 5 years
or more, and the commissions on the New Product are adjusted under the
Rewritten Business Rules.
- No Commissions are paid for "SAVING" cases.
Page 43 of 59
- TERM INSURANCE receives the "Percent of Normal FYC" scale if rewritten,
unless it is in the last 2 years of the level premium guarantee period,
in which case 100% of normal FYC is payable.
TERM TO PERMANENT
- Term-to-permanent commission payments are determined by the conversion
rules of the Old Product. For a replacement of a term policy by a
permanent policy, where no term conversion is available, full
commissions will be paid on the permanent policy.
ANNUITIES/MUTUAL FUND/WRAP ACCOUNT TO LIFE
FULL FIRST-YEAR COMMISSIONS will be paid when money is coming from an Old
Investment Product and going towards a New Protection Product, EXCEPT for
Annuities with surrender/withdrawal charges.
Page 44 of 59
RULES FOR MONEY COMING INTO AN NEW ANNUITY
FIXED TO FIXED ANNUITY / FIXED TO VARIABLE ANNUITY / VARIABLE TO FIXED ANNUITY
- FULL COMMISSIONS will be paid on New Money included within the New
Deposit.
- ONE-HALF OF THE NORMAL FIRST-YEAR COMMISSION will be paid on the Old
Money included within the New Deposit. The commission is only payable
if the old annuity contract is beyond the surrender/withdrawal charge
period.
- NO COMMISSIONS will be paid on the Old Money included within the New
Deposit if a surrender/withdrawal charge was assessed on the old
contract.
VARIABLE ANNUITY TO VARIABLE ANNUITY
- FULL COMMISSIONS will be paid on New Money included within the New
Deposit.
- NO COMMISSIONS will be paid on any Old Money included within the New
Deposit.
MUTUAL FUND OR WRAP ACCOUNT TO FIXED OR VARIABLE ANNUITY
- FULL COMMISSIONS will be paid on all money being deposited.
PERMANENT LIFE INSURANCE TO FIXED OR VARIABLE ANNUITY
- FULL COMMISSIONS will be paid on New Money included within the New
Deposit.
- FULL FIRST-YEAR COMMISSION will be paid on Old Money included within
the New Deposit if the life insurance policy has been in force at least
10 years.
- NO FIRST YEAR COMMISSION paid on Old Money included in the New Deposit
if the life insurance policy has been in force for less than 10 years.
SPECIAL RULES APPLICABLE TO ANNUITIES
- NO COMMISSIONS will be payable on company-sponsored exchanges or
similar exchanges sponsored by MetLife affiliates.
- STRETCH/ DECEDENT XXX. If the annuity is an XXX contract and the
beneficiary elects a stretch/decedent XXX, NO COMMISSIONS will be paid
or credited.
- ANNUITIZATION. One-half (50%) of the normal commissions/GDC will be
credited on an annuitization from a deferred annuity which has been in
place for at least two contract years AND on an annuitization using
life insurance accumulation amounts or death benefit proceeds under the
terms of the policy.
- SPOUSAL TRANSFERS. If the spouse is the primary beneficiary of the
annuity death claim, and he/she elects to retain the proceeds in
his/her name and become the annuitant/owner of the existing contract,
no commission will be paid or credited. If the annuity death proceeds
are moved to a new annuity, instead of using the spousal
assumption/continuation provisions, the same RWB Rules for Old Money
coming into a new Annuity will apply. Full first-year commission will
be paid on New Money.
Page 45 of 59
Page 46 of 59
RULES FOR MONEY COMING INTO A NEW MUTUAL FUND/WRAP
ONE MUTUAL FUND FAMILY/WRAP TO ANOTHER MUTUAL FUND FAMILY/WRAP
- FULL FIRST-YEAR COMMISSIONS will be paid, provided a properly executed
"Mutual Fund Switch Letter," signed by the client, the Financial
Services Representative and his or her manager, is submitted as part of
the transaction.
EXCHANGES WITHIN THE SAME MUTUAL FUND FAMILY
- FULL FIRST-YEAR COMMISSION will be paid on any amount of New Money.
- NO FIRST-YEAR COMMISSION will be paid when Old Money from a mutual fund
family is used to fund a mutual fund from the same family of funds.
There is generally no sales charge to the client for this exchange, and
as such, there is no commission payable.
Annuity To Mutual Fund/Wrap Account
- FULL COMMISSION will be paid on New Money.
- FULL FIRST-YEAR COMMISSION will be paid when a mutual fund or WRAP
account rewrites an annuity that is out of the surrender charge period.
- NO COMMISSION will be paid on the Old Money if the annuity is subject
to a surrender/withdrawal charge.
PERMANENT LIFE INSURANCE TO MUTUAL FUNDS/WRAP ACCOUNTS
- FULL COMMISSIONS will be paid on New Money included within the New
Deposit.
- FULL FIRST-YEAR COMMISSION will be paid on Old Money included within
the New Deposit if the life insurance policy has been in force at least
10 years.
- NO FIRST YEAR COMMISSION paid on Old Money included in the New Deposit
if the life insurance policy has been in force for less than 10 years.
Page 47 of 59
ADDITIONAL RULES THAT APPLY
The Company reserves the right to apply the rewritten business rules in special
situations. Listed here is information regarding several special situations, and
the names of individuals you should contact if you encounter a situation where
it is unclear how these rules apply.
POLICY LOANS. It is against company rules to recommend policy loans to help fund
a New or Existing Products. The date of a policy loan check may be used as the
"date of lapse" in determining whether a new policy will be considered a
"rewritten policy," if, within the Rewritten Business Window:
1) a loan is taken out on an Existing Policy resulting in the
total outstanding loan on that policy to be equal to 80% or
more of the total loan value on that policy, AND
2) the existing policy lapses, is surrendered for the cash value,
or the annualized premium is reduced by policy change, with
three or less months additional premiums having been paid 31
days after the date of the policy loan check.
Remember that it is against Company policy to recommend policy loans to help
fund the purchase of an equity product.
OWNERSHIP CHANGES. When a change in ownership occurs involving a corporation, a
qualified retirement plan or an irrevocable trust, the New Policy will not be
considered Rewritten Business for RWB commission rule purposes, even though the
insured is the same. Neither will an individually-owned policy sold after a
corporate-owned policy is terminated because of business failure or bankruptcy.
MATURED ENDOWMENTS. If the funds of an endowment policy, which has matured or is
within 3 years of maturity, are deposited into a new or existing life insurance
policy, annuity, or mutual fund, all the funds will be considered New Money for
commission purposes, and full FYCs will be paid.
JUVENILE POLICIES. Full commissions will be credited when a juvenile policy
owned by parents, guardians or a trust is rewritten by a New Policy on the same
life that also owns the New Policy and the owner of the New Policy is an adult
(age 18 or older).
QUALIFIED DOMESTIC RELATIONS ORDER. When a life policy is cancelled because of a
court ordered settlement and is rewritten by another life policy on the same
life, full commissions will be credited.
Page 48 of 59
When the assets of an annuity are required to be split because of a Domestic
Relations Order or Qualified Domestic Relations Order, no commissions will be
paid or credited.
PRODUCT EXCHANGES. The company sometimes sponsors special exchange programs
(known as a "company-sponsored exchange") designed to encourage clients to
replace an older product with a newer one, typically because the newer product
has features the older one lacks that are considered advantageous to the client.
The company often provides some incentive to the client to make the sponsored
exchange. Special commission provision may also apply. If they do, these special
commission provisions will supersede the rules published here.
TERM CONVERSIONS. On a term conversion in the first policy year, the term
writer's first-year commissions are protected. The writer of the permanent
policy will receive first-year commissions on the new policy less the FYC paid
on the term policy, and will receive full renewal commissions. A term policy in
its second or later policy year may be converted, and full commissions will be
credited to the writer effecting the term conversion.
Page 49 of 59
EXAMPLES
It's important to note at this point that the examples below show the net FYC
you would receive given the assumptions shown. Remember, AS CURRENTLY IS THE
BUSINESS PROCESS, Full FYC may well be paid out in one pay cycle AND the
relative Rewritten Business Rule adjustments, may come 1 or more pay cycles
later.
EXAMPLE OF HOW THE TABLE WORKS:
PERCENT OF NORMAL FYC
---------------------
YEARS
OLD POLICY HAS UP TO OLD PREMIUM ABOVE OLD PREMIUM
BEEN IN-FORCE LEVEL (1) LEVEL
------------- --------- -----
Less Than 5 0% 100%
5 but less than 6 25% 100%
6 but less than 7 30% 100%
7 but less than 8 35% 100%
8 but less than 9 40% 100%
9 but less than 10 45% 100%
10 or more 50% 100%
(1) Also applies to old money rolled over into an accumulation fund (e.g,
Excess Premium), or whole life riders (e.g, VABR).
Assumptions:
- New Policy FYC Rate is 50%
- Old Policy in-force for 7 -1/2 years (cross table at "7 but less than
8" years in-force row)
Results:
- FYC Rate on New Premium up to the Old Premium level = 17.5% (which is
normal FYC Rate 50% x 35% - the % from the chart above)
- FYC Rate for New Premium above Old Premium level = 50% (New Money, gets
full FYC)
Page 50 of 59
EXAMPLES OF A LIFE TO LIFE REWRITTEN POLICY
EXAMPLE 1: Old policy and New Policy have same premium.
Old Policy New Policy
- In-force for 9 years - New Premium of $1,000
- Premium of $1,000 - Normal FYC rate of 50%
- $0 net cash value
Results:
- FYC on New Premium up to Old Premium level = 50% x 45% x $1000 = $ 225.00
- FYC on New Premium above Old Premium level = 50% x ($1,000 - $1,000) = $ 0.00
---------
TOTAL FYC = $ 225.00
How did we get there?
