AFFILIATION AGREEMENT
THIS AGREEMENT is made among Fidelity Security Life Insurance Company (the
"Insurance Company"), National Pension and Group Consultants, Inc.
("Underwriter") and Xxxxxxx X. Xxxxx & Company (the "Selling Entity"), an
affiliated insurance agency of Underwriter.
In consideration of the mutual promises contained in this agreement, the
parties agree as follows:
1. Purpose and Background. The Underwriter, the Insurance Company and
Selling Entity enter into this agreement for the purpose of authorizing Selling
Entity through certain of its insurance licensed agents to solicit applications
for such life insurance, annuity contracts and such other insurance products as
shall be mutually agreed upon (collectively, the "Insurance Policies") as are
listed on the Schedule Pages. The Schedules Pages may be amended from time to
time to add other Insurance Policies.
2. Licensing and Appointment. The Insurance Company has appointed
Underwriter to serve as the distributor and principal underwriter of the
variable life or variable annuity Insurance Policies. The Underwriter is
registered with the SEC, the National Association of Securities Dealers, Inc.
("NASD") and all appropriate state securities regulatory authorities as a
broker/dealer.
3. Securities Licensing/NASD Compliance. Underwriter shall at all times
when performing its functions under this agreement, be registered as a
securities broker with the SEC and NASD and licensed or registered as a
securities broker/dealer in the states and other local jurisdictions that
require such licensing or registration in connection with sales of variable
products.
Underwriter agrees to abide by all applicable state and federal rules and
regulations promulgated thereunder. For the purpose of compliance with any such
laws or regulations, Underwriter acknowledges and agrees that in performing
services covered by this agreement, it is acting in the capacity of an
independent broker and dealer, as defined by the By-Laws of the NASD, and not as
an agent or employee of any registered investment company.
4. Insurance Licensing. Selling Entity represents that at all times when
performing its functions under this agreement, it shall be validly licensed as
an insurance agency in the states and other jurisdictions that require such
licensing or registration in connection with sales or solicitation of the
Insurance Policies. Selling Entity represents that it is properly authorized as
required under applicable state law to receive insurance commissions generated
from sales of the Insurance Policies.
5. Selling Entity; Sale and Solicitation of Variable Insurance Policies
Underwriter and Selling Entity represent that they will engage in the
solicitation and sale of Insurance Policies in accordance with applicable
securities laws and regulations. In this process, Underwriter represents that
Selling Entity is an associated person as that term is defined under Section
3(a)(18) of the Securities Exchange Act of 1934, as amended. Underwriter further
represents that it will maintain supervision and control over the activities of
each of the validly insurance licensed representatives appointed by Selling
Entity engaged in the solicitation and sales of Insurance Policies pursuant to
this agreement. Each such representative will be a registered representative of
Underwriter (each, a "Registered Representative").
Underwriter will ensure that Selling Entity will be licensed as required to
receive commissions for the sale of variable products in each applicable state.
Additionally, Underwriter represents that individuals who are not properly
licensed under securities laws and regulations will not engage in any way in the
solicitation or sale of variable Insurance Policies.
Underwriter agrees that it will maintain such books and records (including
but not limited to FOCUS reports) as are necessary to comply with the rules of
the NASD or other self-regulatory organizations.
6. Appointment of Selling Agency. The Insurance Company and Underwriter
hereby authorize the Selling Entity to sell those Insurance Policies listed on
the Schedule Pages, as such pages may be amended from time to time, including
the variable Insurance Policies through its validly appointed and licensed
Registered Representatives. Selling Entity is also appointed to perform certain
administrative services necessary to facilitate the solicitation and sales of
the Insurance Policies.
Selling Entity is appointed a general agency of Insurance Company and is
authorized to sell the Insurance Policies listed on the Schedule Pages.
