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EXHIBIT 3(a)
DISTRIBUTION AGREEMENT
AGREEMENT made this __________________ day of ______________________________
1999 by and between Farmers New World Life Insurance Company, a Washington
corporation ("FNWL"), on its behalf and on behalf of each separate account
identified in Schedule 1 hereto, and Investors Brokerage Services, Inc.
("Distributor"), an Illinois corporation.
WITNESSETH
WHEREAS, Distributor is a broker-dealer that engages in the distribution of
variable insurance products and may engage in the distribution of other
investment products;
WHEREAS, FNWL desires to issue certain variable insurance products described
more fully below to the public through Distributor acting as principal
underwriter and distributor; and
WHEREAS, FNWL and Distributor acknowledge that Distributor may distribute
variable insurance products and other investment products for other companies.
NOW, THEREFORE, in consideration of their mutual promises, FNWL and Distributor
hereby agree as follows:
1. DEFINITIONS
a. Contracts -- The class or classes of variable insurance products set forth
on Schedule 2 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 2 from time to time in accordance with Section 10.b of this
Agreement, and including any riders to such contracts and any other contracts
offered in connection therewith. For this purpose and under this Agreement
generally, a "class of Contracts" shall mean those Contracts issued by FNWL 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 Contracts, including
financial statements included in, and all exhibits to, such registration
statement or post-effective amendment. For purposes of Section 8 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 8 of this
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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 Separate Account invests.
e. Variable Account -- A separate account supporting a class or classes of
Contracts 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
10.b of this Agreement.
f. 1933 Act -- The Securities Act of 1933, as amended.
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. Representative -- An individual who is an associated person of Distributor,
as that term is defined in the 1934 Act.
l. Application -- An application for a Contract.
m. Premium -- A payment made under a Contract by an applicant or purchaser to
purchase benefits under the Contract.
2. AUTHORIZATION AND APPOINTMENT
a. Scope of Authority. FNWL 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 Contracts to the public in each state and other jurisdiction in
which the Contracts may lawfully be sold during the term of this Agreement. The
Contracts shall be offered for sale and distribution at Premium rates set from
time to time by FNWL. Distributor shall use its best efforts to market the
Contracts actively subject to compliance with applicable law, including the
rules of the NASD. However, Distributor shall not be obligated to sell any
specific number or amount of Contracts. Also, the parties acknowledge and agree
that Distributor may distribute variable insurance products and other investment
products for other companies. Completed applications for Contracts shall be
transmitted directly to FNWL for acceptance or rejection in accordance with the
underwriting rules established by FNWL.
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 FNWL solely by virtue of their
activities in connection with the sale of the Contracts hereunder. Distributor
and its Representatives shall not have authority, on behalf of FNWL: to make,
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alter or discharge any Contract or other insurance policy or annuity entered
into pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Premium; or to receive any monies or Premiums
(except for the sole purpose of forwarding monies or Premiums to FNWL).
Distributor shall not expend, nor contract for the expenditure of, the funds of
FNWL. Distributor shall not possess or exercise any authority on behalf of FNWL
other than that expressly conferred on Distributor by this Agreement.
3. SOLICITATION ACTIVITIES
a. Representatives. No Representative shall solicit the sale of a Contract
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 FNWL.
b. Solicitation Activities. All solicitation and sales activities engaged in
by Distributor and its Representatives with respect to the Contracts shall be in
compliance with all applicable federal and state securities laws and
regulations, as well as all applicable insurance laws and regulations, and
compliance manuals provided by FNWL. In particular, without limiting the
generality of the foregoing:
(1) Distributor, along with appropriate FNWL registered principals, shall
train, supervise and be solely responsible for the conduct of Representatives in
their solicitation of applications and Premiums and distribution of the
Contracts under, and shall supervise their compliance with, applicable rules and
regulations of any securities regulatory agencies that have jurisdiction over
variable insurance product activities.
(2) Neither Distributor nor any Representative shall offer, attempt to offer,
or solicit Applications for, the Contracts or deliver the Contracts, in any
state or other jurisdiction unless FNWL has notified Distributor that such
Contracts may lawfully be sold or offered for sale in such state, and has not
subsequently revised such notice.
(3) Neither Distributor nor any Representative shall give any information or
make any representation in regard to a class of Contracts in connection with the
offer or sale of such class of Contracts that is not in accordance with the
Prospectus for such class of Contracts, or in the then-currently effective
prospectus or statement of additional information for a Fund, or in current
advertising materials for such class of Contracts authorized by FNWL.
(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
within two business days after receipt in full, together with any Applications,
forms and any other required documentation, to FNWL. Checks or money orders in
payment of Premiums shall be drawn to the order of "Farmers New World Life
Insurance Company." 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 within two business days, to FNWL.
Distributor acknowledges that all such Premiums, whether by check, money order
or wire, shall be the property of FNWL. Distributor acknowledges that FNWL shall
have the unconditional right to reject, in whole or in part, any Application or
Premium.
