DISTRIBUTION AGREEMENT
AGREEMENT made as of 1st day of January, 2001 between The Manufacturers Life
Insurance Company (U.S.A.) ("ManUSA") a stock life insurance company domiciled
in the state of Michigan, on its own behalf and on behalf of Separate Account A
and any other Separate Accounts which ManUSA may create in the future
("Account") and ManEquity, Inc, ("ManEquity"), a Colorado corporation:
WITNESSETH
WHEREAS, the Account is established and maintained by ManUSA pursuant to the
laws of the state of Michigan for flexible premium variable life insurance
policies issued by ManUSA (the "Policies"), under which income, gains and
losses, whether or not realized, from assets allocated to such account, are, in
accordance with the Policies, credited to or charged against such account
without regard to other income, gains, or losses of ManUSA; and
WHEREAS, ManUSA has registered or will register the Account as a unit
investment trust under the Investment Company Act of 1940 (the "Investment
Company Act"); and
WHEREAS, ManEquity is registered as a broker-dealer under the Securities
Exchange Act of 1934 ("Securities Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. (the "NASD") and
WHEREAS, ManUSA has registered or will register the Policies under the
Securities Act of 1933 (the "Securities Act") and proposes to issue and sell
the Policies through the Account to the public through ManEquity acting as
principal underwriter for the Account;
NOW, THEREFORE in consideration of the premises and the mutual covenants herein
contained and other good and valuable consideration, the parties do hereby
agree as follows
Section 1. Principal Underwriter.
(a) Appointment
ManUSA grants to ManEquity the exclusive right during the term of this
Agreement, subject to the registration requirements of the Securities
Act and the Investment Company Act and the provisions of the Securities
Exchange Act, to be the distributor and principal underwriter of the
Policies issued through the Account in each state or other jurisdiction
where the Policies may legally be sold, including any supplementary
Page 1 of 9
benefits which ManUSA may make available in connection therewith.
ManEquity shall offer the Policies for sale and distribution at premium
rates to be set by ManUSA.
(b) Responsibilities
ManEquity will assume full responsibility for the securities activities
of, and for securities law compliance by, its associated persons, (as
that term is defined in Section 3(a)(18) of the Securities Exchange Act)
including, as applicable, compliance with the NASD Conduct Rules and
Federal and State Laws and Regulations. ManEquity, directly or through
ManUSA as its agent, will:
(i) make timely filings with the SEC, NASD, and other regulatory
authorities, of any sales literature or materials relating to the
Account, as required by law to be filed; and
(ii) make available to ManUSA copies of any agreements or plans
intended for use in connection with the sale of the Policies in
sufficient number and in adequate time for clearance by the
appropriate regulatory authorities before they are used, and it
is agreed that the parties will use their best efforts to obtain
such clearance by the appropriate regulatory authorities before
they are used and that the parties will use their best efforts to
obtain such clearance as expeditiously as reasonably possible.
ManEquity will train the associated persons, use its best efforts
to prepare them to complete satisfactorily any and all applicable
NASD and state qualification examinations, register the
associated persons as its registered representatives before they
engage in securities activities, and supervise and control them
in the performance of such activities.
ManEquity shall be under no obligation to effectuate any
particular amount of sales of Policies or to promote or make
sales, except to the extent ManEquity deems advisable or to the
extent otherwise mutually agreed to by ManEquity and ManUSA.
Section 2. Dealer Agreements.
(a) Authority
ManEquity is hereby authorized to enter into separate written dealer
agreements, on such terms and conditions as ManEquity may determine not
inconsistent with this Agreement, with organizations which agree to
participate in the distribution of the Policies and to use their best
efforts to solicit applications for the Policies. Such organizations and
their agents or representatives soliciting applications for Policies
shall
Page 2 of 9
be duly and appropriately licensed, registered or otherwise qualified
for the sale of such Policies (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 such Policies
may be lawfully sold and in which ManUSA is licensed to sell the
Policies. Each such organization shall be both registered as a
broker/dealer under the Securities Exchange Act and a member of the
NASD, or if not so registered or not such a member, then the agents and
representatives of such organization soliciting applications for the
Policies shall be agents and registered representatives of a
broker/dealer and NASD member which is the parent of such organization
and which maintains full responsibility for the training, supervision,
and control of the agents or representatives selling the Policies.
(b) Responsibilities
ManEquity shall have the responsibility for supervision of all such
organizations to the extent required by law and shall assume any legal
responsibilities of ManUSA for the acts, commissions, or defalcations of
any such organizations. Applications for the Policies solicited by such
organizations through their agents or representatives shall be forwarded
to ManUSA. All payments for the Policies shall be made by check to
ManUSA and remitted promptly by such organizations to ManUSA.
Section 3. Payments and Costs.
(a) In connection with the sale of the Policies, ManEquity is responsible
for all amounts (including the sales commissions described in the
prospectus for the Policies) due to the sales representatives or to
broker/dealers who have entered into dealer agreements with ManEquity.