Pursuant to the appointments described in this Section 6, Selling Entity
must comply with the following requirements:
(a) All securities services provided in connection with the sale of
variable Insurance Policies will be through Underwriter and its Registered
Representatives;
(b) All individuals soliciting sales of Insurance Policies will be properly
licensed and appointed by the Insurance Company as required in accordance with
the state insurance laws of those jurisdictions in which the Insurance Policies
are distributed;
(c) Unregistered employees will not engage in any securities activities,
nor receive any compensation based on transactions in insurance securities or
the provision of securities advice;
(d) Underwriter will maintain books and records relating to transactions in
insurance securities at its home office; and
(e) Customers purchasing variable Insurance Policies will make their checks
payable to Insurance Company unless a netting agreement has been entered into.
For the purpose of compliance with any applicable state insurance laws or
regulations promulgated under them, Underwriter and the Selling Entity
acknowledge and agree that solely in performing the insurance-selling functions
reflected by this agreement, they or the Registered Representative are acting as
the agent of the Insurance Company, and in that capacity are authorized only to
solicit applications from the public for the Insurance Policies.
7. Responsibility for Registered Representatives Activities. Underwriter
and Selling Entity will select and supervise persons whom they will train to
solicit applications for the Insurance Policies in conformance with applicable
state and federal laws and regulations. Persons engaged in the sale of variable
Insurance Policies will be registered representatives of Underwriter in
accordance with the rules of the NASD. All individuals soliciting sales of
Insurance Policies will be properly licensed and appointed by the Insurance
Company in accordance with the state insurance laws of those jurisdictions in
which the Insurance Policies may lawfully be distributed.
The Insurance Company shall have authority to determine whether to appoint
or terminate a particular Registered Representative of the Underwriter as an
insurance agent of the Insurance Company. Underwriter agrees to cooperate in
supplying information or making recommendations necessary to complete such
insurance agent appointments.
Additionally, Underwriter represents and warrants that it has reviewed the
"General Recommendation Letter" set forth as Exhibit 1 to this agreement and
that all of the information contained in the General Recommendation Letter is
true for each of its agents for whom it seeks appointment. Should Underwriter
become aware of any information which would contradict the representations
contained in the General Letter of Recommendation for any of its Registered
Representatives who the Insurance Company has appointed, it will promptly
provide such information to the Insurance Company.
Underwriter further represents and warrants that each of its Registered
Representatives who have been appointed by the Insurance Company will continue
to meet the requirements set forth in the General Letter of Recommendation.
In jurisdictions which require that Insurance Company perform background
information prior to appointment, Underwriter agrees to provide such information
as may be necessary to perform such review, including but not limited to
obtaining permission from each Registered Representative who seeks such
appointment.
Upon request by Underwriter, Selling Entity shall furnish such appropriate
records as may be necessary to establish supervision of its Registered
Representatives in connection with sales of the Insurance Policies. Upon
Underwriter's review of such supervisory materials, Selling Entity shall make
such changes to its registered representatives' rules of conduct as Underwriter
may reasonably request but only to the extent that such requests relate to sales
of the Insurance Policies.
Selling Entity shall notify Underwriter if any Registered Representative
ceases to be a registered representative of Selling Entity or ceases to maintain
the proper licensing required for the sale of the Insurance Policies or fails to
meet material rules and standards imposed by either Underwriter or Selling
Entity.
8. Suitability of Sales of Contract. Underwriter will review all contract
and policy applications for suitability, completeness, and correctness as to
form. Underwriter shall also be responsible for ensuring compliance with NASD
suitability rules and standards applicable to purchases of the Insurance
Policies and that all sales are in compliance with applicable laws and
regulations.
Underwriter will promptly, but in no case later than the end of the
business day that Underwriter receives applications and payment, forward to the
Insurance Company, at the address provided, all such applications found suitable
and in good form, together with any payments received with such applications.
Underwriter will immediately return to the applicant all applications deemed by
Underwriter to be unsuitable together with any payments received therewith. The
Insurance Company reserves the right to reject any Insurance Policy application
and return any payment made in connection with an application which is rejected.
Insurance Policies issued will be forwarded to Underwriter, or at the direction
of Underwriter, to the Registered Representative for delivery to the Contract
Owner. Underwriter shall obtain and retain a written receipt for each Insurance
Policy which it or its Registered Representative delivers.
