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EXHIBIT 1(A)(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of January ____, 1996 by and between NATIONAL LIFE
INSURANCE COMPANY ("Insurer"), a Vermont insurance company, on its behalf and
on behalf of each separate account identified in Schedule 1 hereto, and EQUITY
SERVICES, INC. ("Distributor"), a Vermont corporation.
WITNESSETH:
WHEREAS, Distributor is a broker-dealer that engages in the distribution
of variable insurance products and other investment products; and
WHEREAS, Insurer desires to issue certain variable insurance products
described more fully below to the public through Distributor acting as
principal underwriter;
NOW, THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:
1. Definitions
a. Policies -- The class or classes of variable insurance products set
forth on Schedule 1 to this Agreement as in effect at the time this Agreement
is executed, and such other classes of variable insurance products that may be
added to Schedule 1 from time to time in accordance with Section 11.b of this
Agreement, and including any riders to such policies and any other policies
offered in connection therewith. For this purpose and under this Agreement
generally, a "class of Policies" shall mean those Policies issued by Insurer on
the same policy form or forms and covered by the same Registration Statement.
b. Registration Statement -- At any time that this Agreement is in
effect, each currently effective registration statement filed with the SEC
under the 1933 Act on a prescribed form, or currently effective post-effective
amendment thereto, as the case may be, relating to a class of Policies,
including financial statements included in, and all exhibits to, such
registration statement or post-effective amendment. For purposes of Section 9
of this Agreement, the term "Registration Statement" means any document which
is or at any time was a Registration Statement within the meaning of this
Section 1.b.
c. Prospectus -- The prospectus included within a Registration
Statement, except that, if the most recently filed version of the prospectus
(including any supplements thereto) filed pursuant to Rule 497 under the 1933
Act subsequent to the date on which a Registration Statement became effective
differs from the prospectus included within such Registration Statement at the
time it became effective, the term "Prospectus" shall refer to the most
recently filed prospectus filed under Rule 497 under the 1933 Act, from and
after the date on which it shall have been filed. For purposes of Section 9 of
this Agreement, the term "any Prospectus" means any document which is or at any
time was a Prospectus within the meaning of this Section 1.c.
d. Fund -- An investment company in which the Variable Account invests.
e. Variable Account -- A separate account supporting a class or classes
of Policies and specified on Schedule 1 as in effect at the time this Agreement
is executed, or as it may be amended from time to time in accordance with
Section 11.b of this Agreement.
f. 1933 Act -- The Securities Act of 1933, as amended.
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g. 1934 Act -- The Securities Exchange Act of 1934, as amended.
h. 1940 Act -- The Investment Company Act of 1940, as amended.
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers, Inc.
k. Regulations -- The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time this
Agreement is executed or thereafter promulgated.
l. Selling Broker-Dealer -- A person or entity registered as a
broker-dealer and licensed as a life insurance agent or affiliated with a
person or entity so licensed, and authorized to distribute the Policies
pursuant to a sales agreement as provided for in Section 4 of this Agreement.
m. Representative -- When used with reference to Distributor or a
Selling Broker-Dealer, an individual who is an associated person, as that term
is defined in the 1934 Act, thereof.
n. Application -- An application for a Policy.
o. Premium -- A payment made under a Policy by an applicant or purchaser
to purchase benefits under the Policy.
p. Customer Service Center -- The service center identified in the
Prospectus as the location at which Premiums and Applications are accepted.
2. Authorization and Appointment
a. Scope of Authority. Insurer hereby authorizes Distributor on an
exclusive basis, and Distributor accepts such authority, subject to the
registration requirements of the 1933 Act and the 1940 Act and the provisions
of the 1934 Act and conditions herein, to be the distributor and principal
underwriter for the sale of the Policies to the public in each state and other
jurisdiction in which the Policies may lawfully be sold during the term of this
Agreement. Insurer hereby authorizes Distributor to grant authority to Selling
Broker-Dealers to solicit Applications and Premiums to the extent Distributor
deems appropriate and consistent with the marketing program for the Policies or
a class of Policies, subject to the conditions set forth in Section 4 of this
Agreement. The Policies shall be offered for sale and distribution at premium
rates set from time to time by Insurer. Distributor shall use its best efforts
to market the Policies actively, directly and/or through Selling Broker-Dealers
in accordance with Section 4 of this Agreement, subject to compliance with
applicable law, including rules of the NASD.
