Exhibit 1.A.(3)(b)
BROKER AGREEMENT
AGREEMENT made this _____ day of _________, 199__, by and between
Prudential Investment Management Services LLC ("Distributor"), a Delaware
limited liability company, and (name of broker-dealer) ("Broker"), a (state of
incorporation) corporation.
WITNESSETH:
WHEREAS, The Prudential Insurance Company of America ("Company") has
established and maintains the Prudential Variable Contract Account GI-2 (the
"Account"), a separate 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 to commence after the effectiveness of the Registration
Statement filed with the Securities and Exchange Commission ("SEC" or
"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"), and Distributor
is a broker-dealer registered with the Commission under the Securities Exchange
Act of 1934 (the "Exchange Act") with a membership in the National Association
of Securities Dealers, Inc. (the "NASD");
WHEREAS, (name of Contractholder), a(n) (the nature of Contractholder's
business) (the "Contractholder") has purchased a group variable life insurance
contract (the "Contract") from Company; and
WHEREAS, the Broker and the Distributor wish to enter into an agreement
to have the Broker act as agent of (name of Contractholder) for the distribution
of certificates of participation (the "Certificates") in the Contract;
NOW THEREFORE, the parties agree as follows:
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
A. DEFINITIONS
1. THE FUNDS - The Prudential Series Fund, Inc., the outside investment
company funds whose shares are currently being sold to the Account and any other
investment companies whose shares may in the future be sold to the Account. All
are open-end management investment companies registered under the Investment
Company Act, shares of
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which are sold to the Account in connection with the sale of the Contracts.
2. REGISTRATION STATEMENT - The registration statement and amendments
thereto relating to the Contract and the Account, including financial statements
and all exhibits.
3. PROSPECTUS - The prospectus included within the Registration
Statement referred to herein.
4. MARKETING MATERIALS - The terms "advertisement" and "sales
literature" as they are defined in Rule 2210(a) of the NASD's Conduct Rules.
B. AGREEMENTS OF DISTRIBUTOR
1. Pursuant to the authority delegated to it by Company, Distributor
hereby authorizes Broker during the term of this Agreement to solicit
applications for Contract Certificates from eligible persons of (name of
Contractholder) provided that there is an effective Registration Statement
relating to such Contract and provided further that Broker has been notified by
Distributor that the Contract Certificates are qualified for sale under all
applicable securities and insurance laws of the state or jurisdiction in which
the application will be solicited. In connection with the solicitation of
applications for Contract Certificates, Broker is hereby authorized to offer
riders that are available under the Contract in accordance with instructions
furnished by Distributor or Company.
2. Distributor, during the term of this Agreement, will notify Broker
of the issuance of any SEC stop order with respect to the Registration Statement
or any amendments thereto or the initiation of any proceedings for that purpose
relating to the registration and/or offering of the Contract and of any other
action or circumstance that may prevent the lawful sale of the Contract
Certificates in any state or jurisdiction.
3. During the term of this Agreement, Distributor shall advise Broker
of any amendment to the Registration Statement or any amendment or supplement to
any Prospectus. Furthermore, Distributor will provide Broker with a reasonable
quantity of any applicable Contract Prospectuses, and any supplements thereto,
to be used in connection with the transactions contemplated by this Agreement.
C. AGREEMENTS OF BROKER
1. It is understood and agreed that Broker is a broker-dealer
registered with the SEC under the Exchange Act with an NASD membership in good
standing, and that the representatives of Broker who will be soliciting
applications for Contract Certificates also will be duly registered with the
NASD through the Broker.
2. Commencing at such time as Distributor and Broker mutually shall
agree, Broker shall use its best efforts to find applicants for Contract
Certificates acceptable to Company. In
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meeting its obligation to use its best efforts to solicit applicants for
Contract Certificates, Broker shall, during the term of this Agreement, engage
in the following activities:
(a) Continuously utilize only those Prospectuses, statements
of additional information, Marketing Materials, and training
materials relating to the Contract that have been approved by
Company and have been provided by Distributor;
(b) Establish and implement procedures reasonably designed to
achieve compliance with applicable Federal and State
securities laws and regulations, including the rules of the
NASD, relating to the sales practices of its representatives;
and
(c) Take reasonable steps to ensure that the various
representatives registered through it shall not make
recommendations to applicants for Contract Certificates in the
absence of reasonable grounds to believe that participation in
the Contract is suitable for such applicants. While not
limited to the following, a determination of suitability shall
be based on information furnished to a representative after
reasonable inquiry of such applicants concerning the
applicants' insurance and investment objectives, financial
situation and needs, and the likelihood that the applicants
will continue to make the premium payments contemplated by the
Contract.