- Look Up applicable FYC adjustment rate from table (9 years inforce) =
45%
- Multiply as shown above for New Premium up to Old Premium level
($1,000)
- No FYC on New Premium above Old Premium level because New Premium minus
Old Premium is $0.
EXAMPLE 2: New Policy has $500 more premium than old policy.
Old Policy New Policy
- In-force for 9 years - New Premium of $1,500
- Premium of $1,000 - Normal FYC rate of 50%
- $0 net cash value
Results:
- FYC on New Premium up to Old Premium level = 50% x 45% x $1000 = $225.00
- FYC on New Premium above Old Premium level = 50% x ($1,500 - $1,000) = $250.00
-------
TOTAL FYC = $475.00
How did we get there?
- Look Up applicable FYC adjustment rate from table (9 years inforce) =
45%
- Multiply as shown above for New Premium up to Old Premium level
($1,000)
- FYC on New Premium above Old Premium calculated as above because New
Premium minus Old Premium is $500.
Page 51 of 59
EXAMPLE 3: New Policy has $500 more premium than old policy, and additional
$10,000 of Old Policy Cash Value also being rolled over into new policy.
Old Policy New Policy
---------- ----------
- In-force for 9 years - New Premium of $1,500
- Premium of $1,000 - Normal FYC rate of 50%
- $10,000 net cash value (Rolled Over to New Policy)
Results:
- FYC on New Premium up to Old Premium level = 50% x 45% x $1000 = $225.00
- FYC on New Premium above Old Premium level = 50% x ($1,500 - $1,000) = $250.00
- FYC on net Cash Value from Old Policy =2% x 45% x $10,000 = $ 90.00
-------
TOTAL FYC = $565.00
How did we get there?
- Look Up applicable FYC adjustment rate from table (9 years inforce) =
45%
- Multiply as shown above for New Premium up to Old Premium level
($1,000)
- FYC on New Premium above Old Premium calculated as above because New
Premium minus Old Premium is $500.
- Multiply as shown above for Old Money ($10,000) rolled over to new
policy.
EXAMPLE 4: Same as example 3, BUT assume $10,000 of Old Policy Cash Value is
surrendered by owner (i.e., not rolled over into the new policy.)
Old Policy New Policy
---------- ----------
- In-force for 9 years - New Premium of $1,500
- Premium of $1,000 - Normal FYC rate of 50%
- $10,000 net cash value (NOT rolled over)
Results:
- FYC on New Premium up to Old Premium level = 50% x 45% x $1,000 = $ 225.00
- FYC on New Premium above Old Premium level = 50% x ($1,500 - $1,000) = $ 250.00
- FYC on net Cash Value from Old Policy ("Old Money") = $ 0.00
--------
TOTAL FYC = $ 475.00
How did we get there?
- Look Up applicable FYC adjustment rate from table ( 9 years inforce) =
45%
- Multiply as shown above for New Premium up to Old Premium level
($1,000)
- FYC on New Premium above Old Premium calculated as above because New
Premium minus Old Premium is $500.
- Since the owner of the contract surrendered the policy, no premium
dollars came into the new Policy from "Old Money." Hence, No FYC would
be paid on Old Money.
Page 52 of 59
EXAMPLE 5: Same as example 3, BUT $2,500 New Policy Premium. This would cause
the Premium Doubling Rule to take effect.
Old Policy New Policy
---------- ----------
- In-force for 9 years - New Premium of $2,500
- Premium of $1,000 - Normal FYC rate of 50%
- $10,000 net cash value (Rolled over into New Policy)
Results:
- FYC on All New Premium = 50% x $2,500 = $ 1,250.00
- FYC on net Cash Value from Old Policy ("Old Money") = 2% x 45% x $10,000 = $ 90.00
-----------
TOTAL FYC = $ 1,340.00
How did we get there?
- The New base premium is at least double that of the Old base premium,
therefore the Premium Doubling Rule applies and Full FYC will be paid
on the New Policy base premium.
- The Old Money rolled into the New Policy will receive FYC based on the
Table.
EXAMPLE 6 - ANNUITY/MUTUAL FUND/WRAP TO LIFE: $20,000 from an annuity is rolled
over into the PUAR of a new life policy, which has a premium of $500.
Old Contract New Policy
------------ ----------
- $20,000 in Old Contract (Rolled into PUAR) - $500 New Premium
- No Surrender Charges - FYC is 50%
Results:
- FYC Rate of new premium is 50% (50% x 500 = $250) =$250.00
- FYC on PUAR is 3% ($20,000 x 3% = $600) =$600.00
-------
TOTAL FYC =$850.00
How did we get there?
- Full FYC is paid when money is coming from an "old" Investment & Income
product into a "new" Protection product.
- Old contract was out of the surrender charge period.
Page 53 of 59
EXAMPLES OF AN ANNUITY TO REWRITTEN ANNUITY CONTRACT
EXAMPLE 7: Old annuity is out of the surrender charge period.
Old Contract New Contract
------------ ------------
- $100,000 Old Contract Surrender - $100,000 New Contract Deposit
- No Surrender Charges - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit ($100,000 x 6% = $6,000)
- FYC Rate of GDC is 35% of $6,000 = $2,100
- 1/2 FYC on entire deposit = 50% x $2,100 = $1,050.00
---------
TOTAL FYC = $1,050.00
How did we get there?
- Since there were no surrender charges and no New Money deposited, half
the FYC is paid on the deposit.
EXAMPLE 8: Same as Example 7, but assume additional $10,000 new deposit.
Old Contract New Contact
------------ -----------
- $100,000 Old Contract Surrender - $110,000 New Contract Deposit
- No Surrender Charges - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- Full FYC on "New Money" ($10,000 x 6% x 35% = $210) = $ 210.00
- 1/2 FYC on rollover deposit ($100,000 x 6% x 35% x 50% = $1,050) = $ 1,050.00
----------
TOTAL FYC = $ 1,260.00
How did we get there?
- Since there were no surrender charges and there was New Money deposited
along with the deposit rolled over from the old annuity, full FYC (35%
of the GDC) is paid on the "New Money" and half the FYC (50% of the 35%
of the GDC) is paid on the deposit rolled over. The amount will be paid
in the current year and
Page 54 of 59
EXAMPLE 9: Same as Example 7, but old contract is still in the surrender charge
period.
Old Contract New Contact
------------ -----------
- $100,000 Old Contract Surrender - $100,000 New Contract Deposit
- Surrender Charges - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- FYC on rollover deposit ($100,000 x 6% x 35% x 0% = $0) = $ 0.00
--------
TOTAL FYC = $ 0.00
How did we get there?
- Since the old contract was still in the surrender charges no FYC will
be paid.
EXAMPLE 10: Same as Example 8, but old contract is still in the surrender charge
period.
Old Contract New Contact
------------ -----------
- $100,000 Old Contract Surrender - $110,000 New Contract Deposit
- Surrender Charges - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- Full FYC on "New Money" ($10,000 x 6% x 35% = $210) = $ 210.00
- FYC on rollover deposit ($100,000 x 6% x 35% x 0% = $0) = $ 0.00
----------
TOTAL FYC = $ 210.00
How did we get there?
- Since the old contract was still in the surrender charge period, no FYC
will be paid on the "Old Money" included in the deposit to the new
contract. Full FYC (35% of the GDC) is paid on the "New Money."
Page 55 of 59
EXAMPLES OF A MUTUAL FUND/WRAP TO A REWRITTEN MUTUAL FUND/WRAP
EXAMPLE 11: Old fund is from ABC Family. New fund is from XYZ Family, and a
properly executed "Mutual Fund Switch Letter" signed by the client, the FSR and
his/her manager, has been submitted as part of the transaction.
Old Fund New Fund
-------- --------
- $3,000 in Old Fund - $3,000 New Fund Deposit
- GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit ($3,000 x 6% = $180)
- FYC Rate of GDC is 35%
- FULL FYC ON FUND FAMILY CHANGE $3,000 X6% X35% = $63.00
How did we get there?
- Since the old and new funds were from different fund families, full FYC
is paid.
U. IMPORTANT NOTE
- If, in this example, the new fund family was THE SAME AS THE OLD
FAMILY, NO FYC would be payable.
EXAMPLE 12: Same as Example 11, but additional $1,000 "New Money," where new
fund is from the same fund family as old fund.
Old Fund New Fund
-------- --------
- $3,000 in Old Fund - $4,000 New Contract Deposit
- GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- No FYC on "Old Money"
- FULL FYC ON "NEW MONEY" ($4,000 - $3,000) X 6% X 35% = $21.00
How did we get there?
- Full FYC is paid on "New Money" only.
Page 56 of 59
EXAMPLES OF A LIFE TO ANNUITY, MUTUAL FUND, OR WRAP
EXAMPLE 13: Life policy in-force 10 or more years, no New Money. Full FYC is
paid on "Old Money."
Old Policy New Contract/Fund
---------- -----------------
- $2,000 cash surrender value in Old Policy - $2,000 New Contract/Fund Deposit
- Policy in-force 12 years - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- FULL FYC ON DEPOSIT INTO NEW FUND/CONTRACT ($2,000 X 6% X 35% = $42)
EXAMPLE 14: Life policy in-force less than 10 years, no New Money. No FYC is
paid on Old Money.
Old Policy New Contract/Fund
---------- -----------------
- $2,000 cash surrender value in Old Policy - $2,000 New Contract Deposit
- Policy In-force 8 years - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- NO FYC ON "OLD MONEY" ($2,000 - $2,000) X 6% X 35% X 0% = $0.00
Page 57 of 59
EXAMPLE 15: Life policy in-force less than 10 years, $1,000 New Money deposited
into contract/fund. Full FYC is paid on "New Money" only.