b. Limits on Authority. Distributor shall act as an independent contractor
and nothing herein contained shall constitute Distributor or its agents,
officers or employees as agents, officers or employees of Insurer solely by
virtue of their activities in connection with the sale of the Policies
hereunder. Distributor and its Representatives shall not have authority, on
behalf of Insurer: to make, alter or discharge any Policy or other insurance
policy or annuity entered into pursuant to a Policy; to waive any Policy
forfeiture provision; to extend the time of paying any Premium; or to receive
any monies or Premiums (except for the sole purpose of
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forwarding monies or Premiums to Insurer). Distributor shall not expend, nor
contract for the expenditure of, the funds of Insurer. Distributor shall not
possess or exercise any authority on behalf of Insurer other than that
expressly conferred on Distributor by this Agreement.
3. Solicitation Activities
a. Distributor Representatives. No Distributor Representative shall
solicit the sale of a Policy unless at the time of such solicitation such
individual is duly registered with the NASD and duly licensed with all
applicable state insurance and securities regulatory authorities, and is duly
appointed as an insurance agent of Insurer.
b. Solicitation Activities. All solicitation and sales activities
engaged in by Distributor and the Distributor Representatives with respect to
the Policies shall be in compliance with all applicable federal and state
securities laws and regulations, as well as all applicable insurance laws and
regulations and the Insurer's rules and procedures. In particular, without
limiting the generality of the foregoing:
(1) Distributor shall train, supervise and be solely responsible for
the conduct of Distributor Representatives in their solicitation of
Applications and Premiums and distribution of the Policies, and shall supervise
their compliance with applicable rules and regulations of any insurance or
securities regulatory agencies that have jurisdiction over variable insurance
product activities.
(2) Neither Distributor nor any Distributor Representative shall
offer, attempt to offer, or solicit Applications for, the Policies in any state
or other jurisdiction unless Insurer has notified Distributor that such
Policies may lawfully be sold or offered for sale in such state, and has not
subsequently revised such notice.
(3) Neither Distributor nor any Distributor Representative shall
give any information or make any representation in regard to a class of
Policies in connection with the offer or sale of such class of Policies that is
not in accordance with the Prospectus for such class of Policies, or in the
then-currently effective prospectus or statement of additional information for
a Fund, or in current advertising materials for such class of Policies
authorized by Insurer.
(4) All Premiums paid by check or money order that are collected by
Distributor or any of its Representatives shall be remitted promptly, and in
any event not later than two business days, in full, together with any
Applications, forms and any other required documentation, to the Customer
Service Center. Checks or money orders in payment of Premiums shall be drawn
to the order of the Insurer. If any Premium is held at any time by
Distributor, Distributor shall hold such Premium in a fiduciary capacity and
such Premium shall be remitted promptly, and in any event not later than two
business days, to Insurer. Distributor acknowledges that all such Premiums,
whether by check, money order or wire, shall be the property of Insurer.
Distributor acknowledges that Insurer shall have the unconditional right to
reject, in whole or in part, any Application or Premium.
c. Representations and Warranties of Distributor. Distributor represents and
warrants to Insurer that Distributor is and shall remain registered during the
term of this Agreement as a broker- dealer under the 1934 Act, is a member with
the NASD, and is duly registered under applicable state securities laws, and
that Distributor is and shall remain during the term of this Agreement in
compliance with Section 9(a) of the 1940 Act.
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4. Selling Broker-Dealers. Distributor shall ensure that sales of the
Policies by Selling Broker-Dealers comply with the following conditions, and
any additional conditions Insurer may specify from time to time.
a. Every Selling Broker-Dealer shall be both registered as a
broker-dealer with the SEC and a member of the NASD and licensed as an
insurance agent with authority to sell variable products or associated with an
insurance agent so licensed. Any individuals to be authorized to act on behalf
of Selling Broker-Dealer shall be duly registered with the NASD as
representatives of Selling Broker-Dealer with authority to sell variable
products, and shall be licensed as insurance agents with authority to sell
variable products. Distributor shall verify that Selling Broker-Dealer and its
Representatives are duly licensed under applicable state insurance law to sell
the Policies (or, if Broker-Dealer is not so licensed, that it is associated
with an entity so licensed).