9. Solicitation/Representatives Concerning the Contracts. Underwriter will
perform the selling functions required by this agreement in accordance with the
terms and conditions of any applicable prospectus(es). Underwriter will make
only representations included in the prospectus or in any authorized
supplemental material. No sales solicitations, including the delivery of
supplemental sales literature or other such materials, shall occur, be delivered
to, or used with a prospective purchaser unless accompanied or preceded by
appropriate and then-current prospectus(es).
Any material prepared or used by Selling Entity or its Registered
Representative, which describes in whole or in part or refers by name or form to
any of the Insurance Policies or underlying funds or uses the name of the
Insurance Company, Underwriter or the logos or service marks of any of them, or
the name, logos or service marks of any "Affiliated Company" of any of them, as
that term is defined in Section 2(a)(2) of the Investment Company Act of 1940,
must be approved by Underwriter in writing prior to any such use.
Selling Entity acknowledge that information pertaining to Underwriter and
Insurance Company is proprietary in nature. Selling Entity agrees that it will
not disclose any information concerning Insurance Company's or Underwriter's
products, services or programs to any person for consideration or otherwise
unless Insurance Company and/or Underwriter consent to such use in writing.
Selling Entity agrees that, following the termination of this agreement for any
reason, they will not enter into any plan, program scheme or course of action
which would systematically attempt to induce any Contract owner(s) away from
Insurance Company, except that Selling Entity may always recommend a move to
another company's product if such move would be more suitable than Insurance
Company's product for a particular client or clients or in the event of a
detrimental change in the financial stability of Insurance Company which Selling
Entity believes would jeopardize its clients.
10. Client Information/Confidential Information During the term of this
agreement Insurance Company and Underwriter will have access to confidential
information ("Confidential Information"). Confidential Information includes, but
is not limited to, the names, addresses, telephone numbers, social security
numbers, documents, profiles and portfolios of Registered Representatives and of
applicants for and purchasers of Insurance Policies. Neither Underwriter nor
Insurance Company shall use, copy or disclose such Confidential Information in
any systematic manner, except as required to perform services under this
agreement. The parties acknowledge that the Insurance Company may continue to
service the Insurance Policies sold pursuant to this agreement, including, as
appropriate, to accept additional contributions and premium for and to modify,
add, or exchange coverage to the Insurance Policy of a policyowner who purchased
from an agent of the Selling Entity.
The parties also understand that Insurance Company and/or Underwriter may
respond to policyowners inquiries concerning other Insurance Company products
and services. The parties also agree that this Section 10 shall not apply to
individuals with whom the Underwriter or Insurance Company have a pre-existing
relationship. Similarly, the parties understand that Selling Entity may have
access to trade secrets belonging to the Insurance Company and the Underwriter.
Selling Entity agrees that it will not use or disclose such trade secrets
without the written permission of the Insurance Company and/or the Underwriter,
as the case may be.
11. Compensation. Compensation payable to Underwriter on sales of the
Insurance Policies sold by Registered Representatives will be paid to the
Selling Entity designates, in accordance with the compensation schedule(s) set
forth on the Schedule Pages. Such Schedule Pages may be amended from time to
time and compensation will be paid in accordance with the compensation schedule
in effect at the time the premium payments are received by the applicable
Insurance Company (in the case of annuities) or at the time the applications are
received (in the case of life insurance). The Insurance Company and Underwriter
reserve the privilege of revising the compensation schedules set forth in the
Schedule Pages at any time with reasonable prior written notice to Selling
Entity.
12. Assignment of Agreement. This agreement may not be assigned except by
mutual consent and will continue, subject to the termination by any party on
written notice to the other party, except that in the event Selling Entity
ceases to be validly licensed as an insurance agency in the states and other
jurisdictions that require such licensing or registration in connection with
sales or solicitation of the Insurance Policies, this agreement will immediately
terminate. Underwriter reserves the right to designate, at its sole discretion,
an alternative Principal Underwriter for the distribution of the Contracts
covered by this agreement with 30 days prior written notice to Selling Entity,
except in the event that FSL replaces Underwriter as discussed below.