Old Policy New Contract/Fund
---------- -----------------
- $2,000 cash surrender value in Old Policy - $3,000 New Contract Deposit
- Policy In-force 8 years - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- FULL FYC ON "NEW MONEY" ($3,000 - $2,000) X 6% X 35% = $21.00
- $0 GDC on old policy cash surrender value.
EXAMPLE 16: Life policy in-force 10 or more years, $1,000 of New Money deposited
into contract/fund. Full FYC is paid on the "Old Money" AND "New Money."
Old Policy New Contract/Fund
---------- -----------------
- $2,000 cash surrender value in Old Policy - $3,000 New Contract Deposit
- Policy In-force 12 years - GDC Rate of 6%
- FYC is 35% of GDC
Results:
- GDC is 6% of New Deposit
- FYC Rate of GDC is 35%
- FULL FYC ON DEPOSIT INTO NEW CONTRACT/FUND $3,000 X 6% X 35% = $63.00
Page 58 of 59
EXHIBIT D
ASSOCIATED INSURANCE AGENCY
The Broker/Dealer named below ("Broker"), having executed a Sales
Agreement (the "Agreement") by and among Broker and General American
Distributors ("GAD") dated _____________ that, among other things, provides for
sales of Variable Contracts and Fixed Contracts through a designated associated
insurance agency or agencies, hereby designates the associated insurance agency
(the "Associated Insurance Agency") named below as its Agency (as that term is
defined in the Agreement) pursuant to Section III(B) thereof. By signing this
Exhibit D, each of Broker and the Associated Insurance Agency hereby represent
and warrant that the Associated Insurance Agency is and will remain qualified to
serve as an Agency in accordance with the terms of the Agreement, and the
Associated Insurance Agency hereby agrees to be bound by and subject to the
terms of the Agreement.
__________________________________________
Broker/Dealer
By: ______________________________________
__________________________________________
Print Name & Title
__________________________________________
(Tax Identification Number)
__________________________________________
Associated Insurance Agency Name
By: ______________________________________
__________________________________________
Print Name & Title
__________________________________________
(Tax Identification Number)
Page 59 of 59
GENERAL AMERICAN FINANCIAL
WHOLESALE SALES AGREEMENT
TABLE OF CONTENTS
I. DEFINITIONS
II. COMPLIANCE WITH APPLICABLE LAWS
III. AGREEMENTS, REPRESENTATIONS, AND COVENANTS
A. AGREEMENTS AND COVENANTS OF GAD
B. REPRESENTATIONS AND COVENANTS OF WHOLESALER
IV. PRINCIPLES OF ETHICAL MARKET CONDUCT
V. COMPENSATION
VI. COMPLAINTS AND INVESTIGATIONS
VII. RECORDS AND ADMINISTRATION
VIII. PRIVACY INFORMATION
A. PROPRIETARY INFORMATION
B. RECEIPT OF CUSTOMER NONPUBLIC PERSONAL INFORMATION FROM
WHOLESALER BY GAD
C. TREATMENT OF NONPUBLIC PERSONAL INFORMATION DISCLOSED TO
WHOLESALER BY GAD
D. CONFIDENTIAL INFORMATION
E. PROTECTED HEALTH INFORMATION
IX. INDEMNIFICATION
X. GENERAL PROVISIONS
A. TERM AND TERMINATION
B. ASSIGNABILITY
C. AMENDMENTS
D. NOTICES
E. ARBITRATION
F. GOVERNING LAW
G. ENTIRE UNDERSTANDING
H. NO THIRD PARTY BENEFICIARIES
I. NON-EXCLUSIVITY
J. WAIVER
K. COUNTERPARTS
L. SEVERABILITY
Page 1 of 34
GENERAL AMERICAN FINANCIAL
SALES AGREEMENT
This Broker-Dealer Wholesale Agreement (the "Agreement") dated
______________________________, 2003, ("Effective Date") by and between General
American Distributors, a Missouri corporation, ("GAD") and
______________________, a ____________________corporation that, for the
distribution of traditional fixed rate insurance products only, is a validly
licensed insurance agency, or for the distribution of registered products, is
registered as a broker dealer with the Securities and Exchange Commission
("SEC") under the 1934 Act and a member of the National Association of
Securities Dealers ("NASD") and is also either licensed as or is affiliated with
a validly licensed insurance agency (collectively "Wholesaler").
WITNESSETH:
WHEREAS, GAD issues or provides access to certain insurance and
financial products, including but not limited to, fixed rate annuities, variable
annuities, variable life insurance policies, fixed rate life insurance policies,
variable riders on such fixed rate products, and other insurance products as
identified on Exhibits A and B attached hereto, which is incorporated herein by
reference (together, the "Contracts"); and
WHEREAS, GAD, on behalf of itself and each Affiliate that issues or
provides access to the Contracts identified in Exhibit A hereto, is authorized
to enter into selling agreements with unaffiliated broker-dealers or selling
groups, as the case may be, to distribute the Contracts; and
WHEREAS, GAD is the distributor and principal underwriter of the
Contracts, and is authorized to enter into agreements, with registered
broker-dealers and insurance agencies for the distribution of the Contracts; and
WHEREAS, Wholesaler is a registered broker-dealer desiring to
participate in the promotion of sales and distribution of the Contracts, which
are deemed to be securities under the Securities Act of 1933; and
WHEREAS, Wholesaler has relationships with certain third party
retailing selling groups ("Retailers"), which have qualified and licensed
agents/registered representatives who will solicit and sell the Contracts.
WHEREAS, GAD, subject to the terms and conditions of the Agreement,
hereby appoints Wholesaler to support the sales of and provide service with
respect to the Contracts which are set forth on the applicable Exhibits A and B
on a non-exclusive basis; and
Page 2 of 34
WHEREAS, Wholesaler accepts such appointment and agrees to use its best
efforts to find purchasers for the Contracts; and
WHEREAS, GAD proposes to compensate Wholesaler for the sale and
servicing of Contracts in accordance with Exhibits A and B.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
I. DEFINITIONS
1) Affiliate - Any entity that controls, is controlled by or is
under common control with including, without limitation, any
entity that owns 25% or more of the voting stock of any GAD
company and any entity that is a subsidiary of that company.
2) Agency- an associated insurance agency of Wholesaler, which is
properly licensed to participate in the business of insurance.
3) Applicable Laws - Shall have meaning given to such term as in
accordance with Section II of this Agreement.
4) Confidential Information - Shall have meaning given to such
term as described in Section VIII(D) of this Agreement.
5) Fixed Contracts - Contracts that are not variable and include,
without limitation, fixed rate annuities, fixed rate life
insurance and other fixed insurance contracts, issued by GAD,
as more fully described in Exhibit B, which may be amended by
GAD in its sole discretion from time to time.
6) General Agent - Shall have the meaning given to such term as
described in Section III(A)(20) of this Agreement.
7) Nonpublic Personal Information- Nonpublic personal information
means financial or health related information by which a
financial institution's consumers and customers are
individually
Page 3 of 34
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.
8) 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.
9) 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.
10) Variable Contracts - Variable life insurance policies,
variable annuity contracts, variable insurance riders and
other variable insurance contracts, issued by GAD, as more
fully described in Exhibit A at the time of this Agreement or
as may be amended by GAD in its sole discretion from time to
time.
11) Protected Health Information or PHI -- 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. PHI includes
demographic information about individuals, including names;
addresses; dates directly related to an individual, including
but not limited to birth date; telephone numbers; fax numbers;
E-mail addresses; Social Security numbers; policy numbers;
medical record numbers; account numbers; and any other unique
identifying number, characteristic, or code. PHI includes, but
is not limited to, information provided by an individual on an
application for a long term care insurance policy or other
health care plan issued by GAD or an affiliate of GAD;
information related to the declination or issuance of, or
claim under, a long term care insurance policy issued by GAD
or an affiliate; or information derived therefrom.
II. COMPLIANCE WITH APPLICABLE LAWS
1) GAD and Wholesaler agree to comply with all applicable state
and federal statutes, laws, rules, and regulations including
with out limitation, state insurance laws, rules and
regulations, and federal and state securities laws, rules and
regulations. Applicable state and federal statutes, laws,
rules and regulations may also include, applicable guidelines,
policies, and rulings of federal and state
Page 4 of 34
regulatory organizations and agencies, including without
limitation state insurance departments, the SEC and the
National Association of Securities Dealers, Inc. ("NASD"),
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
("Applicable Laws").
2) Notwithstanding the foregoing, GAD and Wholesaler agree to
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 verify
customer identity, to conduct customer due diligence, and to
implement anti-money laundering compliance programs. As
required by the Act, Wholesaler 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 employees; and an independent audit
function.
3) Further, Wholesaler agrees to comply with the economic
sanctions programs administered by the U.S. Treasury
Department's Office of Foreign Assets Control ("OFAC").
Wholesaler certifies that it has an OFAC compliance program in
place which includes procedures for checking customer names
[and persons with signature authority over accounts] against
the OFAC lists of sanctioned governments and
specially-designated nationals, terrorists and traffickers;
the screening of wire transfers [and other payments] against
the OFAC lists; a designated compliance officer; an internal
communication network; training of appropriate personnel; and
an independent audit function.
4) GAD and Wholesaler agree to promptly notify the other whenever
questionable activity or potential indications of suspicious
activity or OFAC matches are detected. GAD and Wholesaler
agree to investigate any potentially suspicious activity and
to take appropriate action, including the blocking of
accounts, the filing of Suspicious Activity Reports and the
reporting of matches to OFAC, in connection with the
Contracts.