b. Every Selling Broker-Dealer (or, if applicable, its associated
general insurance agency) and each of its Representatives shall have been
appointed by Insurer, provided that Insurer reserves the right to refuse to
appoint any proposed person, or once appointed, to terminate such appointment.
c. Every Selling Broker-Dealer must enter into a written sales agreement
with Distributor which sales agreement, among other things, will require such
Selling Broker-Dealer to use its best efforts to solicit applications for
Policies and to comply with applicable laws and regulations, including the
Insurer's rules and regulations as reflected in the Insurer's rules and
procedures or otherwise communicated to agents appointed by Insurer, and will
contain such other provisions as the Distributor deems to be consistent
herewith.
d. In view of Insurer's desire to ensure that Policies will be sold to
purchasers for whom the Policies will be suitable, the written Sales Agreement
shall require that Selling Broker-Dealers and their Representatives 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
the applicant. While not limited to the following, a determination of
suitability shall be based on information supplied by an applicant after a
reasonable inquiry concerning the applicant's other security holdings,
insurance and investment objectives, financial situation and needs, and the
likelihood that the applicant will continue to make any premium payments
contemplated by the Policy applied for and will keep the Policy in force for a
sufficient period of time so that Insurer's acquisition costs are amortized
over a reasonable period of time.
5. Marketing Materials
a. Preparation and Filing. Insurer shall be primarily responsible for
the design and preparation of all promotional, sales and advertising material
relating to the Policies. Distributor shall be responsible for filing such
material, as required, with the NASD and any state securities regulatory
authorities. Insurer shall be responsible for filing all promotional, sales or
advertising material, as required, with any state insurance regulatory
authorities. Insurer shall be responsible for preparing the Policy Forms and
filing them with applicable state insurance regulatory authorities, and for
preparing the Prospectuses and Registration Statements and filing them with the
SEC and state regulatory authorities, to the extent required. The parties
shall notify each other expeditiously of any comments provided by the SEC, NASD
or any securities or insurance regulatory authority on such material, and will
cooperate expeditiously in resolving and implementing any comments, as
applicable.
b. Use in Solicitation Activities. Insurer shall be responsible for
furnishing Distributor with such Applications, Prospectuses and other materials
for use by Distributor and
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any Selling Broker-Dealers in their solicitation activities with respect to
the Policies. Insurer shall notify Distributor of those states or
jurisdictions which require delivery of a statement of additional information
with a prospectus to a prospective purchaser.
6. Compensation and Expenses
a. Insurer shall pay compensation for sales of the Policies in
accordance with Schedule 2 hereto. Insurer shall pay compensation payable to
Distributor Representatives and to Selling Broker-Dealers, on Distributor's
behalf, subject to the provisions of Section 7 of this Agreement.
b. Insurer shall pay all expenses in connection with:
(1) the preparation and filing of each Registration Statement
(including each pre-effective and post-effective amendment thereto) and the
preparation and filing of each Prospectus (including any preliminary and each
definitive Prospectus);
(2) the preparation, underwriting, issuance and administration of
the Policies;
(3) any registration, qualification or approval or other filing of
the Policies or Policy forms required under the securities or insurance laws of
the states in which the Policies will be offered.
(4) all registration fees for the Policies payable to the SEC;
(5) the printing and mailing of definitive Prospectuses for the
Policies and any supplements thereto for distribution to existing Policy
Owners; and
(6) the printing and mailing of all promotional materials relating
to the Policies.
c. Distributor shall pay the following expenses related to its
distribution of the Policies:
(1) NASD filing fees and expenses of Representatives for which the
Distributor agrees to be responsible; and
(2) any other expenses incurred by Distributor or its employees for
the purpose of carrying out the obligations of Distributor hereunder.
7. Compliance
a. Maintaining Registration and Approvals. Insurer shall be responsible
for maintaining the registration of the Policies with the SEC and any state
securities regulatory authority with which such registration is required, and
for gaining and maintaining approval of the Policy forms where required under
the insurance laws and regulations of each state or other jurisdiction in which
the Policies are to be offered.
b. Confirmations and 1934 Act Compliance. Insurer, as agent for
Distributor, shall confirm to each applicant for and purchaser of a Policy in
accordance with Rule 10b-10 under the 1934 Act acceptance of Premiums and such
other transactions as are required by
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Rule 10b-10 or administrative interpretations thereunder. Insurer shall
maintain and preserve such books and records with respect to such confirmations
and all other required books of account and related financial records relating
to the distribution of the Policies in conformity with the requirements of
Rules 17a-3 and 17a-4 under the 1934 Act to the extent such requirements apply.