3. All payments under the Contract collected by representatives of
Broker shall be held at all times in a fiduciary capacity and shall be remitted
promptly in full together with such applications, forms and other required
documentation to an office of the Company designated by Distributor. Checks or
money orders in payment of premiums shall be drawn to the order of The
Prudential Insurance Company of America. Broker acknowledges that Company
retains the ultimate right to control the sale of the Contract and the
underlying Certificates and that the Distributor or Company shall have the
unconditional right to reject, in whole or part, any application for a Contract
Certificate. If the Company or Distributor rejects an application, Company
immediately will return all payments directly to the applicant and Broker will
be notified of such action. If any participant in a Contract elects to return
such Contract Certificate pursuant to Rule 6e-3(T)(b)(13)(viii) of the
Investment Company Act or other applicable law, the participant will receive a
refund of premium payments calculated in accordance with applicable law. Broker
will be notified of any such action.
4. Broker shall act as an independent contractor, and nothing herein
contained shall constitute Broker, its representatives, or any employees thereof
as "associated persons," as that term is defined in Section 3(a)(18) of the
Exchange Act, of Company or Distributor in connection with the solicitation of
Contract Certificates. Broker, its representatives, and its employees shall not
hold themselves out to be associated persons of Company or Distributor in this
connection or in any dealings with the public. Distributor shall have no
supervisory responsibility for Broker or Broker's associated persons, either
registered or unregistered.
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5. 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 Contract Certificates (other than general
advertising materials which do not make specific reference to the Contract) will
not be used without the prior written consent of Distributor and, where
appropriate, the endorsement of the Company to be obtained by Distributor.
Furthermore, Broker agrees that it is responsible for securing and will secure
all required regulatory approvals for any Marketing Materials it develops.
6. Solicitation and other activities by Broker shall be undertaken only
in accordance with applicable laws and regulations. No representative of Broker
shall solicit applications for Contract Certificates until duly licensed and
appointed by Company as a life insurance and variable contract broker or agent
of Company in the appropriate states or other jurisdictions. Broker shall ensure
that such representatives fulfill any training requirements necessary to be so
licensed. Broker understands and acknowledges that neither it nor its
representatives are authorized by Distributor or Company to give any information
or make any representation in connection with this Agreement or the offering of
Contract Certificates other than those contained in the Prospectus or other
Marketing Materials authorized in writing by Distributor or Company.
7. Broker shall not have authority on behalf of Distributor or Company
to: (1) make, alter or discharge the Contract, the Certificate, or any other
form used in connection with the Contract; (2) waive any forfeiture, extend the
time of paying any premium; or (3) receive any monies or premiums due, or to
become due, to Company, except as set forth in Section C.3. of this Agreement.
Broker shall not expend, nor contract for the expenditure of the funds of
Distributor, nor shall Broker possess or exercise any authority on behalf of
Distributor by this Agreement.
8. Broker shall have the responsibility for maintaining the records of
its representatives that are licensed, registered, and otherwise qualified to
sell Contract Certificates. Broker shall maintain such other records as are
required of it by applicable laws and regulations. The books, accounts, and
records of the Account, Company, Distributor, and Broker relating to the sale of
Contract Certificates shall be maintained so as to disclose clearly and
accurately the nature and details of each transaction. Copies of all records
maintained by Broker in connection with this Agreement shall be made available
to and become the property of the Distributor upon its request. Nothing in this
Section C.8. shall be interpreted to prevent the Broker from retaining any such
other records which Broker, in its discretion, deems necessary or desirable to
keep. Broker 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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D. COMPENSATION
1. Pursuant to the Distribution Agreement between Distributor and
Company, Distributor shall cause Company to arrange for the payment of
commissions to Broker as compensation for the sale of each Contract Certificate
sold by a representative of Broker. The amount of such compensation shall be
based on a schedule to be determined by agreement of Company, Distributor, and
Broker. Company shall identify to Broker with each such payment the name of the
representative of Broker who solicited each Contract Certificate covered by the
payment.
2. Neither Broker nor any of its representatives shall have any right
to withhold or deduct any part of any premium it shall receive for purposes of
payment of commission or otherwise. Neither Broker nor any of its
representatives shall have an interest in any compensation paid by Company to
Distributor, now or hereafter, in connection with the sale of any Contract
Certificate.
E. USE OF INSURANCE AGENCY AFFILIATE OF BROKER
It is understood and agreed that the registered representatives of
Broker engaged in the offer and sale of Contract Certificates may be employed by
(name of agency), an affiliate of Broker that is licensed as an insurance agency
(hereinafter referred to as "Insurance Agency Affiliate"), and whose
shareholders, officers, and employees are "associated persons" of Broker within
the meaning of Section 3(a)(18) of the Exchange Act. It is further understood
and agreed that records relating to sales of Contract Certificates by such
employees may be maintained by Insurance Agency Affiliate. It is further
understood and agreed that commissions payable under this agreement shall, if
Broker so directs, be paid to Insurance Agency Affiliate. Broker agrees that, if
the Contract Certificates are sold through Insurance Agency Affiliate:
1. Broker will retain full responsibility for compliance with the
requirements of all applicable federal and state securities laws, and will
continue to perform all obligations set forth in Section C. above.