Page 5 of 34
III. AGREEMENTS, REPRESENTATIONS, AND COVENANTS
A. AGREEMENTS AND COVENANTS OF GAD
1) GAD represents that it is duly authorized, on behalf of itself
and each Affiliate that issues or provides access to the
Contracts identified in Exhibit A hereto, to enter into this
Agreement with Wholesaler to wholesale such Contracts.
2) GAD shall advise Wholesaler of any revision of or supplement
to any Prospectus related to the Variable Contracts or
underlying investments of such Variable Contracts.
3) 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 by its own
Board of Directors. Pursuant to the foregoing, GAD shall
specifically retain ultimate authority, including but not
limited to:
a) to refuse for any reason to appoint a Representative and
cancel any existing appointment at any time;
b) to direct the marketing of its insurance products and
services;
c) to review and approve all advertising concerning, its
insurance products and services;
d) to underwrite all insurance policies issued by it;
e) to cancel risks;
f) to handle all matters involving claims adjusting and
payment;
g) to prepare all policy forms and amendments; and
h) to maintain custody of, responsibility for and control of
all investments.
B. REPRESENTATIONS AND COVENANTS OF WHOLESALER
1) Wholesaler represents and warrants that it will only support
Contracts in those states where it or its Agency is
appropriately licensed and that it 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.
2) Wholesaler represents and warrants that it is a registered
broker-dealer under the Securities Exchange act of 1934 ("1934
Act"), has all necessary broker-dealer licenses, is a member
in good standing with the NASD, and is licensed as an
insurance Wholesaler and has obtained any other
Page 6 of 34
approvals, licenses, authorizations, orders or consents which
are necessary to enter into this Agreement and to perform its
duties hereunder.
3) Wholesaler represents that neither it is not currently under
investigation by any insurance regulator, the NASD or SEC, any
other self-regulatory organization or other governmental
authority (except for any investigations of which it has
notified GAD in writing). Wholesaler further agrees that, if a
formal or informal investigation of Wholesaler or any of its
agents is commenced by any insurance regulator, the NASD or
SEC, any other self regulatory organization or other
governmental authority, whether or not in connection with the
sale of the Contracts, Wholesaler will notify GAD of the
existence and subject matter of such investigation. The Agency
further agrees that no subagent shall be appointed to solicit
and procure Contracts of GAD if the subagent has been
convicted of any felony prohibited by the Federal Violent
Crime Control and Law Enforcement Act of 1994.
4) Wholesaler acknowledges that GAD shall have the unconditional
right to reject, in whole or in part, any application for a
Contract. If GAD rejects an application, GAD will immediately
return any purchase payments received directly to the
Wholesaler and Wholesaler will 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 Laws shall
specify, will be returned by GAD to the Wholesaler and the
Wholesaler will be responsible for promptly returning such
payments to the purchaser. If a purchase payment is either
refunded or returned to the purchaser, no commission will be
payable to Wholesaler hereunder, and any commission received
by Wholesaler will be returned promptly to GAD. GAD may, at
its option, offset any such amounts against any amounts
payable to Wholesaler.
5) Wholesaler is not a principal, underwriter or agent of GAD,
any Affiliate of GAD, or any GAD separate account. Wholesaler
shall act as an independent contractor, and nothing herein
contained shall constitute Wholesaler, nor its agents or other
representatives as employees of GAD in connection with the
solicitation or support of applications for Contracts or other
dealings with the public. Wholesaler, its agents and its other
representatives, shall not hold themselves out to be employees
of GAD in this connection or in any dealings with the public.
Page 7 of 34
6) Wholesaler agrees that any material it develops, approves or
uses for sales, training, explanatory or other purposes in
connection with the solicitation of applications for the
Contracts hereunder, other than generic advertising material
which does not make specific reference to GAD or the
Contracts, will not be used without the prior written consent
of GAD.
7) Authorized activities by Wholesaler shall be undertaken only
in accordance with Applicable Laws. Wholesaler represents no
commissions, or portions thereof, or other compensation for
the sale of the Contracts will be paid to any person or entity
which is not duly licensed and appointed by GAD in the
appropriate states as required by Applicable Laws.
8) Neither Wholesaler nor its agents, designees or other
representatives shall have authority on behalf of GAD to alter
or amend any Contract or any form related to a Contract to
adjust or settle any claim or commit GAD with respect thereto,
or bind GAD or any of its Affiliates in any way; or enter into
legal proceedings in connection with any matter pertaining to
GAD's business without its prior written consent. Wholesaler
shall not expend, nor contract for the expenditure of, funds
of GAD nor shall Wholesaler possess or exercise any authority
on behalf of GAD other than that expressly conferred on
Wholesaler by this Agreement.
9) Wholesaler shall prepare any forms necessary to comply with
Applicable Laws; and received from GAD in connection with the
sale of the Contracts as replacement for other insurance or
annuity products and to send such forms to GAD. In the
alternative, if such forms are not required but information
with respect to replacement is required, Wholesaler will
transmit such information in writing to GAD. Wholesaler
further shall notify GAD when sales of the Contracts are
replacement contracts. Such notification shall not be later
than the time that Wholesaler submits applications for such
Contracts to GAD.
10) Wholesaler shall furnish GAD or any appropriate regulatory
authority with any information, documentation, or reports
prepared in connection with or related to this Agreement which
may be requested by GAD or an appropriate regulatory authority
in order to ascertain whether the operations of GAD or
Wholesaler related to the Contracts are being conducted in a
manner consistent with Applicable Laws.
11) Wholesaler will adhere to all Applicable laws, including but
not limited to, state insurance replacement regulations,
before it receives or supports any applications for Contracts.
Page 8 of 34
12) Wholesaler represents that it has full authority to enter into
this Agreement and that by entering into this Agreement it
will not impair any other of its contractual obligations with
respect to sales of any Contract.
13) Wholesaler shall promote the Contracts only to registered
representatives licensed through broker-dealers which have or
will enter into active selling agreements with GAD and who are
or will be variable licensed and appointed with GAD for the
sale of the Contracts.
14) Any solicitation by Wholesaler of broker-dealers who do not
have an active selling agreement with GAD shall only be done
in such manner and using materials as are prescribed by GAD.
15) Wholesaler agrees that it shall, at all times, when performing
its functions under this Agreement, be registered as a
securities broker-dealer with the SEC and will maintain its
membership with the NASD, and shall be licensed or registered
as a securities broker- dealer in the states that require such
licensing or registration in connection with the services to
be provided under this Agreement.
16) MARKETING AND ADMINISTRATIVE DUTIES OF WHOLESALER.
a. Wholesaler will use its relationships with Retailers and
Retailers' broker dealers and registered representatives
to promote the Contracts. GAD, in their discretion, may
accept or reject the services of any broker dealer or
registered representatives, and are under no duty to
contract with or appoint any particular broker dealer or
registered representative. Wholesaler is not authorized
to provide marketing services related to the Contracts to
registered representatives of broker-dealers which do not
have selling agreements with GAD, or to registered
representatives who are not properly licensed and
appointed with GAD.
b. Wholesaler will provide certain marketing and
administrative services to promote the sale of the
Contracts. Such services shall include, but are not
limited to, assistance in the appointment and contracting
of agents; distribution of training and recruiting
materials, and sales materials, newsletters, and field
service bulletins (provided that all such materials shall
be approved by GAD prior to use); assistance with sales
promotional activities; training of sales staff and
registered representatives with respect to the features
of the Contracts, and providing technical
Page 9 of 34
assistance to registered representatives and sales staff
in the ongoing servicing of owners of the Contracts.
c. Wholesaler shall have no direct contact with any member
of the public, including any client of the designated
broker-dealers or registered representatives, or owner of
a Contract or their representatives except in
circumstances where a duly licensed and appointed
registered representative of the broker dealer is
present.
d. The responsibilities of Wholesaler also shall include:
(i.) the establishment and implementation of appropriate
procedures to ensure the prompt distribution of
prospectuses, training, and marketing materials,
and any amendments or supplements thereto, to
authorized retail broker-dealer representatives,
and the prompt collection from such representatives
and disposal of such materials when recalled or
replaced by GAD by more current materials;
(ii.) an initial review of applications, forms, and other
required documentation for Contracts to the extent
requested by GAD. The purpose of such review is to
assist retail broker-dealers in ensuring that
applications, forms, and other documentation comply
with the standards and procedures provided from
time to time by GAD. Wholesaler shall perform such
initial review, if requested, in an expeditious
manner, and shall forward the materials so reviewed
to GAD promptly after completing the initial
review. Wholesaler has no authority to, and shall
not, accept or endorse any checks or money orders
intended to be applied as premium or purchase
payments to the Contracts.
e. Wholesaler shall perform its activities under this
Agreement in full compliance with the requirements of the
1934 Act and all other applicable federal or state laws,
and with the rules of the NASD. Wholesaler agrees that it
is responsible for maintaining its own appropriate books,
records, and other items that may be required by the SEC,
NASD, or other regulatory agencies having jurisdiction
over such activities.
f. In conjunction with marketing and sales promotion
efforts, GAD will be responsible for the costs of
producing and printing all policy forms, related
prospectuses, and the basic sales literature that they
deem appropriate.