Insurer shall maintain all such books and records and hold such books and
records on behalf of and as agent for Distributor whose property they are and
shall remain, and acknowledges that such books and records are at all times
subject to inspection by the SEC in accordance with Section 17(a) of the 1934
Act.
c. Issuance and Administration of Policies. Insurer shall be
responsible for issuing the Policies and administering the Policies and the
Variable Account, including all Policy Owner communications, provided, however,
that Distributor shall have full responsibility for the securities activities
of all persons employed by the Insurer who are engaged directly or indirectly
in the Policy operations, and for the training, supervision and control of such
persons to the extent of such activities.
8. Investigations and Proceedings
a. Cooperation. Distributor and Insurer shall cooperate fully in any
securities or insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the offering, sale or distribution of the
Policies distributed under this Agreement. Without limiting the foregoing,
Insurer and Distributor shall notify each other promptly of any customer
complaint or notice of any regulatory investigation or proceeding or judicial
proceeding received by either party with respect to the Policies.
b. Customer Complaints. Distributor and Insurer shall cooperate fully
in responding to any customer complaints. Distributor will promptly provide to
Insurer a copy of all customer complaints received by Distributor concerning or
related to the Policies. Distributor will timely provide information as needed
to enable Insurer to respond to such complaints, and, at Insurer's option, will
itself respond to such complaints as directed by Insurer.
9. Indemnification
a. By Insurer. Insurer shall indemnify and hold harmless Distributor
and each person who controls or is associated with Distributor within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any claim
asserted), to which Distributor and/or any such person may become subject,
under any statute or regulation, any NASD rule or interpretation, at common law
or otherwise, insofar as such losses, claims, damages or liabilities:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
contained in any (i) Registration Statement or in any Prospectus or (ii)
blue-sky application or other document executed by Insurer specifically for the
purpose of qualifying any or all of the Policies for sale under the securities
laws of any jurisdiction; provided that Insurer shall not be liable in any such
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon, an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon information furnished
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in writing to Insurer by Distributor specifically for use in the preparation of
any such Registration Statement or any such blue-sky application or any
amendment thereof or supplement thereto;
(2) result from any breach by Insurer of any provision of this
Agreement.
This indemnification agreement shall be in addition to any liability
that Insurer may otherwise have; provided, however, that no person shall be
entitled to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking indemnification.
b. By Distributor. Distributor shall indemnify and hold harmless
Insurer and each person who controls or is associated with Insurer within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any claim
asserted), to which Insurer and/or any such person may become subject under any
statute or regulation, any NASD rule or interpretation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances in which they
were made, contained in any (i) Registration Statement or in any Prospectus, or
(ii) blue-sky application or other document executed by Insurer specifically
for the purpose of qualifying any or all of the Policies for sale under the
securities laws of any jurisdiction; in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon information furnished in writing
by Distributor to Insurer specifically for use in the preparation of any such
Registration Statement or any such blue-sky application or any amendment
thereof or supplement thereto;
(2) result because of any use by Distributor or any Distributor
Representative of promotional, sales or advertising material not authorized by
Insurer or any verbal or written misrepresentations by Distributor or any
Distributor Representative or any unlawful sales practices concerning the
Policies by Distributor or any Distributor Representative under federal
securities laws or NASD regulations; or
(3) result from any breach by Distributor of any provision of this
Agreement.
This indemnification shall be in addition to any liability that
Distributor may otherwise have; provided, however, that no person shall be
entitled to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking indemnification.
c. General. Promptly after receipt by a party entitled to
indemnification ("indemnified person") under this Section 9 of notice of the
commencement of any action as to which a claim will be made against any person
obligated to provide indemnification under this Section 9 ("indemnifying
party"), such indemnified person shall notify the indemnifying party in writing
of the commencement thereof as soon as practicable thereafter, but failure to
so notify the indemnifying party shall not relieve the indemnifying party from
any liability which
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it may have to the indemnified person otherwise than on account of this Section
9. The indemnifying party will be entitled to participate in the defense of
the indemnified person but such participation will not relive such indemnifying
party of the obligation to reimburse the indemnified person for reasonable
legal and other expenses incurred by such indemnified person in defending
himself or itself.