2. Any books and records maintained by Insurance Agency Affiliate will
be deemed, for purposes of the Exchange Act, to be books and records of Broker
and will conform to the requirements of Section 17 of the Exchange Act and the
rules thereunder. The manner in which the books and records of Broker and
Insurance Agency Affiliate are made and maintained will permit supervisory
personnel of Broker as well as authorized examiners of the SEC or of another
appropriate governmental agency or self-regulatory organization to review data
concerning transactions of Contract Certificates effected through Insurance
Agency Affiliate to the same extent as if such transactions had been effected
through Broker itself. This may be accomplished either through maintaining one
set of books and records for Broker and Insurance Agency Affiliate or by
maintaining separate sets of books and records with
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adequate integration, through cross-referencing or otherwise, between records
maintained by Broker and those maintained by Insurance Agency Affiliate.
3. Any receipt by Insurance Agency Affiliate of commissions for the
sale of Contract Certificates, and any payment by Insurance Agency Affiliate of
commissions for the sale of Contract Certificates to its sales personnel, will
be reflected in the FOCUS reports filed by Broker pursuant to Section 17 of the
Exchange Act and the rules thereunder and in its fee assessment reports filed
with the NASD.
4. All premiums derived from the sale of Contract Certificates through
Insurance Agency Affiliate will be sent directly to Company by the customers of
Insurance Agency Affiliate or will be sent by them to Broker for forwarding to
the Company. Insurance Agency Affiliate will not receive or accumulate customer
premiums intended for payment under the Contract.
F. COMPLAINTS AND INVESTIGATIONS
1. Broker and Distributor jointly agree to cooperate fully in any
insurance regulatory investigation or proceeding or judicial proceeding arising
in connection with Contract Certificates marketed under this Agreement. Broker
and Distributor further agree to cooperate fully in any securities regulatory
investigation or proceeding or judicial proceeding with respect to Broker,
Distributor, their affiliates and their representatives to the extent that such
investigation or proceeding is in connection with Contract Certificates marketed
under this Agreement. Broker 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.
G. TERM AND AGREEMENT
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 upon thirty (30) days written notice to the other party of its
intention to do so.
2. Upon termination of this Agreement, all authorizations, rights and
obligations shall cease except: (a) the agreements contained in Section F.
hereof; (b) the indemnity set forth in Section H. hereof; and (c) the obligation
to settle accounts hereunder, including payment of any applicable commissions on
premiums subsequently received for Contract Certificates in effect at the time
of termination or issued pursuant to applications received by Broker before
termination.
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H. INDEMNITY
1. Broker shall be held to the exercise of reasonable care in carrying
out the provision of this Agreement.
2. Distributor agrees to indemnify and hold harmless Broker and each
officer or director of Broker against any losses, claims, damages or
liabilities, joint or several, to which Broker or such officer or director
become subject, under the Securities Act or otherwise, 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 material
fact, required to be stated therein or necessary to make the statements therein
not misleading, contained in any Registration Statement or any post-effective
amendment thereof or in the Prospectus or any amendment or supplement to the
Prospectus, or any marketing materials provided by the Company or by the
Distributor.
3. Broker agrees to indemnify and hold harmless Company and Distributor
and each of their current and former directors and officers and each person, if
any, who controls or has controlled Company or Distributor within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities to which Company or Distributor and any such director or officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon:
(a) Any unauthorized use of marketing materials or any verbal
or written misrepresentations or any unlawful sales practices
concerning the Contract or the underlying Certificates by
Broker or its officers, employees or representatives,
including personnel of any Insurance Agency Affiliate;
(b) Claims by representatives or employees of Broker or any
Insurance Agency Affiliate for commissions, service fees,
development allowances or other compensation or remuneration
of any type; or
(c) The failure of Broker, its officers, employees, or
representatives, including personnel of any Insurance Agency
Affiliate, to comply with the provisions of this Agreement;
and the Broker will reimburse Company and Distributor and any
director or officer or controlling person of either for any
legal or other expenses reasonably incurred by Company,
Distributor, or such director, officer of controlling person
in connection with investigating or defending any such loss,
claims, damage, liability or action. This indemnity agreement
will be in addition to any liability which Broker may
otherwise have.
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I. WARRANTIES
Each party to this Agreement warrants to the other party as follows:
1. It has full power and authority to execute and deliver this
Agreement and to perform and observe the provisions herein;
2. 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
3. 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.
J. ASSIGNABILITY
This Agreement shall not be assigned by either party without the
written consent of the other.
K. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
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.
PRUDENTIAL INVESTMENT MANAGEMENT SERVICES LLC
(Distributor)
By:_____________________________
Title: President
-----------------------------------------------------
(Broker)
By:_____________________________
Title:
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