FORM OF DISTRIBUTION AND SERVICING AGREEMENT
This DISTRIBUTION AND SERVICING AGREEMENT, dated as of , is made by
and among The Equitable of Colorado, Inc. ("EOC"), and EQ Financial Consultants,
Inc. ("EQFC") as follows:
WHEREAS, pursuant to a Distribution Agreement, dated as of June 30, 1996
and a Distribution Agreement dated July 1, 1998 EQFC is a principal underwriter
of The Xxxxxx River Trust ("Trust"), a series mutual fund registered under the
Investment Company Act of 1940 ("1940 Act") whose shareholders are separate
accounts of EOC and of other insurance companies;
WHEREAS, EOC issues variable insurance contracts ("Variable Contracts")
whose net premiums or considerations are allocated in whole or in part to the
respective separate accounts of EOC for investment in the Trust, for direct
investment or for investment in other funding media ("Separate Accounts");
WHEREAS, units of interest in the Separate Accounts are registered under
the Securities Act of 1933 ("1933 Act") to the extent such registration is
required;
WHEREAS, EOC is a broker-dealer registered under the Securities Exchange
Act of 1934, as amended ("1934 Act"), and is a member of the National
Association of Securities Dealers, Inc. ("NASD");
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WHEREAS, EOC desires to engage EQFC, which is a registered broker-dealer
under the 1934 Act and a member of the NASD to assume the responsibilities set
forth in this Agreement with respect to the distribution of the Variable
Contracts, including in particular the responsibility for compliance with
broker-dealer requirements under federal and any applicable state or foreign
securities laws and the NASD Rules of Fair Practice ("NASD Rules") with respect
to the offering of the Variable Contracts, and EQFC desires to assume such
responsibilities;
NOW, THEREFORE, the parties hereto agree as follows;
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ARTICLE I
Distribution Responsibility for the Variable Contracts
Sec. 1.1 EOC authorizes to act, and EQFC agrees to serve, as broker-dealer
in connection with the distribution of their respective Variable Contracts to
the extent provided in this Agreement. EQFC shall be fully responsible for
carrying out all compliance and supervisory obligations in connection with the
distribution of the Variable Contracts, as required by the NASD rules and by
federal and any applicable state or foreign securities laws. Equitable shall be
fully responsible for compensating the Agents for their sales of Variable
Contracts, as provided in Section 1.4.
Sec. 1.2 Without limiting the generality of Section 1.1, EQFC agrees that
it shall be fully responsible for:
(A) Requiring that each person who is appointed by EOC as an insurance
agent and is authorized to offer and sell the Variable Contracts under the
insurance laws (an "Agent")is duly registered as a representative of EQFC and is
appropriately licensed, registered or otherwise qualified to offer and sell the
Variable Contracts under the federal securities laws and any applicable
securities laws of each state or other jurisdiction in which the Variable
Contracts offered by such person may be lawfully sold;
(B) Training, supervising and directing the Agents for purposes of
complying on a continuous basis with the NASD rules and with federal and state
securities laws applicable in connection with the offer and sale of the Variable
Contracts. In this connection EQFC shall:
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(i) Establish and implement reasonable written procedures which
provide for diligent supervision of sales practices of the Agents;
(ii) Require that Agents shall recommend the purchase of Variable
Contracts only upon reasonable grounds to believe that the purchase is suitable
for each prospective purchaser, and verify their compliance with such
requirement;
(iii) Provide a sufficient number of registered principals and an
adequate compliance staff to carry out the responsibilities set forth herein;
and
(iv) Impose disciplinary measures on the Agents.
(C) Oversight of the securities activities of all persons engaged
directly or indirectly in operations of EQFC and EOC related to the offer or
sale of the Variable Products, each of whom shall be considered a "person
associated" with EQFC, as defined in Section 3(a)(18) of the 1934 Act. EQFC
shall have full responsibility for each such person with regard to his or her
training, supervision and control, as contemplated by Section 15 of the 1934
Act, and, in that connection, shall have the authority to require that
disciplinary action be taken with respect to such persons.
Sec. 1.3 EQFC represents that it is a broker-dealer duly registered under
1934 Act and is a member in good standing of the NASD and, to the extent
necessary to perform the activities contemplated hereunder, is duly registered,
or otherwise qualified, under securities laws of every state or other
jurisdiction in
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which the Variable Contracts are available for sale, and EQFC agrees to maintain
such status. Consistent with its designation as distributor of the Variable
Contracts, as provided in Section 1.1 of this Agreement, EQFC acknowledges that
it may be deemed to be an "underwriter" of a "principal underwriter" of the
Separate Accounts under the federal securities laws.
