EXHIBIT 1.A.(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT made this 17th day of March, 1997, by and between The Prudential
Insurance Company of America (the "Company"), a New Jersey corporation on its
own behalf and on behalf of Prudential Variable Contract Account GI-2 (the
"Account") and Prudential Investment Management Services LLC (the
"Distributor"), a Delaware limited liability company.
WITNESSETH:
WHEREAS, the Company has established and maintains the Account, a
investment account, pursuant to the laws of New Jersey for the purpose of
providing a choice of variable investment options under group life insurance
contracts (the "Contracts"), to commence after the effectiveness of the
Registration Statement filed with the Securities and Exchange Commission on Form
S-6 pursuant to the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the Account is registered as a unit investment trust under the
Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Distributor is a broker-dealer registered with the Securities
and Exchange Commission (the "Commission") under Section 15(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and is a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Company and the Distributor wish to enter into an agreement to
have the Distributor act as the Company's principal underwriter for the sale of
Contracts and the distribution of certificates of participation (the
"Certificates") in the Contracts;
NOW THEREFORE, the parties agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR
The Company agrees that during the term of this Agreement it will take all
action required to cause the Contracts to comply with all applicable federal and
state laws and regulations. During the term of this Agreement, the Company
appoints the Distributor and the Distributor agrees to act as the principal
underwriter for the sale of Contracts, as well as the Certificates issued
thereunder, in each state and other jurisdictions in which such Contracts may
lawfully be sold. Distributor shall offer the Contracts for sale and distribute
Certificates at premium rates set by the Company. Applications for the Contracts
and the underlying Certificates shall be solicited only by representatives of
Distributor duly qualified and appropriately licensed in each state or other
jurisdiction where they solicit such applications. Company shall appoint
Distributor's qualified representatives as life insurance agents of Company.
Completed applications for Contracts and the underlying Certificates shall be
transmitted directly to the Company for acceptance or rejection in accordance
with underwriting rules established by the Company. Initial premium payments for
the Certificates under the Contracts shall be made by check payable to the
Company and shall be held
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at all times by Distributor or its representatives in a fiduciary capacity and
remitted promptly to the Company. Anything in this Agreement to the contrary
notwithstanding, the Company retains the ultimate right to control the sale of
the Contracts, as well as the Certificates issued thereunder, and to appoint and
discharge life insurance agents of the Company. The Distributor shall be held to
the exercise of reasonable care in carrying out the provisions of this
Agreement.
2. SALES AGREEMENTS
Distributor is hereby authorized to enter into separate written agreements,
on such terms and conditions as Distributor may determine not inconsistent with
this Agreement, with one or more organizations which agree to participate in the
distribution of the Contracts and Certificates under the Contracts. Such
organization (hereafter "Broker") shall be registered with the Commission under
Section 15(b) of the Exchange Act and with the NASD as a member firm. Broker and
its representatives soliciting applications for Contracts and Certificates shall
be duly and appropriately licensed, registered, or otherwise qualified for the
sale of such Contracts and Certificates (and the riders and other policies
offered in connection therewith) under the insurance laws and any applicable
blue-sky laws of each state or other jurisdiction in which the Broker or its
representatives solicit such sales.
Broker shall assume any legal responsibilities of Company for the acts,
commissions or defalcations of such representatives insofar as they relate to
the sale of the Contracts and Certificates. Applications Contracts and
Certificates solicited by such Broker through its representatives shall be to
the Company, and if received by Distributor, shall be forwarded to Company. All
premium payments under the Contracts shall be made by check to Company and, if
received by Broker, shall be held at all times in a fiduciary capacity and
remitted promptly to Company.
3. LIFE INSURANCE LICENSING
Company shall be responsible for insuring that Brokers are duly qualified,
under the insurance laws of the applicable jurisdictions, to sell the Contracts
and Certificates.
4. SUITABILITY
Parties to this Agreement are prohibited from recommending the purchase of
investment options or interests in the Account to prospective Contract holders
and Certificates purchasers. Such prohibition also shall extend to
contributions, transfers, exchanges, and redemptions by Certificate purchasers
of investment options or interests in the Account. Parties shall take reasonable
steps to ensure that their representatives and associates refrain from making
the aforementioned recommendations.
Parties to this Agreement shall take reasonable steps to ensure that they
will offer Certificates that are appropriate to the needs of the prospective
Certificate purchasers. While not limited to the
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following, a determination of appropriateness shall be based on information
furnished to the parties after reasonable inquiry of such applicants concerning
the applicants' insurance and investment objectives, financial situations and
needs, and the likelihood that the applicants will continue to make the premiun
payments contemplated by the Certificates under the Contracts.