The parties understand that if FSL replaces Underwriter any such
substituted party will automatically assume all of Underwriter's rights and
duties under this agreement. FSL may assume such functions itself, or assign
these to affiliated, properly licensed broker-dealers. FSL will notify Selling
Entity if any such substitution occurs.
13. Indemnification. No party to this agreement will be liable for any
obligation, act or omission of the other. Each party to this agreement will hold
harmless and indemnify the (1) Registered Investment Companies which are used to
fund the Contracts, (2) Insurance Company, (3) Underwriter and (4) Selling
Entity, as appropriate, for any loss or expense suffered as a result of the
violation or noncompliance by any party to this agreement of any of the terms of
this agreement or of any applicable law or regulation. No party nor any of its
employees or agents will be liable to the other party for any direct, special or
consequential damages arising out of or in connection with the performance of
any services pursuant to this agreement. Each party to this agreement agrees to
indemnify and hold harmless any other affected party for any losses, claims,
damages or liabilities (or actions in respect thereof) which arise out of or are
based on any untrue statement or alleged untrue statement of a material fact
required to be stated or necessary to make the statements made not misleading in
the connection with the solicitation, sale, or administration of the of the
Insurance Policies.
14. Notices. All notices to the Insurance Company or Underwriter relating
to this agreement should be sent to the attention of :
Fidelity Security Life Insurance Company
0000 Xxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: ____________________
All notices to Selling Entity should be sent to the attention of:
Xxxxxxx X. Xxxxx & Company
0000 Xxxxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: ____________________
15. Independent Contractors. Underwriter and Insurance Company are
independent contractors with respect to Selling Entity and Registered
Representatives.
16. Governing Law. This agreement shall be construed in accordance with and
governed by the laws of the state of Missouri.
17. Amendment of Agreement. Except as provided in this section, the terms
of this agreement may not be amended except by the written agreement of all
parties hereto. Notwithstanding the requirement that any amendment to this
agreement be in writing, the parties agree that Underwriter reserves the right
to amend this agreement at any time, and the submission of an application by
Selling Entity after notice of any such amendment has been sent to the other
parties shall constitute the other parties' agreement to any such amendment. The
parties also agree that Insurance Company may amend the Compensation Schedules
attached to Exhibit 1 of this agreement at any time upon reasonable notice in
writing to the Selling Entity. Following provision of notice of a change in
compensation schedules, submission of additional business shall operate to
ratify acceptance of such schedules.
18. Termination. This agreement may be terminated, without cause, by any
party upon 90 days' prior written notice, and may be terminated, for failure to
perform satisfactorily or other cause, by any party immediately; and shall be
terminated if Selling Agent shall cease to be a validly licensed as an insurance
agency in the states and other jurisdictions that require such licensing or
registration in connection with sales or solicitation of the Insurance Policies.
Notwithstanding, the following sections shall survive any such termination:
Sections 7, 9, 10 11, 13, 16, 19, 20, and 21.
19. Waiver Upon Termination. Failure of any party to terminate this
agreement for any of the causes set forth in this agreement will not constitute
a waiver of the right to terminate this agreement at a later time for any of
these causes.
20. Books and Records. Selling Entity shall maintain all books and records
required by applicable laws and regulations in connection with the offer and
sale of the Insurance Policies. The books, accounts and records of Selling
Entity relating to the sale of the Insurance Policies shall be maintained so as
to clearly and accurately disclose the nature and details of all transactions.
Underwriter and Insurance Company reserve the right to request reasonable
periodic inspection of such books and records as relate to the sale and
solicitation of the Insurance Policies.
21. Cooperation with Regulatory Investigations. Selling Entity and
Underwriter and Insurance Company agree to cooperate fully in any insurance,
securities or other regulatory investigation, inquiry, inspection, or proceeding
or in any judicial proceeding arising in connection with the Insurance Policies.
Selling Entity and Underwriter shall cooperate with each other to resolve any
customer complaint, and each agrees to promptly notify the other upon receipt of
notice of any investigation, claim, or proceeding involving the Insurance
Policies or any situation which would materially affect the respective party's
ability to perform its obligations hereunder. Each of the parties to this
agreement agrees that it will promptly notify the other parties of any material
claim of which it becomes aware involving the sale or solicitation of the
Insurance Policies.