(b) As between ManUSA and ManEquity, ManUSA will bear the cost of all
services and expenses, including legal services and expenses and
registration, filing and other fees, in connection with:
(i) registering and qualifying the Account, the Policies and (to the
extent requested by ManEquity) the associated persons with
Federal and state regulatory authorities and the NASD, and
(ii) printing and distributing all registration statements and
prospectuses (including amendments), Policies, notices, periodic
reports, proxy solicitation material, sales literature and
advertising filed or distributed in connection with the sale of
the Policies.
Page 3 of 9
Section 4. Life Insurance Agents.
(a) ManEquity is authorized to appoint the organizations described in
Section 2(a) above as independent general agents of ManUSA for the sale
of the Policies and any supplementary benefits or policies in connection
therewith. ManUSA will undertake to apply for life insurance agent
appointments in the appropriate states or jurisdictions of the
designated agents or representatives of those organizations so appointed
by ManEquity; provided that ManUSA reserves the right to refuse to
appoint any proposed agent, or once appointed to terminate the same,
(b) Anyone or any party selling the Policies must be duly licensed insurance
producers. ManUSA shall have the responsibility for arranging for such
agent appointments.
(c) All premium funds collected by ManEquity or any organization appointed
by ManEquity pursuant to Section 2(a) above, or their representatives,
shall be held at all times in a fiduciary capacity and promptly be
forwarded to ManUSA.
Section 5. Suitability.
(a) ManUSA wishes to ensure that the Policies distributed by ManEquity will
be issued to purchasers for whom the Policy will be suitable. ManEquity
shall take reasonable steps to ensure that the various agents appointed
by it, or cause the organizations appointed pursuant to 2(a) above to
ensure that its representatives, shall not make recommendations to an
applicant to purchase a Policy in the absence of reasonable grounds to
believe that the purchase of the Policy is suitable for such applicant.
ManEquity shall adhere, or cause the organizations so appointed to
adhere, to the Standards of Suitability for the Policy adopted by
ManUSA. The Standards of Suitability are set forth in Schedule A, which
schedule is incorporated herein. While not limited to the following, a
determination of suitability shall be based on information furnished to
an agent after reasonable inquiry of such applicant concerning the
applicant's insurance and investment objectives, financial situation and
needs, and the likelihood that the applicant will persist with the
Policy for such a period of time that ManUSA's acquisition costs are
amortized over a reasonable period of time.
(b) ManUSA, however, retains the ultimate right of control over and
responsibility for, marketing the Policies.
(c) ManUSA also retains the right to reject applications for the Policies
and maintains responsibility for all insurance underwriting aspects in
connection with such applications.
Section 6. Promotion Materials.
ManEquity shall have the responsibility for consulting with respect to the
design and the drafting and legal review and filing of sales promotion
materials, and for the preparation of individual
Page 4 of 9
sales proposals related to the sale of the Policies. All sales and promotional
materials for the Policies must first be reviewed and approved by ManUSA.
ManEquity and any organization appointed by ManEquity pursuant to Section 2(a)
above shall not give any information or make any representations concerning any
aspect of the Policies or ManUSA's operations to any person or entity unless
such information or representations are contained in the prospectuses for the
Policies, or are contained in sales or promotional materials approved by ManUSA
Section 7. Reports.
ManEquity shall have the responsibility for maintaining the records of agents
licensed, registered and otherwise qualified to sell the Policies; calculating
and furnishing periodic reports to ManUSA of the commissions and service fees
payable to agents, brokers, general agents and sales managers of ManUSA and its
affiliates; and for furnishing periodic reports to ManUSA as to the sale of
Policies made pursuant to this Agreement.
Section 8. Records.
ManEquity shall maintain and preserve such accounts, books and other documents
as are required of it by applicable laws and regulations. The books, accounts
and records of ManUSA, the Account and ManEquity as to all transactions
hereunder shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions, including such accounting information
as necessary to support the reasonableness of the amounts to be paid by ManUSA
hereunder. Without limiting the foregoing, ManEquity will:
(a) maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act all books and records required to be maintained
in connection with the offer and sale of the Policies, which books and
records shall remain the property of ManEquity and shall be subject to
inspection by the Securities and Exchange Commission ("SEC") in
accordance with Section 17(a) of the Securities Exchange Act; and
(b) before or upon completion of each transaction for which a confirmation
is legally required, send a written confirmation for each such
transaction reflecting the facts of the transaction.
(c) ManUSA shall have access to the books and records maintained by
ManEquity pursuant to this Agreement and shall have the right to
inspect, audit, and copy same.
Section 9. Compensation.
For the services rendered, expenses assumed and the continuing obligations set
forth herein, ManEquity shall receive from ManUSA such amounts and at such
times as may from time to time be agreed upon by ManEquity and ManUSA.
Page 5 of 9
Section 10. Liability for Other Party.