Page 10 of 34
g. GAD is responsible for maintaining in effect the
registration statement for the Contracts. GAD shall
immediately notify Wholesaler of the issuance of any stop
order, any federal or state proceeding, or any other
action that would prevent the sale of the Contracts in
any state or jurisdiction.
h. Wholesaler shall immediately notify GAD with respect to:
(i.) the initiation and disposition of any form of
disciplinary action against Wholesaler or any of its
employees by the NASD, or any other regulatory agency or
instrumentality having jurisdiction with respect to the
subject matter hereof; (ii.) the issuance of any form of
deficiency notice made part of the public record by the
NASD or any such agency regarding Wholesaler's practices;
(iii.) the execution of any consensual order with respect
thereto; and/or (iv.) any change, termination, or
suspension of its status as a broker-dealer or NASD
member.
i. Wholesaler will have responsibility for its marketing and
sales promotional costs including, but not limited to:
(i.) all travel of Wholesaler and its agents;
(ii.) any meetings with broker-dealers or their
affiliates.
(iii.) hiring any staff, maintaining office space, and
meeting its expenses.
17) INSURANCE COVERAGE.
a) Fidelity Bond. Wholesaler shall secure and maintain a
fidelity bond (including coverage for larceny and
embezzlement), issued by a reputable bonding company,
covering all of its directors, officers, agents,
representatives, associated persons and employees who
have access to funds of GAD. This bond shall be
maintained at Wholesaler's expense in at least the amount
prescribed under Rule 3020 of the NASD Conduct Rules or
future amendments thereto. Wholesaler shall provide GAD
with satisfactory evidence of said bond upon GAD's
reasonable request. Wholesaler hereby assigns any
proceeds received from a fidelity bonding company, or
other liability coverage, to GAD as their interest may
appear, to the extent of its loss due to activities
covered by the bond, policy or other liability coverage.
b) Plan of Insurance Agents. Wholesaler shall maintain in
full force and effect during the term of this Agreement a
plan of insurance, which may be a plan of self-insurance,
which shall provide coverage for errors and omissions of
the Wholesaler, its Agency, representatives and agents.
If such insurance plan terminates for any reason during
the term of the Agreement, Wholesaler
Page 11 of 34
shall immediately notify GAD of such termination. If
requested by GAD, Wholesaler shall provide satisfactory
evidence of coverage under such insurance policy
satisfactory to GAD showing the amount and scope of
coverage provided.
c) Wholesaler represents that all of its directors, officers
and representatives are and shall be covered by blanket
fidelity bonds, including coverage for larceny and
embezzlement, issued by a reputable bonding company.
These bonds shall be maintained at Wholesaler's expense
and shall be at least, of the form type and amount
required under the NASD Rules of Fair Practice. Upon
request, Wholesaler shall give evidence satisfactory to
GAD that such coverage is in force. Furthermore,
Wholesaler shall give prompt written notice to GAD of any
notice of cancellation or change of such coverage.
Wholesaler hereby assigns any proceeds received from a
fidelity banding company, or other liability coverage, to
GAD as their interest may appear, to the extent of their
loss due to activities covered by the bond, policy or
other liability coverage.
18) Wholesaler and Agency, as applicable, will maintain the books
and records relating to the sale of Variable Contracts and the
receipt and disbursement of insurance commissions and fees
thereon. Such books and records will be maintained and
preserved in conformity with the requirements of Section 17(a)
of the 1934 Act and the Rules thereunder, to the extent
applicable, and will at all times be compiled and maintained
in a manner that permits inspection by supervisory personnel
of the Wholesaler, the SEC, the NASD, and other appropriate
regulatory authorities.
19) Broker agrees to comply with the policies and procedures of
GAD 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, privacy policies and
procedures, as those policies and procedures may be provided
to Broker by GAD from time to time.
20) For a period of 12 months after termination of the Agreement,
the Agency shall not, directly or indirectly, on a systematic
basis, contact the policyholders of the Company or condone
such contact for the purpose of inducing any such
policyholders to lapse, cancel, and fail to renew or replace
any Contract. If the Agency, in the judgment of GAD is
determined to have engaged in such prohibited activity, then
GAD shall have the right to declare the Agency's claims for
compensation or any other benefit under the Agreement shall be
forfeited and void. GAD may also pursue all remedies,
including injunction, to assure compliance with the covenants
in this section
Page 12 of 34
and shall, if successful, be entitled to recover from the
Agency all costs and expenses incurred in pursuing such
remedies, including reasonable attorneys' fees.
IV. PRINCIPLES OF ETHICAL MARKET CONDUCT
As a member of the American Council of Life Insurance's
Insurance Marketplace Standards Association (IMSA), GAD
expects that the Agency and its subagents will abide by the
six principles of ethical market conduct set forth by IMSA in
connection with all Contracts sold pursuant to this Agreement.
The six principles are as follows: (a) to conduct business
according to high standards of honesty and fairness and to
render that service to its customers which in the same
circumstances, it would apply to or demand for itself; (b) to
provide competent and customer focused sales and service; (c)
to engage in active and fair competition; (d) to provide
advertising and sales material that are clear as to purpose
and honest and fair as to content; (e) to provide fair and
expeditious handling of customer complaints and disputes; and
(f) to maintain a system of supervision and review that is
reasonably designed to achieve compliance with these
principles of ethical market conduct.
V. COMPENSATION
1) GAD shall pay compensation to Wholesaler as set forth in the
attached Compensation Schedule (Exhibit A), while it is in
effect.
2) GAD may at any time offset against any compensation payable to
(a) Agency or its successors or assigns, any indebtedness due
from the Agency to GAD, and (b) the subagents or their
successors or assigns any indebtedness due from the subagent
to GAD. Nothing contained herein shall be construed as giving
Agency the right to incur any indebtedness on behalf of GAD.
Any remaining indebtedness of Wholesaler to GAD arising under
this Agreement shall be a first lien against any monies
payable hereunder. The right of Wholesaler, or any person
claiming through Wholesaler to receive any compensation
provided by this Agreement shall be subordinate to the right
of GAD to offset such compensation against any such
indebtedness of the Wholesaler to GAD.
3) No compensation shall be payable, and any compensation already
paid shall be returned to GAD on request, under each of the
following conditions:
a) if GAD, in its sole discretion, determines not to issue
the Contract applied for,
Page 13 of 34
b) if GAD refunds the premium paid by the applicant, upon
the exercise of applicant's right of withdrawal pursuant
to any "free-look" privilege,
c) if GAD refunds the premium paid by applicant as a result
of the resolution of a consumer complaint, recognizing
that GAD has sole discretion to refund premiums paid by
applicants, or
d) if GAD determines 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.
4) GAD shall pay the compensation to Agency for Contracts
credited to the Agency under the Agreement, as set forth in
Compensation Schedule, attached, while it is in effect. Such
Compensation shall be payable when the premium is due and paid
to GAD subject to the provisions of this Agreement and of the
Compensation Schedule.
5) GAD shall not be obligated to pay any compensation, which
would violate the applicable laws of any jurisdictions,
anything in this Agreement notwithstanding.
6) In addition to the conditions and limitations elsewhere
contained in the Agreement and the Compensation Schedule(s),
no first year commission shall be payable on replacements or
switches of an Affiliate Contract with another Affiliate
Contract, which are undisclosed, and which otherwise require
disclosure by either state regulation or GAD rules on
replacement transactions; specific GAD rules for such
Affiliate replacements are hereby incorporated by reference in
Exhibit C.
7) With respect to compensation under this Agreement, in the
event that anything contained in this Section V conflicts with
the terms of the compensation described in the attached
product schedules, the terms contained in such schedules
attached will prevail.
VI. COMPLAINTS AND INVESTIGATIONS
1) Wholesaler and GAD jointly agree to cooperate fully in any
regulatory investigation or proceeding or judicial proceeding
arising in connection with the offer, sale, and/or servicing
of the Contracts.
Page 14 of 34
2) Both the Wholesaler and GAD jointly agree to investigate any
customer complaint in connection with the Contracts. The term
customer complaint shall mean an oral or written communication
either directly from the purchaser of or applicant for
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.
3) Such cooperation referred to in Sections VI (1) and VI (2) of
this Agreement shall include, but is not limited to, each
party promptly notifying the other of the receipt of notice of
any such investigation or proceeding, forwarding to the other
party a copy of any written materials in connection with the
matter and such additional information as may be necessary to
furnish a complete understanding of same. In the case of a
customer complaint, promptly refer such complaint to the other
party for handling where appropriate and provide the other
party with customer complaint information and documentation
upon request. A complaint is defined as a written or
documented verbal communication received by a company or its
distributors, which primarily expresses a grievance.
4) GAD 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,
policyholders 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 GAD and GAD, on behalf
of itself, settles the matter, Broker shall indemnify and hold
harmless GAD from any and all claims, complaints or grievances
made by Broker or any applicant, policyholder or other made in
connection with such matter.
VII. RECORDS AND ADMINISTRATION
1) Once a Contract has been issued, it will be delivered after
review by Wholesaler to the applicant, accompanied by any
applicable Notice of Withdrawal Right and any additional
appropriate documents. GAD will confirm or cause to be
confirmed to customers all Contract transactions, as to the
extent legally required, and will administer the Contracts
after they have been delivered, but may from time to time
require assistance from Wholesaler. Wholesaler hereby
undertakes to render such assistance to GAD.
Page 15 of 34
2) Wholesaler will maintain all books and records as required by
Rules 17a-3 and 17a-4 under the 1934 Act, except to the extent
that GAD may agree to maintain any such records on
Wholesaler's behalf. Records subject to any such agreement
shall be maintained by GAD as agent for Wholesaler in
compliance with said rules, and such records shall be and
remain the property of Wholesaler 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 GAD's right to ownership and control of all pertinent
records and documents pertaining to its business operations
including, without limitation, its operations relating to the
Contracts, which right is hereby recognized and affirmed. GAD
and Wholesaler agree that each shall 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 or regulation, as Confidential Information as described in
Section VIII(B) of this Agreement, and neither party shall
reveal or disclose such Confidential Information to any third
party unless such disclosure is authorized by the party
affected thereby or unless such disclosure is expressly
required by applicable federal or state regulatory
authorities. However, nothing contained herein shall be deemed
to interfere with any document, record or other information,
which by law, is a matter of public record.