Sec. 1.4 EOC shall have exclusive responsibility for the payment of
commissions or other fees to the Agents. All compensation paid by EOC to the
Agents with respect to sales of the Variable Contracts shall be paid by EOC on
its own behalf, and shall be reflected on the books and records of EOC. The
responsibility of EOC shall include the performance of all activities necessary
in order that the payment of compensation hereunder complies with all applicable
federal securities laws and state securities and insurance laws. EOC retains the
ultimate right to determine the rates of commission and other fees to be paid to
the Agents in connection with their respective Variable Contracts. Nothing
contained in this Agreement shall obligate EQFC to pay any commissions or other
fees to Agents or to reimburse any Agents for expenses incurred by them with
respect to the Variable Contracts, nor shall EQFC have any responsibility for
the adequacy or accuracy of any amount paid to an Agent in connection with the
sale of the Variable Contracts. EQFC shall have no right or interest whatsoever
in any commissions or other fees payable to Agents by EOC.
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Sec. 1.5 EQFC and EOC shall each cause to be maintained and perserved such
accounts, books and other documents as are required by the 1934 Act and 1940 Act
and any other applicable laws and regulations. In particular, without limiting
the foregoing, EQFC shall cause all the books and records in connection with the
offer and sale of the Variable Contracts to be maintained and perserved in
conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act, to
the extent that such requirements are applicable to the Variable Contracts. The
payment of premiums, purchase payments, commissions and other fees and payments
in connection with the Variable Contracts shall be reflected on the books and
records of EOC and, as provided in Section 1.4 here of and as may otherwise be
required under applicable NASD regulations and federal and applicable state
securities laws requirements.
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Sec. 1.6 EQFC, and EOC shall each submit to all regulators and
administrative bodies having jurisdiction over the sales of the Variable
Contracts, present or future, any information, reports, or other material that
any such body by reason of this Agreement may request or require pursuant to
applicable laws or regulations. In particular, without limiting the foregoing,
EOC agrees that any books and records which it maintains pursuant to Section 1.5
of this Agreement which are required to be maintained under Rule 17a-3 or 17a-4
of the 1934 Act shall be subject to inspection by the SEC in accordance with
Section 17(a) of the 1934 Act.
Sec. 1.7 EQFC, and EOC each agree and understand that all documents,
reports, records, books, files and other materials required under applicable
NASD regulations and federal and state securities laws relative to the sale of
Variable Contracts shall be the property of EQFC, with the exception of those
books and records maintained by EOC pursuant to Section 1.4 which relate to
sales compensation and shall be the joint property of EOC and EQFC. If, however,
such documents, reports, records, books, files and other materials which are the
property of EQFC are required by applicable regulation or law to be maintained
also by EOC, such material shall be the joint property of EQFC and EOC. All
other documents, reports, records, books, files and other materials maintained
relative to this Agreement shall be the property of EOC. Upon the termination of
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this Agreement, all such material shall be returned to the applicable party.
Sec. 1.8 EQFC and EOC from time to time during the term of this Agreement,
shall allocate among themselves, subject to a right of further delegaiton, the
administrative responsibility for maintaining and preserving the books, records
and accounts kept in connection with the Variable Contracts; provided, however,
in the case of books, records and accounts kept pursuant to a requirement of
applicable law or regulation, the ultimate responsibility for maintaining and
preserving such books, records and accounts shall be that of the party which is
required to maintain or preserve such books, records and accounts under the
applicable law or regulation, and such books, records and accounts shall be
maintained and preserved under the supervision of that party. EQFC and EOC shall
cause each other to be furnished with such reports as each may reasonably
request for the purpose of meeting its respective reporting and recordkeeping
requirements under such regulations and laws and under the insurance laws of the
State of Colorado and any other applicable states or jurisdictions.
ARTICLE II
Procedures for Sale of Variable Contracts
Sec. 2.1 EOC represents and warrants that units of interest of its
respective Separate Accounts offered under the Variable Contracts are registered
under the 1933 Act to the extent such registration is required, that the
Separate Accounts are registered under the 1940 Act unless
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exempt from such registration, and that the Variable Contracts are qualified to
be sold under the insurance laws and any applicable securities laws of all
states and other jurisdictions in which the Variable Contracts are authorized
for sale. EOC further repesents and warrants that it is a life insurance company
duly organized under the laws of the State of Colorado and in good standing and
authorized to conduct business under the laws of each state in which the
Variable Contracts are offered and sold.