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c. Suitability. FNWL and Distributor wish to ensure that the Contracts sold by
Distributor will be issued to purchasers for whom the Contracts are suitable.
Distributor shall require that the Representatives have reasonable grounds to
believe that a recommendation to an applicant to purchase a Contract is suitable
for that applicant. Distributor shall review all applications for suitability in
accordance with Rule 2310 of the NASD Conduct Rules and interpretations and
guidance relating thereto. FNWL will review all applications under the
suitability standards set forth in variable life insurance regulations adopted
by states where the Contracts are sold, and standards adopted by FNWL or as set
forth in compliance and operational manuals. While not limited to the following,
a determination of suitability shall be based on information furnished to a
Representative after reasonable inquiry of the applicant concerning his or her
financial status, retirement needs, reasons for purchasing a Contract,
investment sophistication and experience, other securities holdings, investment
objectives (including risk tolerance), investment time horizon and tax status.
d. Representations and Warranties of Distributor. Distributor represents and
warrants to FNWL that Distributor is and during the term of this Agreement shall
remain registered as a broker-dealer under the 1934 Act, admitted as a member
with the NASD, and 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.
4. MARKETING MATERIALS
a. Preparation and Filing. FNWL and Distributor shall together design and
develop all promotional, sales and advertising material relating to the
Contracts and any other marketing-related documents for use in the sale of the
Contracts, subject to review and approval by Distributor of such material and
documents in accordance with Section 2210 of the NASD Conduct Rules. Distributor
shall be responsible for filing such material with the NASD and any state
securities regulatory authorities requiring such filings. FNWL shall be
responsible for filing all promotional, sales or advertising material, as
required, with any state insurance regulatory authorities. FNWL shall be
responsible for preparing the Contract 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. FNWL shall be responsible for furnishing
Distributor with such Applications, Prospectuses and other materials for use by
Distributor and Representatives in their solicitation activities with respect to
the Contracts. FNWL shall notify Distributor of those states or jurisdictions
which require delivery of a statement of additional information with a
Prospectus to a prospective purchaser. Distributor or its Representatives shall
not use any promotional, sales or advertising materials that have not been
approved by FNWL.
5. COMPENSATION AND EXPENSES
a. FNWL shall pay compensation for sales of the Contracts in accordance with
the schedules to the Registered Representatives Agreements attached hereto, as
revised from time to time by Distributor.
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b. FNWL shall pay all expenses, except for commissions to Representatives, in
connection with the variable products including, but not limited to, the
preparation and filing of the Contracts, Registration Statements, and
promotional materials. FNWL will pay commissions to the Representatives as
paying agent on behalf of Distributor and will maintain the books and records
reflecting such payments in accordance with the requirements of the 1934 Act on
behalf of Distributor.
6. COMPLIANCE
a. Maintaining Registration and Approvals. FNWL shall be responsible for
maintaining the registration of the Contracts with the SEC and any state
securities regulatory authority with which such registration is required, and
for gaining and maintaining approval of the Contract forms where required under
the insurance laws and regulations of each state or other jurisdiction in which
the Contracts are to be offered.
b. Confirmations and 1934 Act Compliance. FNWL, as agent for Distributor,
shall confirm to each applicant for and purchaser of a Contract in accordance
with Rule 10b-10 under the 1934 Act acceptance of Premiums and such other
transactions as are required by Rule 10b-10 or administrative interpretations
thereunder. FNWL shall maintain and preserve books and records with respect to
such confirmations in conformity with the requirements of Rules 17a-3 and 17a-4
under the 1934 Act to the extent such requirements apply. The books, accounts
and records of FNWL, the Variable Account and Distributor as to all transactions
hereunder shall be maintained so as to disclose clearly and accurately the
nature and details of the transactions. FNWL shall maintain, as agent for
Distributor, such books and records of Distributor pertaining to the offer and
sale of the Contracts and required by the 1934 Act as may be mutually agreed
upon by FNWL and Distributor, including but not limited to maintaining a record
of Representatives and of the payment of commissions and other payments or
service fees to Representatives. In addition, FNWL, as agent for Distributor,
shall maintain and preserve such additional accounts, books and other records as
are required of FNWL and Distributor by the 1934 Act. FNWL 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, NASD, and all other regulatory
bodies having jurisdiction.
c. Reports. Distributor shall cause FNWL to be furnished with such reports as
FNWL may reasonably request for the purpose of meeting its reporting and record
keeping requirements under the 1933 Act, the 1934 Act and the 1940 Act and
regulations thereunder as well as the insurance laws of the State of Illinois
and any other applicable states or jurisdictions.
d. Issuance and Administration of Contracts. FNWL shall be responsible for
issuing the Contracts and administering the Contracts and the Variable Account,
provided, however, that Distributor shall have full responsibility for the
securities activities of all persons employed by FNWL, engaged directly or
indirectly in the Contract operations, and for the training, supervision and
control of such persons to the extent of such activities.