22. Fidelity Bond. Underwriter represents that all of its directors,
officers, employees and Registered Representatives are and shall be continuously
covered by a blanket fidelity bond, covering for larceny and embezzlement,
issued by a reputable bonding company. This bond shall be maintained at
Underwriter's expense and shall be, at least, of the form, type and amount
required under the NASD Rules of Fair Practice.
23. Counterparts. This agreement may be executed in one or more
counterpart, each of which shall be deemed in all respects an original.
24. Arbitration. Selling Entity and Underwriter and Insurance Company agree
that any dispute or claim arising out of the terms of this agreement shall be
submitted and settled in accordance with the Code of Arbitration Procedure of
the NASD.
In reliance on the representations set forth and in consideration of the
undertakings described herein, the parties represented below do hereby contract
and agree. This agreement is effective ________________.
FIDELITY SECURITY LIFE INSURANCE COMPANY
By:__________________________________________
Name:________________________________________
Title:_________________________________________
NATIONAL PENSION AND GROUP CONSULTANTS, INC.
By: _____________________________________
Name:___________________________________
Title:____________________________________
XXXXXXX X. XXXXX & COMPANY
By:_____________________________
Name: __________________________
Title:____________________________
Exhibit 1
Affiliation Agreement Schedule Page
Selling Entity is authorized to solicit applications for the life insurance
policies, annuity contracts and the other insurance products listed below:
FSL Flexible Premium Variable Annuity
All products described herein are subject to state availability. Compensation
Schedules and additional terms for each product described above are listed on
the following pages. Consistent with the terms of this agreement, Compensation
Schedules may be changed at any time.
Payment of compensation for any product is subject to the following conditions
and limitations, in addition to any applicable provision of this agreement.
1. Chargebacks of Commissions. If the Insurance Company returns all or a
portion of a premium paid with respect to an Insurance Policy, Selling Entity
shall be obligated to refund to Underwriter applicable commissions on the amount
of such premium only where:
(a) consistent with this agreement, the Insurance Policy solicited is
returned as not taken under the policy "free look" provisions;
(b) premiums are refunded due to overpayments, errors in billing or in the
timing of automatic premium collection deductions, or errors resulting in policy
reissue;
(c) the check delivered in payment of any contract premium does not clear
and the premium collection deductions, or errors resulting in policy reissue;
(d) the Insurance Policy on which commission payments were made is
terminated or premium is refunded because the Registered Representative(s) or
Selling Entity who sold the Insurance Policy committed an act, error or omission
which materially contributed to the termination of the Insurance Policy or the
need to return premium;
(e) the Insurance Company rejects the application;
(f) a judicial or regulatory authority directs the Insurance Company to
return premium payments without assessment of a surrender charge;
(g) the applicant's initial premium on a 1035 exchange is returned
because the expected rollover amount from another policy or contract is not
transferred due to the exchange not meeting the legal requirements to qualify
for a tax-free exchange;
(h) the Insurance Company returns unearned premium on a life insurance
contract as required by the provisions of the policy;
(i) the Insurance Company determines that it has a legal liability to
return premiums on a life insurance contract within the first year after the
Insurance Policy is issued; or
(j) the Insurance Company and Selling Entity mutually agree to return all
or a portion of a premium with respect to a particular contract or policy.
2. Free Look Provision. If any Insurance Policy is redeemed at any time or
if within 45 days after confirmation by the Insurance Company of any premium
payments credited to an Insurance Policy, that Insurance Policy is tendered for
full or partial surrender, or the life at risk thereunder dies, then, at the
option of the Insurance Company or Underwriter, no commission will be payable
with respect to such premium payments and any commission previously paid for
said premium payments must be refunded to the Insurance Company or Underwriter
as directed by Underwriter. Underwriter agrees to notify Selling Entity with 10
business days after the request for repurchase or redemption, or notification of
death of the life at risk is received by the Insurance Company.