VIII. PRIVACY INFORMATION
A. PROPRIETARY INFORMATION
Any and all account records developed by GAD or provided to
GAD by Wholesaler or its Affiliates, including but not limited
to customer files, sales aides, computer software, customer
names, addresses, telephone numbers and related paperwork,
literature, authorizations, manuals and supplies of every kind
and nature relating to the Contracts and the servicing of the
Contracts are and shall remain the property of GAD. Such
proprietary information and materials shall be treated as
nonpublic personal information and/or confidential
information, as appropriate pursuant to Sections VIII(A), (B),
(C), and (D) of this Agreement.
Any and all proprietary information and material developed and
provided by GAD shall be returned to GAD (including all copies
made by the Wholesaler or its Affiliates) upon termination of
this Agreement. Any materials developed by the Wholesaler or
its Affiliates in support of the marketing, sales, advertising
or training related to GAD or its Contracts shall be destroyed
upon the termination of the Agreement.
Page 16 of 34
B. RECEIPT OF CUSTOMER NONPUBLIC PERSONAL INFORMATION FROM
WHOLESALER BY GAD
1) GAD will treat nonpublic personal information regarding
Wholesaler's customers provided to it by Wholesaler under this
Agreement as Confidential Information under Section VIII(B) of
this Agreement, except that such provisions shall not apply to
such information regarding customers of Wholesaler who were,
are or become policyholders or customers of GAD or any of its
Affiliates other than by reason of the services provided by
Wholesaler under this Agreement.
2) Notwithstanding the foregoing, GAD and its Affiliates shall
have the right to use or disclose such nonpublic personal
information: (a) to the full extent required to comply with
Applicable Laws or requests of regulators; (b) as necessary in
connection with any of GAD's audit, legal, compliance or
accounting procedures; (c) as necessary or permitted by
Applicable Laws in the ordinary course of business, for
example to administer Contracts and provide customer service
to purchasers of Contracts under this Agreement; (d) as
authorized by such customer; and (e) to protect against or
prevent fraud.
3) GAD 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 Wholesaler
provided they do not use nonpublic personal information
regarding Wholesaler's customers provided by Wholesaler to
specifically target customers, and such marketing, offering,
selling or distributing by GAD 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.
C. TREATMENT OF NONPUBLIC PERSONAL INFORMATION DISCLOSED TO
WHOLESALER BY GAD
Wholesaler will treat nonpublic personal information regarding
Wholesaler's customers provided to it by GAD under this
Agreement as Confidential Information and shall use such
information only to solicit sales of and to provide service
with respect to Contracts sold pursuant to this Agreement.
Notwithstanding the foregoing, Wholesaler shall have the right
to use or disclose nonpublic personal information provided to
it by GAD to the extent permitted by Applicable Laws and GAD's
privacy policy, for example, to comply with Applicable Laws or
requests of regulators, in connection with Wholesaler's audit
procedures, as authorized by such customers, and to protect
against or prevent fraud.
Page 17 of 34
D. CONFIDENTIAL INFORMATION
1) GAD and Wholesaler will maintain the confidentiality of
Confidential Information disclosed by either party to the
other party under the terms of this Agreement. Except as
otherwise provided in Sections VIII(A) and VIII(B), neither
GAD nor Wholesaler shall disclose any Confidential Information
that is covered by this Agreement, and shall only disclose
such information if authorized in writing by the affected
party or if expressly required under the terms of a valid
subpoena or order issued by a court of competent jurisdiction
or regulatory body or applicable laws and regulations.
"Confidential Information" means: (a) any information that
this Agreement specifies will be treated as "Confidential
Information" under this Section VIII(B); (b) any information
of Wholesaler and their Affiliates disclosed by Wholesaler to
GAD through the course of business during the term of this
Agreement, or any information of GAD and its Affiliates that
is disclosed by GAD to Wholesaler through the course of
business during the term of this Agreement, in each such case
if such information is clearly identified as and marked
"confidential" by the disclosing party, such information
includes, but is not limited to, new products, marketing
strategies and materials, development plans, customer
information, client lists, pricing information, rates and
values, financial information and computer systems; (c)
nonpublic personal information; and (d) information required
to be treated as confidential under Applicable Laws.
2) "Confidential Information" does not include (i) information
which is now generally available in the public domain or which
in the future enters the public domain through no fault of the
receiving party; (ii) information that is disclosed to the
receiving party by a third party without violation by such
third party of an independent obligation of confidentiality of
which the receiving party is aware; or (iii) information that
the disclosing party consents in writing that the receiving
party may disclose.
3) The disclosing party warrants that it has the right to provide
access to, disclose and use, the Confidential Information to
be provided hereunder. The receiving party shall not be liable
to the other for:
a) inadvertent use, publication, or dissemination of the
Confidential Information received hereunder provided
that: (i) it uses the same degree of care in safeguarding
such information as it used for its own information of
like importance; (ii) it has complied with Applicable
Laws; and (iii) upon discovery of such, it shall take
steps to prevent any further inadvertent use,
publication, or dissemination; and/or
Page 18 of 34
b) unauthorized use, publication or dissemination of the
Confidential Information received hereunder by persons
who are or have been in its employ unless it fails to
safeguard such information with the same degree of care
as it uses for its own proprietary information of like
importance and provided that the receiving party uses
such Confidential Information in accordance with
Applicable Laws.
4) Any similarity between the Confidential Information and any
other information, regardless of medium, whether verbal or
written, as well as contracts and/or services acquired from
third parties or developed by the receiving party, or
Affiliates independently through its or their own efforts,
thought, labor and ingenuity shall not constitute any
violation of this Agreement and shall not subject the
receiving party to any liability whatsoever.
5) The receiving party shall use the Confidential Information
solely for purposes contemplated by this Agreement and shall
not disclose the Confidential Information except as expressly
provided herein.
6) The receiving party understands that neither the disclosing
party nor any of its representatives or designees have made or
make any representation or warranty as to the accuracy or
completeness of the Confidential Information.
E. PROTECTED HEALTH INFORMATION
To the extent that Broker and its Representatives receive, create,
has access to or uses PHI, as that term is defined in Section I of
the Agreement, regarding individuals who are applicants for, owners
of or eligible for benefits under certain health insurance products
and optional riders offered by or through GAD or any of its
Affiliates, in accordance with the requirements of the federal
Health Insurance Portability and Accountability Act of 1996 and
related regulations ("HIPAA"), as may be amended from time to time,
Broker agrees:
1) Not to use or disclose PHI except (i.) to perform functions,
activities, or services for, or on behalf of, GAD or its
Affiliates as specified in the Agreement and consistent with
applicable laws, or (ii.) to the extent that such use or
disclosure is required by law. Any such use or disclosure
shall be limited to that required to perform such services or
to that required by relevant law.
2) To use appropriate safeguards to prevent use or disclosure of
PHI other than as permitted by this Agreement.
Page 19 of 34
3) To promptly report to GAD any use or disclosure of PHI not
permitted by this Agreement of which Broker becomes aware and
to mitigate any harmful effect of any use or disclosure that
is made by Broker or its Representatives in violation of the
requirements of this Agreement.
4) To ensure that any third party with whom Broker contracts or
is hired under that arrangement, receives or has access to PHI
agrees to the same restrictions and conditions that apply to
Broker with respect to PHI under this Agreement.
5) To, within 15 days of GAD's request, provide GAD with any PHI
or information relating to PHI as deemed necessary by GAD to
provide individuals with access to, amendment of, and an
accounting of disclosures of their PHI.
6) To make Broker's records relating to 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
GAD's, or one of its Affiliate's, compliance with HIPAA.
7) To, upon termination of this Agreement, in accordance with
GAD's wishes either return or destroy all PHI Broker maintains
in any form and retain no copies. If GAD agrees that such
return or destruction is not feasible, Broker shall extend
these protections to the PHI beyond the termination of the
Agreement, in which case any further use or disclosure of the
PHI will be solely for the purposes that make return or
destruction infeasible. Destruction without retention of
copies is deemed "infeasible" if prohibited by the terms of
the Agreement or by applicable law, including record retention
requirements of various state insurance laws.