Sec. 2.2 EQFC will require that the Agents use only the effective
prospectuses, statements of additional information ("SAIs") and other authorized
materials in soliciting and selling the Variable Contracts. EQFC is not
authorized to give any information or to make any representations concerning the
Variable Contracts other than those contained in the current prospectus or SAI
therefor filed with the SEC or in such materials as may be authorized by EOC.
SEC. 2.3 All applications for Variable Contracts shall be made on
application forms supplied by EOC, as appropriate, and all payments collected by
EQFC shall be remitted by EQFC promptly in full, together with such application
or enrollment forms and any other required documentation, directly to EOC, at
the address indicated on such application or to such other address as EOC may,
from time to time, designate in writing. EOC shall review all such applications
for suitability. Checks or money orders in payment on any Variable Contract
shall be drawn to the order of "Equitable of Colorado, Inc." All applications
for Variable Contracts shall be subject to
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acceptance or rejection by EOC at its discretion.
Sec. 2.4 All money payable in connection with any of the Variable
Contracts, whether as premiums, purchase payment or otherwise, and whether paid
by, or on behalf of any applicant or contractowner, is the property of EOC and
shall be transmitted promptly in accordance with the administrative procedures
of EOC without any deduction or offset for any reason, including by example but
not limitation, any deduction or offset for compensation claimed by EQFC. No
cash payments shall be accepted by EQFC in connection with the Variable
Contracts.
Sec. 2.5 EOC shall be responsible for payment of the costs of printing the
prospectuses, SAIs and sales material used in connection with the solicitation
of applications for the Variable Contracts and to allocate such costs between
themselves. EOC shall provide to EQFC copies of such prospectusus. SAIs and
sales material in such number as EQFC shall reasonably request. EOC shall make
available to EQFC copies of all financial statements and other documents that
EQFC shall reasonably request for use in connection with the distribution of the
Variable Contracts.
Sec. 2.6 Notwithstanding anything in this Agreement to the contrary, EQFC
may enter into sales agreements with independent broker-dealers for the sale of
the Variable Contracts, subject to the prior written approval of EOC of each
such sales agreement and the terms thereof. All such
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sales agreements entered into by EQFC shall provide that each independent
broker-dealer will assume full responsibility for continued compliance by itself
and its associated persons with the NASD Rules and applicable federal and state
securities and insurance laws. All associated persons of such independent
broker-deal soliciting applications for the Variable Contracts shall be duly and
appropriately licensed or appointed for the sale of the Variable Contracts under
the NASD Rules and federal and state securities and insurance laws in which such
person shall offer or sell the Variable Contracts.
Sec. 2.7 EOC shall apply for and maintain the proper insurance licenses for
each of the Agents selling the Variable Contracts in all states or jurisdictions
in which the Variable Contracts are offered for sale by such Agent. EOC reserves
the right to refuse to appoint any proposed agent, independent broker-dealer, or
any representative thereof as an Agent, and may terminate an Agent or
independent broker-dealer once appointed. EOC shall promptly notify EQFC of each
such termination. EOC agrees to be responsible for all licensing or other fees
required under pertinent state insurance laws to properly authorize Agents for
the sale of the Variable Contracts; however, the foregoing shall not limit EOC's
right to collect such amount from any person or entity other than EQFC.
Sec.2.8 The parties hereto recognize that any person selling the Variable
Contracts as contemplated by this Agreement shall be acting as an insurance
agent of EOC or as an insurance broker, and that the rights of EQFC to supervise
such persons shall be limited to the extent specifically described herein or
required under applicable federal or state securities laws or NASD regulations.
Such persons shall not be considered employees of EQFC and
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shall be considered agents of EQFC only as and to the extent required by such
laws and regulations. Further, it is intended by the parties hereto that such
persons are and shall continue to be considered to have a common law independent
contractor relationship with EOC and not to be common law employees of EOC,
unless any contract between EQFC and any person selling the Variable Contracts
specifically provides otherwise.
Sec. 2.9 Consistent with the responsibility of EQFC to discharge all
compliance and supervisory obligations relating to the distribution of the
Variable Contracts as provided in this Agreement and consistent with the
authority given to EQFC hereunder, EOC shall retain the ultimate right of
control over, and responsibility for, the issuance, servicing and marketing of
its Variable Contracts. In that connection, EOC shall review and approve all
advertising concerning the Variable Contracts issued by each of them; however,
EQFC shall be responsible for filing such materials, as required, with the NASD
and with state securities regulators and for obtaining such approvals as may be
necessary.