3. Rebating. If Selling Entity or any Registered Representative rebates or
offers to rebate all or any part of a premium on an Insurance Policy issued by
the Insurance Company in violation of applicable state insurance laws or
regulations, or if Selling Entity or any Registered Representative shall
withhold any premium on an Insurance Policy issued by the Insurance Company, the
same may be grounds for termination of this agreement by Underwriter. If Selling
Entity induces or attempts to induce any Insurance Policy owner to relinquish an
Insurance Policy except under circumstances where there is reasonable grounds
for believing the policy, contract or certificate is not suitable for such
person, Selling Entity's right to receive any compensation under this agreement
shall cease and terminate.
COMMISSION SCHEDULE FOR
ANNUITY CONTRACTS
This Schedule is attached to and is made a part of this agreement. In no
event will FSL be liable for the payment of any compensation with respect to any
solicitation made, in whole or in part, by any person not appropriately licensed
to conduct such activities.
The compensation arrangements described below shall govern commission
payouts. Commission will be paid in accordance with instructions received from
Selling Entity.
1. Commissions based on premium payments will be based only on premium
actually received and accepted by the Insurance Company.
2. No commission will be earned on the initial exchange of any FSL
contract. Subsequent premium payments will, as permitted by law be eligible for
commission payments.
3. The Insurance Company reserves the right to reduce first year
commissions and renewal commissions if necessary, on any annuity contracts sold
to residents of any jurisdiction which imposes new, and/or additional premium or
similar taxes or charge. In such event, the Insurance Company will notify
Selling Entity.
4. If, within 45 days after confirmation of any premium credited to any
Insurance Policy by the Insurance Company, the Insurance Policy is canceled or
surrendered, or if the Insurance Policy owner shall die, then, at the option of
the Insurance Company, no commissions will be payable with respect to that
premium and any commission previously paid on that premium must be refunded to
the Insurance Company.
Compensation is listed by annuity product as follows:
EXHIBIT 2
GENERAL LETTER OF RECOMMENDATION
Underwriter ("we") hereby represent and warrants to Fidelity Security Life
Insurance Company ("FSL") that all the following requirements will be fulfilled
in conjunction with the submission of licensing/appointment papers for all
applicants as sub-agents submitted by Underwriter. Underwriter will, upon
request, forward proof of compliance with same to XXX.
0. We have made a thorough and diligent inquiry and investigation relative
to each applicant's identity, residence and business reputation and declare that
each applicant is personally known to us, has been examined by us, is known to
be of good moral character, has a good business reputation, is reliable, is
financially responsible and is worthy of appointment by FSL. Each individual is
trustworthy, competent and qualified to act as an agent for FSL to hold himself
out in good faith to the general public. We will notify FSL of any applicant who
has been discharged from bankruptcy within three years preceding the date of
application.
2. We have on file a X-000, X-000, or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative requirements for
the registration of each applicant as a registered representative through our
NASD member firm, and each applicant is presently registered as an NASD
registered representative.
The above information in our files indicates no fact or condition which
would disqualify the applicant from receiving a license and all the findings of
all investigative information is favorable.
3. We certify that all education requirements have been met for the
specific state each applicant is requesting a license in, and that, all such
persons have fulfilled the appropriate examination, education and training
requirements.
4. If the applicant is required to submit his picture, his signature, and
securities registration in the state in which he is applying for a license, we
certify that those items forwarded to FSL are those of the applicant and the
securities registration is a true copy of the original.
5. We hereby warrant that the applicant is not applying for a license with
FSL in order to place insurance chiefly and solely on his life or property,
lives or property of his relatives, or property or liability of his associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed or any or all risks
written by these applicants, to the end that the insurance interest of the
public will be properly protected.
7. We will be responsible for all acts and omissions of each applicant
within the scope of his agency appointment during any period of a temporary
license and a permanent license. This responsibility is full and complete
without regard to any technical distinction between this relationship and that
which exists in law between principal and agent.
8. We will not permit any applicant to transact insurance as an agent until
duly licensed therefore. No applicants have been given a contract or furnished
supplies, nor have any applicants been permitted to write, solicit business, or
act as an agent in any capacity, and they will not be so permitted until the
certificate of authority or license applied for is received.