Neither party to this Agreement shall be liable to the other for any action
taken or omitted by it, or any of its officers, agents or employees, in
performing their responsibilities under this Agreement in good faith and
without gross negligence, willful misfeasance or reckless disregard of such
responsibilities, unless otherwise mutually agreed in writing.
Section 11. Notification of Parties.
Both parties to this Agreement shall advise the other promptly of
(a) Any action of the SEC or any authorities of any state or other
jurisdiction, of which it has knowledge, affecting registration or
qualification of the Account or the Policies, or the right to offer the
Policies for sale; and
(b) the happening of any event which makes untrue any statement, or which
requires the making of any change, in the registration statements or
prospectuses in order to make the statements therein not misleading.
Section 12. Investigation and Proceedings.
(a) ManEquity and ManUSA agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Policies distributed under this Agreement. ManEquity
and ManUSA further agree to cooperate fully in any securities regulatory
investigation or proceeding or judicial proceeding with respect to
ManUSA, ManEquity, their affiliates and their agents or representatives
to the extent that such investigation or proceeding is in connection
with Policies distributed under this Agreement. Without limiting the
foregoing:
(i) ManEquity will be notified promptly of any customer complaint or
notice of any regulatory investigation or proceeding or judicial
proceeding received by ManUSA with respect to ManEquity or any
agent or representative or which may affect ManUSA's issuance of
any Policy marketed under this Agreement;
(ii) ManEquity will promptly notify ManUSA of any customer complaint
or notice of any regulatory investigation or proceeding received
by ManEquity or its affiliates with respect to ManEquity or any
agent or representative in connection with any Policy distributed
under this Agreement or any activity in connection with any such
Policy.
Page 6 of 9
(b) In the case of a customer complaint, ManEquity and ManUSA 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 prior to its 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 fax
Section 13. Guarantee.
ManUSA undertakes to guarantee the performance of any obligations ManEquity may
have pursuant to Section 27(f) of the Investment Company Act, as amended, and
paragraph (b) of Rule 27d-2 adopted by the Securities and Exchange Commission,
to make refunds of charges required of the principal underwriter of Policies
issued in connection with the Account.
Section 14. Termination.
This Agreement shall terminate automatically if it shall be assigned. This
Agreement may be terminated at any time by either party hereto on 60 days'
written notice to the other party hereto, without the payment of any penalty.
Upon termination of this Agreement all authorizations, rights and obligations
shall cease except:
(a) the obligation to settle accounts hereunder, including commissions on
premiums subsequently received for Policies in effect at the time of
termination; and
(b) the agreements contained in paragraphs 11 and 12 hereof.
Section 15. Regulation.
(a) This Agreement shall be subject to the provisions of the Investment
Company Act and the Securities Exchange Act and the rules, regulations,
and rulings thereunder and to the NASD, from time to time in effect,
including such exemptions from the Investment Company Act as the SEC may
grant, and the terms hereof shall be interpreted and construed in
accordance therewith.
(b) ManEquity shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of the Account, present or
future, any information, reports or other material which any such body
by reason of this Agreement may request or require pursuant to
applicable laws and regulations.
Page 7 of 9
Section 16. Severability.
Should any portion of this Agreement for any reason be held to be void in law
or in equity, the Agreement shall be construed, insofar as is possible, as if
such portion had ever been contained therein.
Section 17. Governing Law.
This Agreement shall be construed in accordance with and governed by the laws
of the state of Michigan.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed under seal by their duly authorized officers as of the date first
mentioned above.
THE MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By: /s/ Xxxx Xxxxxx
-----------------------------
Xxxx Xxxxxx
Its: Vice President & Chief
Financial Officer
MANEQUITY,INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------
Xxxx Xxxxxxxx
Its: President
Page 8 of 9
SCHEDULE A
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
STANDARDS OF SUITABILITY
RESOLVED, that the following Standards of Suitability which express the policy
of the Company with respect to determining the suitability for applicants for
variable life insurance policies be adopted:
1. No recommendation shall be made to a potential applicant to purchase a
variable life insurance policy and no variable life insurance policy shall
be issued in the absence of reasonable grounds to believe that the purchase
of such policy is not unsuitable for such applicant on the basis of
information furnished after reasonable inquiry of such applicant concerning
the applicant's insurance and investment objectives, financial situation
and needs, and any other information known to the Company or to the agent
making the recommendation.
2. Lapse rates for variable life insurance within the first two policy years
which are significantly higher than both those encountered by the Company
or any affiliate for corresponding fixed benefit life insurance policies
and lapse rates of other insurers issuing variable life insurance policies
shall be considered in determining whether the above guidelines adopted by
the Company are reasonable and also whether the Company and its agents are
engaging, as a general business practice, in the sale of variable life
insurance to persons for whom it is unsuitable. For purposes of this Clause
(2), conversions from variable life insurance to fixed benefit life
insurance policies pursuant to the NAIC Model Variable Life Insurance
Regulation shall not be considered lapses.
Page 9 of 9