Sec. 2.10 Unless otherwise agreed in writing by EOC, neither EQFC nor any
Agent nor any independent broker-dealer shall have an interest in any surrender
charges, deductions or other fees payable to EOC.
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ARTICLE III
Services and Personnel Provied by EOC
Sec. 3.1 EOC agrees to furnish compliance and related support services,
including personnel, to assist EQFC in the performance of the services which
EQFC is required to provide hereunder. In furnishing such services, all
personnel of EOC shall be subject at all times to the supervision and control of
EQFC.
ARTICLE IV
Compensation and Expenses
Sec. 4.1 EQFC shall be compensated, not less frequently than quarterly, by
EOC for its services under this Agreement in an aggregate annual amount which
shall be equal to the actual expenses incurred by EQFC to provide compliance and
related support services, plus a percentage of such expenses which shall
approximate the annual rate of profit earned by EQFC from its performance of
comparable services for unaffiliated clients.
Sec 4.2 EQFC shall pay the costs and expenses, direct and indirect,
incurred by EOC in furnishing services and personnel, pursuant to Article III of
this Agreement. In determining the basis for the apportionment of expenses,
specific identification or estimates based on time, company assets, square
footage or any other mutually agreeable method providing for a fair and
reasonable allocation of cost may be used, provided such method is in conformity
with the requirements of the Colorado Insurance Law and regulations. The charge
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to EQFC for such apportioned expenses shall be at cost as described in this
Section 4.2.
Sec. 4.3 Within 45 days after the end of each calendar quarter, and more
often if desired, EOC shall submit to EQFC a statement of apportioned expenses
showing the basis for such apportionment; and settlement shall be made within 15
days thereafter. The statement of apportioned expenses shall set forth in
reasonable detail the nature of the expenses being apportioned and other
relevant information to support the charge.
ARTICLE V
Term of Agreement
Sec. 5.1 Subject to termination as herein provided, this Agreement shall
remain in full force and effect for a two-year peroid commencing on the date
first above written, and this Agreement shall continue in full force and effect
from year to year thereafter, until terminated as herein provided.
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Sec. 5.2 This Agreement may be terminated by any party hereto on not less
than 60 days' prior written notice to the other parties or by an agreement in
writing signed by all of the parties hereto, except that data processing
services may not be terminated on less than 180 days' prior written notice, if
requested by Equico in writing promptly following its receipt of written notice
of termination of this Agreement. This Agreement shall automatically be
terminated in the event of its assignment.
Sec. 5.3 Upon termination of this Agreement, all authorizations, rights,
and obligations shall cease except the obligations to settle accounts hereunder,
including the settlement of monies due in connection with Variable Contracts in
effect at the time of termination or issued pursuant to applications received by
EOC prior to termination.
ARTICLE VI
Miscellaneous
Sec. 6.1 Should an irreconcilable difference of opinion arise between or
among the parties to this Agreement as to the interpretation of any matter
respecting this Agreement, it is hereby mutually agreed that such differences
shall be submitted to arbitration as the sole remedy available to the parties.
Such arbitration shall be in accordance with the rules of the American
Arbitration Association, the arbitrators shall have extensive experience in the
insurance industry, and the arbitration shall take place in New York, New York.
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Sec. 6.2 For purposes of this Agreement, the term "Variable Contracts"
shall not include any vairable insurance contract issued by EOC which is not
offered and sold by employees or agents of EOC.
Sec. 6.3 If any provision 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.
Sec. 6.4 This Agreement constitutes the entire agreement between the
parties hereto and may not be modified except in a written instrument executed
by all parties hereto.
Sec. 6.5 This Agreement shall be subject to the provisions of the 1934 Act
and, to the extent applicable, the 1940 Act and the rules, requlations and
rulings thereunder and of the NASD, from time to time in effect, including such
exemptions from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and constured in accordance therewith.
Sec. 6.6 This Agreement shall be interpreted in accordance with the laws of
the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunto duly authorized, as of the day
and year first above written.
THE EQUITABLE OF COLORADO, INC.
By: /s/Name
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Name:
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Title:----------------------
EQ FINANCIAL CONSULTANTS SECURITIES, INC.
By: /s/Name
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Name:
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Title:
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