The indemnification provisions contained in this Section 9 shall
remain operative in full force and effect, regardless of any termination of
this Agreement. A successor by law of Distributor or Insurer, as the case may
be, shall be entitled to the benefits of the indemnification provisions
contained in this Section 9.
10. Termination. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of the other party. This
Agreement may be terminated at any time for any reason or for no reason by
either party upon 60 days' written notice to the other party, without payment
of any penalty. (The term "assigned" shall not include any transaction
exempted from Section 15(b)(2) of the 1940 Act.) This Agreement may be
terminated immediately at the option of either party to this Agreement upon the
other party's material breach of any provision of this Agreement or of any
representation or warranty made in this Agreement, unless such breach has been
cured within 10 days after receipt of notice of breach from the non-breaching
party. 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 Policies in effect
at the time of termination or issued pursuant to Applications signed prior to
termination.
11. Miscellaneous
a. Binding Effect. This Agreement shall be binding on and shall inure
to the benefit of the respective successors and assigns of the parties hereto
provided that neither party shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party.
b. Schedules. The parties to this Agreement may amend Schedule 1 to
this Agreement from time to time to reflect additions of any class of Policies
and Variable Accounts. The provisions of this Agreement shall be equally
applicable to each such class of Policies and each Variable Account that may be
added to the Schedule, unless the context otherwise requires. Insurer may
amend Schedule 2 unilaterally, from time to time. Any other change in the
terms or provisions of this Agreement shall be by written agreement between
Insurer and Distributor.
c. Rights, Remedies, etc, are Cumulative. The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws. Failure of either
party to insist upon strict compliance with any of the conditions of this
Agreement shall not be construed as a waiver of any of the conditions, but the
same shall remain in full force and effect. No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
d. Notices. All notices hereunder are to be made in writing and shall
be given:
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if to Insurer, to:
D. Xxxxxxx Xxxxxx, Esq.
National Life Insurance Company
One National Life Drive
Montpelier, Vermont 05604
if to Distributor, to:
Xxxxxxx Xxxxxx, Director of Compliance
Equity Services, Inc.
National Life Drive
Montpelier, Vermont 05604
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or transmitted by
registered or certified United States mail with return receipt requested, or by
overnight mail by a nationally recognized courier, and shall be effective upon
delivery. Failure to provide written notice shall not constitute a defense to
any action unless the party who did not receive written notice was materially
prejudiced thereby.
f. Interpretation; Jurisdiction. This Agreement constitutes the whole
agreement between the parties hereto with respect to the subject matter hereof,
and supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to such subject matter. No prior
writings by or between the parties with respect to the subject matter hereof
shall be used by either party in connection with the interpretation of any
provision of this Agreement. This Agreement shall be construed and its
provisions interpreted under and in accordance with the internal laws of the
state of [Vermont] without giving effect to principles of conflict of laws.
g. Severability. This is a severable Agreement. In the event that any
provision of this Agreement would require a party to take action prohibited by
applicable federal or state law or prohibit a party from taking action required
by applicable federal or state law, then it is the intention of the parties
hereto that such provision shall be enforced to the extent permitted under the
law, and, in any event, that all other provisions of this Agreement shall
remain valid and duly enforceable as if the provision at issue had never been a
part hereof.
h. Section and Other Headings. The headings in this Agreement are
included for convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their construction or effect.
i. Counterparts. This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
j. Regulation. This Agreement shall be subject to the provisions of the
1933 Act, 1934 Act and 1940 Act and the Regulations and the rules and
regulations 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 construed in accordance therewith.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.
NATIONAL LIFE INSURANCE COMPANY
By:
-----------------------------
Name:
Title:
EQUITY SERVICES, INC.
By:
-----------------------------
Name:
Title:
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SCHEDULE 1
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REGISTRATION VARIABLE
VARIABLE POLICY FORM STATEMENT ACCOUNT
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1. Variable life Form S-6 National Variable Life
policy File No. 33-91938 Insurance Account
File No. 811-
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SCHEDULE 2
SCHEDULES OF SALES COMMISSIONS
Commission Paid to
Year Distributor (% of Premium)