7. INVESTIGATIONS AND PROCEEDINGS
a. Cooperation. Distributor and FNWL shall cooperate fully in any securities
or insurance regulatory investigation or proceeding or judicial proceeding
arising in connection with the offering, sale or
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distribution of the Contracts distributed under this Agreement. Without limiting
the foregoing, FNWL 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 Contracts.
b. Customer Complaints. Distributor agrees that it will comply with the
reporting requirements imposed by Section 3070 of the NASD Rules of Conduct with
regard to the sales of the Contracts. Without limiting the foregoing,
Distributor agrees to notify the NASD if Distributor or persons associated with
the Distributor are the subject of any written customer complaint involving
allegations of theft, forgery or misappropriation of funds or securities, or is
the subject of any claim for damages by a customer, broker, or dealer which is
settled for an amount exceeding $15,000.
8. INDEMNIFICATION
a. By FNWL. FNWL shall indemnify and hold harmless Distributor and any
officer, director, or employee of Distributor 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 Registration Statement or in any Prospectus; provided that FNWL 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 in writing to FNWL by Distributor specifically for use in the
preparation of any such Registration Statement or any amendment thereof or
supplement thereto;
(2) result from any breach by FNWL of any provision of this Agreement.
This indemnification agreement shall be in addition to any liability that FNWL
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 FNWL and any
officer, director, or employee of FNWL 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
FNWL 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
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order to make the statements therein not misleading, in light of the
circumstances in which they were made, contained in any Registration Statement
or in any Prospectus; 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 FNWL specifically for use in the preparation of any such
Registration Statement or any amendment thereof or supplement thereto;
(2) result from any breach by Distributor of any provision of this Agreement;
(3) result from Distributor's own misconduct or negligence.
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 8 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 8 ("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 it may have to the indemnified person otherwise than on account of this
Section 8. The indemnifying party will be entitled to participate in the defense
of the indemnified person but such participation will not relieve 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 8 shall remain
operative in full force and effect, regardless of any termination of this
Agreement. A successor by law of Distributor or FNWL, as the case may be, shall
be entitled to the benefits of the indemnification provisions contained in this
Section 8.
9. TERMINATION. This Agreement shall terminate automatically if it is assigned
by the Distributor without the prior written consent of the other party. This
Agreement may be terminated at any time for any 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 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 following:
(1) the obligation to settle accounts hereunder, including commissions on
Premiums subsequently received for Contracts in effect at the time of
termination or issued pursuant to Applications received by FNWL prior to
termination; (2) the provisions contained in Section 8 regarding and, (3) the
provisions contained in Section 3(b)(4) regarding the remittance of premiums.
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In the event of any termination for any reason, all books and records and sales
or marketing materials held by Distributor shall promptly be returned to FNWL
free from any claim or retention of rights by Distributor.
10. 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 Schedules 1 and 2 to this
Agreement from time to time to reflect additions of any class of Contracts and
Variable Accounts. The provisions of this Agreement shall be equally applicable
to each such class of Contracts and each Variable Account that may be added to
the Schedule, unless the context otherwise requires. FNWL and Distributor may
modify Schedule 3 as mutually agreed in writing from time to time. Any other
change in the terms or provisions of this Agreement shall be by written
agreement between FNWL 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:
if to FNWL, to:
C. Xxxx Xxxxxx, President
Farmers New World Life Insurance Company
0000 00xx Xxxxxx X.X.
Xxxxxx Xxxxxx, XX 00000
with a copy to:
X. Xxxxxxx Close
Vice President & General Counsel
Farmers New World Life Insurance Company
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
if to Distributor, to:
Xxxxxxx Xxxxxxxxx, President
Investors Brokerage Services, Inc.
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0 Xxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
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.
e. 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 is made in the State of Washington,
and all questions concerning its validity, construction or otherwise shall be
determined under the laws of Washington without giving effect to principals of
conflict of laws.
f. 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.
g. 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.
h. Counterparts. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
i. Regulation. This Agreement shall be subject to the provisions of the 1933
Act, 1934 Act and 1940 Act and the regulations thereunder 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 above.
FARMERS NEW WORLD LIFE INSURANCE COMPANY
FNWL
By:
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Name: C. Xxxx Xxxxxx
Title: President
INVESTORS BROKERAGE SERVICES, INC.
Distributor
By:
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Name: Xxxxxxx Xxxxxxxxx
Title: President
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SCHEDULE 1
For purposes of the Distribution Agreement between FNWL and Distributor entered
into on the_____day of__________, 1999, the separate accounts are as follows:
1. Farmers Annuity Separate Account A
2. Farmers Variable Life Separate Account A
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SCHEDULE 2
For purposes of the Distribution Agreement between FNWL and Distributor entered
into on the____day of__________, 1999, the variable products are as follows:
1. Farmers Variable Annuity
2. Farmers Variable Universal Life
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SCHEDULE 3
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