IX. INDEMNIFICATION
1) Except with respect to matters relating to the joint
distribution of Contracts, the following indemnification
provisions shall apply:
a) GAD will indemnify and hold harmless Wholesaler from any
and all losses, claims, damages or liabilities (or
actions in respect thereof), to which Wholesaler may
become subject, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Prospectus, Registration Statements or any other sales or
offering materials furnished or approved in writing by
GAD for any of the Contracts or any relevant funding
vehicle or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged
Page 20 of 34
omission to state therein a material fact required to be
stated therein or necessary to make the statements
therein not misleading; and will reimburse Wholesaler for
any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such
loss, claim, damage, liability or action in respect
thereof; provided, however, that GAD shall not be liable
in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or
omission or alleged omission made by Wholesaler when
referring to or explaining such Prospectus, amendment,
Registration Statement or any other sales or offering
materials. GAD shall not indemnify Wholesaler for any
action where an applicant for any of the Contracts was
not furnished or sent or given, at or prior to written
confirmation of the sale of a Contract, a copy of the
appropriate Prospectus (es), any Statement of Additional
Information, if required or requested, and any
supplements or amendments to either furnished to
Wholesaler by GAD. The forgoing indemnities shall, upon
the same terms and conditions, extend to and inure to the
benefit of each director, trustee and officer of
Wholesaler and any person controlling it.
b) Wholesaler will indemnify and hold harmless GAD against
any losses, claims, damages or liabilities (or actions in
respect thereof), to which GAD may become subject,
insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based
upon any negligent, improper, fraudulent or unauthorized
acts or omissions by Wholesaler, its employees, agents,
representatives, officers or directors, including but not
limited to improper or unlawful sales practices, any
statement or alleged untrue statement of any material
fact, any omission or alleged omission, any unauthorized
use of sales materials or advertisements, and any oral or
written misrepresentations; and will reimburse GAD for
any legal or other expenses reasonably incurred by it in
connection with investigating or defending against any
such loss, claim, damage, liability or action. The
foregoing indemnities shall, upon the same terms and
conditions, extend to and inure to the benefit of each
director, trustee and officer of GAD and any person
controlling it.
c) Wholesaler shall indemnify and hold harmless GAD from any
and all losses, claims, damages or liabilities (or
actions in respect thereof) to which GAD may be subject,
insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or result
from any breach of any representation or warranty,
covenant, agreement, obligation or undertaking in this
Agreement by Wholesaler or its directors, officers,
employees or other representatives or by any other person
or entity acting on behalf of or under control of
Wholesaler; and xxxx
Xxxx 21 of 34
reimburse GAD for any legal or other expenses reasonably
incurred by it in connection with investigating or
defending against any such loss, claim, damage, liability
or action. The foregoing indemnities shall, upon the same
terms and conditions, extend to and inure to the benefit
of each director, trustee and officer of GAD and any
person controlling it.
d) Wholesaler shall indemnify and hold GAD harmless for any
penalties, losses or liabilities resulting from GAD
improperly paying any compensation under this Agreement,
unless such improper payment was caused by GAD's
negligence or willful misconduct; and will reimburse GAD
for any legal or other expenses reasonably incurred by it
in connection with investigating or defending against any
such loss, claim, damage, liability or action. The
foregoing indemnities shall, upon the same terms and
conditions, extend to and inure to the benefit of each
director, trustee and officer of GAD and any person
controlling it.
2) Promptly after receipt by an indemnified party of notice of
the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the
indemnifying party, notify the indemnifying party in writing
of the commencement thereof; but the omission to notify the
indemnifying party shall not relieve it from any liability
which it may otherwise have to any indemnified party. In case
any such action shall be brought against any indemnified
party, it shall notify the indemnifying party of the
commencement thereof. The indemnifying party shall be entitled
to participate in, and, to the extent that it shall wish,
jointly with any other indemnifying party, similarly notified,
to assume the defense thereof, with counsel satisfactory to
such indemnified party. After notice from the indemnifying
party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other
expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation.
X. GENERAL PROVISIONS
A. TERM AND TERMINATION
1) This Agreement shall continue in force for one year from its
Effective Date and thereafter shall automatically be renewed
every year for a further one year period; provided that either
party may unilaterally terminate this Agreement with or
without cause upon sixty (60) days' written notice to the
other party of its intention to do so.
Page 22 of 34
2) Change in Status.
a) Broker-Dealer Status. The Agreement shall terminate
immediately upon GAD or Wholesaler ceasing to be a
registered Broker-dealer or a member of the NASD.
b) 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.
3) Upon termination of this Agreement, all authorizations, rights
and obligations shall cease except (a) the agreements
contained in Sections, VI, VIII, IX, X(E), X(F), and X(J)
hereof; and (b) the obligation to settle accounts hereunder.
Except with respect to records maintained by or on behalf of
Wholesaler pursuant to Rules 17a-3 and 17a-4 under the 1934
Act, Wholesaler shall return to GAD, within 30 days after the
Effective Date of termination, any and all records in its
possession which have been specifically maintained in
connection with GAD's operations related to the Contracts.
B. ASSIGNABILITY
This Agreement shall not be assigned by either party without
the written consent of the other.
C. 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.
D. NOTICES
Notices to be given hereunder shall be addressed to:
General American Distributors, Inc. _____________
Attn: Law Department _____________
00000 Xxxxxx Xxxxx Xxxx _____________
Xx. Xxxxx, XX 00000 _____________
Page 23 of 34
E. ARBITRATION
1) All disputes and differences between the parties, other than
those arising with respect to the use of nonpublic personal
information under Section VIII must be decided by arbitration,
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.
2) 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.
3) 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.
4) Each party shall select an arbitrator within thirty-days (30)
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 will 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.
5) The arbitrators shall interpret this Agreement as an honorable
engagement rather than merely as a legal obligation and shall
consider practical business and equitable principles as well
as industry custom and practice regarding the applicable
insurance and securities business. The arbitrators are
released from judicial formalities and shall not be bound by
strict rules of procedure and evidence.
6) The arbitrators shall determine all arbitration schedules and
procedural rules. Organizational and other meetings will be
held in Missouri, unless the arbitrators select another
location. The arbitrators shall decide all matters by majority
vote.
Page 24 of 34
7) 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.
8) Unless the arbitrators shall provide otherwise, each party
will 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)
one-half (1/2) of the expenses of the arbitration, including
the fees and expenses of the arbitrators
F. GOVERNING LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri without
regard to Missouri choice of law provisions.
G. 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
representatives shall be binding.
H. NO THIRD PARTY BENEFICIARIES
Nothing in the Agreement shall convey any rights upon any
person or entity, which is not a party to the Agreement.
I. NON-EXCLUSIVITY
Wholesaler and Agency agree that no territory or product is
assigned exclusively hereunder and that GAD 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 Wholesaler
transacts business hereunder.
J. 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 25 of 34
K. COUNTERPARTS
This Agreement may be executed in counterparts, with the same
force and effect as if executed in one complete document.
L. 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
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract and
agree.
GENERAL AMERICAN DISTRIBUTORS
(BROKER-DEALER)
By__________________________________
____________________________________
Print Name & Title
Date________________________________
(WHOLESALER)
By__________________________________
____________________________________
Print Name & Title
Date________________________________
Page 26 of 34
EXHIBIT A
WHOLESALING ALLOWANCE
GEN AMERICA LIFE INSURANCE COMPANY
In addition to the compensation to the retail BD, General American Distributors
(GAD) agrees to pay to the Wholesaler an additional allowance equal to 24% of
target premium and 1% of excess premium in the first year on VUL (00), and VUL
(2002).
In addition, 1% of renewal premiums will be payable on VUL(00) and VUL 2002.
NEW ENGLAND LIFE INSURANCE COMPANY
For policies credited to the Agency under the Agreement while this part is in
effect, marketing allowance payable to the Agency shall be the following
percentages of recurring premiums (up to Target Premiums) and shall be payable
when the premium is due and paid to the Company, subject to the provisions of
the Agreement.
FIRST YEAR WHOLESALING ALLOWANCE
24% of target premium for VUSL Bands 1 & 2, VUL
Bands 0, 1 & 2, VOL Bands 1 & 2
RENEWAL YEAR WHOLESALING ALLOWANCE - YEARS 2-10
2.50% for; VUL Bands 0 & 1
2.25% for VUL Band 2;
2.00% for VUSL Band 1 & 2
EXCESS PREMIUMS (YEARS 1-10)
0.5% premiums over the Target Premium on VUL , VUSL, VOL
SERVICE FEES: No service fees are payable on target premium or
excess premium.
ENTERPRISE EXECUTIVE ADVANTAGE - (EEA - COLI)
Year 1 Target 3.00%
Year 1 Excess 0%
Year 2+ Target 0%
Year 2+ Excess 0%
VARIABLE UNIVERSAL SURVIVORSHIP LIFE (VUSL)
COMMISSION CHARGEBACK
If for any reason the policy lapses anytime prior to the 13th month, all
unearned Wholesale allowances (up to the Target Premium) already received by the
agent are charged back as well as one-half of the earned Wholesale allowances.
Wholesale allowances received on dump-in amounts above the Target Premium are
not charged back. Partial surrenders prior to the 13th month will result in
partial chargebacks
Page 27 of 34
% of TARGET Premium by Policy Year YEAR 1 YEARS 2-5 YEARS 6-10 YEARS 11+
---------------------------------- ------ --------- ---------- ---------
Wholesale allowance 20% 1% 1% 1%
Total on Target to Wholesale BD 20% 1% 1% 1%
% of EXCESS Premium by Policy Year YEAR 1 YEARS 2-5 YEARS 6-10 YEARS 11+
---------------------------------- ------ --------- ---------- ---------
Wholesale allowance 1% 1% 1% 1%
Total on Excess to Wholesale BD 1% 1% 1% 1%
METLIFE
In addition to the compensation to the retail BD, MetLife agrees to pay to the
Wholesaler an additional allowance equal to 22.5% of target premium in the FIRST
Year
Renewal Allowance
UL (01) and UL1
% of Renewal Premium
Years 2-4 Years 5-10
--------- ----------
Target $0 - $499,999 3% 2.25%
Target $500,000 - $2.0 Mil 3.75% 2.25%
Target $ >2.0 Mil 4.5% 2.25%
Page 28 of 34
EXHIBIT B
SCHEDULE OF FIXED PRODUCT AND COMPENSATION
Page 29 of 34
EXHIBIT C
REWRITTEN BUSINESS (RWB) COMMISSION RULES
(formerly, Replacement Commission Rules)
EFFECTIVE JUNE 1, 2002
Note: Notwithstanding the rules below, no FYC will be payable on internal
replacements or switches that are undisclosed, which includes all internal
replacements or switches for which disclosure is required by either state
regulation or GAD rules.