5. PROMOTIONAL MATERIALS
Company shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals
relating to the sale of the Contracts and Certificates. Distributor shall not
use any such materials that have not been approved by Company. Distributor shall
be responsible for obtaining NASD review of all promotional materials.
6. COMPENSATION
Company shall arrange for the payment of commissions directly to those
representatives of Distributor who are entitled thereto in connection with the
sale of the Contacts on behalf of Distributor, in the amounts and on such terms
and conditions as Company and Distributor shall determine; provided that such
terms, conditions and commissions shall be as are set forth in or as are not
inconsistent with the Prospectus included as part of the Registration Statement
for the Contracts and effective under the Securities Act.
Company shall arrange for the payment of commissions directly to those
Brokers who sell Contracts and Certificates under agreements entered into
pursuant to paragraph 2 hereof, in amounts as may be agreed to by the Company
and specified in such written agreements between Distributor and Brokers.
Company shall reimburse Distributor for the costs and expenses incurred by
Distributor in furnishing or obtaining the services, materials, and supplies
required by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder. Reimbursement shall be a portion of
Distributor's yearly expenses based on Company's share of relevant activity. In
addition, Company shall pay Distributor a surcharge of one (1) to three (3)
percent of the commissions Company pays to Brokers and to representatives of
Distributor.
7. RECORDS
Distributor shall have the responsibility for maintaining the records of
its representatives that are licensed, registered and otherwise qualified to
sell the Contracts and the underlying Certificates. Distributor shall maintain
such other records as are required of it by applicable laws and regulations. The
books, accounts, and records of the Company, the Account and Distributor shall
be maintained so as to disclose clearly and accurately the nature and details of
the transactions. Copies of all records maintained by the Distributor in
connection with this Agreement shall be made available to and become the
property of the Company upon its request. The Distributor shall keep
confidential any information obtained pursuant to this Agreement and shall
disclose such information only if the Company has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state
regulatory authorities.
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8. INVESTIGATION AND PROCEEDING
Distributor and Company agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Contracts and Certificates distributed under this Agreement.
Distributor and Company further agree to cooperate fully in any securities
regulatory investigation or proceeding with respect to Company, Distributor,
their affiliates and their representatives to the extent that such investigation
or proceeding is in connection with the Contracts and Certificates distributed
under this Agreement. The Distributor shall furnish applicable federal and state
regulatory authorities with any information or reports in connection with its
services under this Agreement which such authorities may request to ascertain
whether the Company's operations are being conducted in a manner consistent with
any applicable law or regulation.
In the case of a substantive customer complaint, Distributor and Company
will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval not
less than five business days before being sent to the customer or regulatory
authority, except that if a more prompt response is required, the proposed
response shall be communicated by telephone or telegraph.
9. TERMINATION
This Agreement shall terminate automatically upon its assignment within the
meaning of such term in the Investment Company Act. This Agreement, however, may
be transferred by the Distributor without the prior written consent of the
Company in the circumstances set forth in Rule 2a-6 under the Investment Company
Act. The Agreement may be terminated at any time by either party on 60 days
written notice to the other party, without the payment of any penalty. Upon
termination of this Agreement all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder, including commissions
on premiums subsequently received for Contracts in effect at a time of
termination, and the agreements contained in paragraph 8 hereof.
10. REGULATION
This Agreement shall be subject to the provisions of the Investment Company
Act and the Exchange Act and of the rules, regulations, and rulings thereunder
and the applicable rules and regulations of the NASD, from time to time in
effect, and the terms hereof shall be interpreted and construed in accordance
therewith.
11. Severability
If any provisions of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
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12. WARRANTIES
Each party to this Agreement warrants to the other party as follows:
(a) it has full power and authority to execute and deliver this
Agreement and to perform and observe the provisions herein;
(b) the execution, delivery, and performance of this Agreement have
been duly authorized by all necessary corporate actions and do not and will
not contravene any requirement of law or any contractual restrictions or
agreement binding on or affecting such party or its assets; and
(c) this Agreement has been duly and properly executed and delivered
by such party and constitutes a legal, valid, and binding obligation of
such party enforceable in accordance with its terms.
13. APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
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Name: Xxxx X. Xxxxx
Title: President, Group Life Insurance
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
By:
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Name: E. Xxxxxxx Xxxxxxxxx
Title: President
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