A. DEFINITIONS
For most states and for the GAD enterprise, a replacement can be broadly defined
as purchasing a new policy in connection with discontinuing or changing another
policy. Such a definition applies for disclosure purposes and when replacement
forms must be completed. However, for purposes of Rewritten Business (RWB)
commission rules, the definition is more limited.
APPLICATION OF RWB COMMISSION RULES: A new individual life insurance policy
issued within the Enterprise will be subject to RWB commission rules if a
premium-paying life insurance policy (the "old policy") previously issued within
the Enterprise on the same life meets one of the following criteria within six
months before or 12 months after the Home Office Receipt Date (XXXX) of a new
life policy (the "RWB WINDOW"; for a new annuity, the RWB window is three months
before and after the issue date):
- Is fully or partially lapsed, including lapse to extended term or reduced
paid-up;
- Is fully or partially surrendered;
- Has a reduction in annualized premium through a policy change;
- Has a loan taken out that results in the total outstanding loan exceeding
80% of the total loan value of the policy, and the policy subsequently
lapses, is surrendered or has a reduction in annualized premium, with less
than four months of additional premiums being paid after the policy loan.
However, the new policy will not be considered rewritten business for RWB
commission rule purposes, even though the insured is the same, if (a) a change
in ownership occurs involving a corporation, a qualified retirement plan or an
irrevocable trust; (b) a corporate-owned policy is terminated because of
business failure or bankruptcy; (c) a life policy is cancelled because of a
court-ordered settlement; or (d) a juvenile policy owned by parents, guardians
or a trust is rewritten by a new policy on the same life that also owns the new
policy and is an adult (age 18 or older).
For survivorship policies, a survivorship policy "rewrites" a single life policy
(or vice versa) if one of the insureds on the survivorship policy is the insured
on the single life policy. However, one survivorship policy rewrites another
only if both insureds are the same.
The RWB commission rules will be applied, assuming the above definitions are
satisfied, even though
- No funds are moved from the old policy to the new policy; or
- The agent is not told and does not know of the rewritten business; or
- The policy ownership or policy payor changes, except for changes in
ownership involving a corporation, a qualified retirement plan or an
irrevocable trust.
OLD MONEY: The net cash value released (excluding dividend accumulations) from
the old policy during the RWB Window, whether that cash value is explicitly
rolled into the new policy or not. In addition, a full or partial
Page 30 of 34
surrender of paid-up additions (or of a paid-up policy) on the same life is
considered rollover money if it falls within the RWB window, even if the old
policy is not otherwise changed or "rewritten".
NEW MONEY: The excess, if any, of the amount applied to the new policy over the
Old Money, on or within 12 months after the issue date of the new policy.
OLD PREMIUM: The amount of first year premium paid (up to the target premium for
flexible premium policies) on the old policy.
NEW PREMIUM: The amount of first year premium paid (up to the target premium for
flexible premium policies) on the new policy. This amount may be paid by either
Old Money or New Money.
B. Life-to-Life (Permanent or Term)
FYC ON OLD MONEY:
No FYC will be payable.
FYC ON NEW MONEY
FYC will then be payable as follows.
a. FOR THE AMOUNT OF NEW MONEY UP TO THE OLD PREMIUM LEVEL,
If the New Premium is at least double the Old Premium and the old policy is
at least five years old, then full first commissions are payable.
If the New Premium is less than double the Old Premium or the old policy is
less than five years old, then first commission are payable as follows:
% OF NORMAL FYC IF
EXISTING POLICY REPLACED % OF NORMAL FYC IF EXISTING POLICY
YEARS EXISTING BY ORIGINAL WRITING AGENT REPLACED BY NEW AGENT (NOT A
POLICY IN FORCE (OR "BUSINESS SUCCESSOR") "BUSINESS SUCCESSOR")
--------------- ------------------------- ---------------------
LESS THAN 5 YEARS 0% 0%
5 YEARS < 6 YEARS 25% 25%
6 YEARS < 7 YEARS 30% 25%
7 YEARS < 8 YEARS 35% 25%
8 YEARS < 9 YEARS 40% 25%
9 YEARS < 10 YEARS 45% 25%
10+ YEARS 50% 25%
EXCEPTIONS:
Term insurance sold after 1/1/01 will receive double the above rates if
later rewritten.
If a level term policy is rewritten to another term policy in the last
two years of its level premium period, full normal first year
commissions will be paid
Page 31 of 34
If a term policy is converted as of attained age to a permanent policy,
the commission rules applicable to attained-age term conversions will
be applied, whether or not a term conversion was available and whether
or not a term conversion was actually performed.
b. FOR THE AMOUNT OF NEW MONEY IN EXCESS OF THE OLD PREMIUM LEVEL, UP TO THE
NEW PREMIUM LEVEL.
Full normal first commissions are payable.
c. FOR THE BALANCE OF ANY NEW MONEY, APPLIED AS EXCESS, LUMP-SUM, OR DUMP-IN.
Full normal excess, single premium or paid up additions commissions will be
paid.
OTHER CONSIDERATIONS
1. In applying these rules, the Company may estimate the amount of premium to
be paid in the first year after the replacement and determine a single
percentage of normal commission to be paid on future first year premium
payments, combining the reduced rate in (a) above with the full rate in (b)
above. A review may be made at or before the first anniversary and an
adjustment made if the actual premiums paid differ from those that had been
expected.
2. Full renewal commissions will be payable on the new policy.
3. Rewritten premium will not count as a chargeable termination in any bonus
calculation if the old policy is at least five years old when it is
rewritten. However, any other rewritten premium, including any excess of
the Old Premium over the New Premium (i.e., premium that is not rewritten)
will count as a chargeable termination.
4. All commissions on the new policy will be payable to the writing agent of
the new policy.
5. There are no longer separate rules for pension policies.
C. LIFE-TO-ANNUITY, MUTUAL FUND, OR WRAP ACCOUNT
Rewrites of a life policy to an annuity, mutual fund or wrap account will now be
subject to RWB commission rules. The RWB window will be three months before to
three months after the issue date of the new contract. The net cash released
from the life policy will be considered Old Money.
- If the life policy if less than 10 years old, no first-year commission will
be paid on Old Money;
- If the life policy is more than 10 years old, full normal commission will
be paid on Old Money;
- Full normal commission will be paid on New Money.
D. ANNUITY-TO-LIFE
Annuity-to-life rewrites are not subject to RWB commission rules; full
normal commissions are payable.
Page 32 of 34
E. ANNUITY-TO-ANNUITY
Annuity-to-annuity rewrites are subject to RWB commission rules. The RWB window
will be three months before to three months after the issue date of the new
annuity. The net cash released by the old annuity will be considered Old Money.
If a variable annuity is rewritten by another variable annuity, no commissions
will be payable unless the initial deposit on the new annuity exceeds the
terminated value in the old annuity. In that case, a normal commission will be
paid on the increase.
For a fixed-to-fixed, fixed-to-variable or variable-to-fixed rewritten annuity,
no first year commissions will be payable unless (1) the initial deposit on the
new annuity exceeds the terminated value in the old annuity; or (2) the old
annuity is beyond its surrender charge period; or (3) the old fixed annuity is
within 30 days of the end of a rate guarantee window. In these cases, a full
normal FYC will be paid on any increased deposit and 50% of a normal FYC will be
paid on the balance.
If, under a Spousal Transfer Provision, the spousal beneficiary of an annuity
death claim elects to retain the proceeds in and to become the annuitant of the
existing contract, no commission will be paid on the amount transferred. If,
instead, the death proceeds are moved to a new annuity but not through a Spousal
Transfer Provision, no FYC will be paid. In either case, full normal commissions
will be paid on any New Money
F. ANNUITY-TO-MUTUAL FUND OR WRAP ACCOUNT
No commission will be paid on Old Money if a mutual fund or wrap account
replaces an annuity that is subject to a surrender charge. The Old Money will be
considered the cash released by the annuity, and the RWB window will be three
months before and three months after the effective date of the fund or wrap
account.
G. DISABILITY-TO-DISABILITY
For disability-to-disability rewrites, there is no change from previous
replacement commission rules. If there is an increase in annual premium on the
new policy, a full first-year commission will be paid on the increased premium.
No first-year commission will be paid on the balance of premium. A full new
scale of renewal commissions will be paid only on the increased premium. The old
renewal scale, measured from the original issue date, will be continued on the
balance of the premium. If there is no increase in annual premium on the new
policy, no first-year commission will be paid and the old renewal scale will be
continued, measured from the original issue date.
H. EXCHANGE PROGRAMS
A policy that qualifies for a special exchange offer will be subject to special
exchange commission rules that may differ from normal RWB commission rules. A
policy that would qualify for an exchange offer will be treated according to
exchange commission rules even if a rewriting occurs instead.
Page 33 of 34
EXHIBIT D
AFFILIATED INSURANCE AGENCY
The Wholesaler/Dealer named below ("Wholesaler"), having executed a
Sales Agreement ("Agreement") with General American Distributors ("GAD") dated
_____________ which, provides for sales of GAD's Variable Contracts through a
designated affiliated insurance agency or agencies ("Agency"), hereby designates
the Agency named below pursuant to Section III(B) of the Agreement. Wholesaler
and Agency hereby represent and warrant that the Agency named below is and will
be maintained in compliance with this Agreement.
__________________________________________
Affiliated Insurance Agency Name
By: ______________________________________
__________________________________________
Print Name & Title
__________________________________________
(Tax Identification Number)
__________________________________________
Affiliated Insurance Agency Name
By: ______________________________________
__________________________________________
Print Name & Title
__________________________________________
(Tax Identification Number)
Page 34 of 34
