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Exhibit 3
DISTRIBUTION AGREEMENT
BETWEEN
NATIONWIDE LIFE INSURANCE COMPANY
AND
SECURITY DISTRIBUTORS, INC.
THIS DISTRIBUTION AGREEMENT, made as of the 19th day of September, 2000, by
and between NATIONWIDE LIFE INSURANCE COMPANY ("INSURER"), a life insurance
company organized under the laws of the State of Ohio, for itself and on behalf
of the Nationwide Variable Account, Nationwide Multiflex Variable Account and
any other separate accounts in which purchase payments in support of the
Contracts are invested (the "SEPARATE ACCOUNTS"), each a separate account
established and maintained by Insurer under the laws of the State of Ohio, and
SECURITY DISTRIBUTORS, INC., a corporation organized and existing under the laws
of the State of Kansas ("UNDERWRITER").
WITNESSETH:
WHEREAS, the Separate Accounts have been established by Insurer to support
variable annuity contracts, including the Contracts, issued by Insurer pursuant
to the NEA Valuebuilder program;
WHEREAS, each Separate Account has been registered as a unit investment
trust under the federal Investment Company Act of 1940, as amended ("ICA-40");
WHEREAS, each Separate Account is sub-divided into various subaccounts (the
"SUBACCOUNTS");
WHEREAS, certain companies registered as open-end management investment
companies under ICA-40 will serve as the underlying investment vehicles for the
Separate Accounts;
WHEREAS, such investment companies are authorized to issue shares of
capital stock ("SHARES") in separate series, with each such series representing
the interests in a separate portfolio of securities and other assets;
WHEREAS, the Insurer, by and through each Separate Account, will purchase
Shares of a registered investment company corresponding to each subaccount;
WHEREAS, Security Benefit Life Insurance Company ("REINSURER") has entered
into a Reinsurance Agreement with the Insurer providing for the ceding of the
Contracts to Reinsurer on an indemnity basis;
WHEREAS, Insurer has agreed to issue the Contracts until such time as
Reinsurer obtains approval in the fifty states for the issuance and sale of its
own NEA Valuebuilder contracts;
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WHEREAS, Underwriter, a wholly-owned subsidiary of Reinsurer, is registered
as a broker-dealer under the Securities Exchange Act of 1934, as amended,
("SEA-34") and is a member of the National Association of Securities Dealers,
Inc. ("NASD");
WHEREAS, Underwriter desires to distribute the Contracts supported by the
Separate Accounts and offered by Insurer;
WHEREAS, Insurer desires to issue such Contracts to the public through
Underwriter acting as the principal underwriter; and
WHEREAS, Insurer and Reinsurer have entered into an Administrative Services
Agreement ("ADMINISTRATIVE SERVICES AGREEMENT") providing for the servicing of
the Contracts by the Insurer until the Service Transfer Date (as such term is
defined in the Administrative Services Agreement), and by the Reinsurer
thereafter;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. ADDITIONAL DEFINITIONS
----------------------
(a) AFFILIATE -- With respect to a person, any other person controlling,
controlled by, or under common control with, such person.
(b) APPLICATION -- An application for a Contract and any other forms
required to be completed before a Contract is issued.
(c) CONTRACTS -- The annuity contracts, endorsements, riders, policies
and certificates issued by the Insurer pursuant to the NEA
Valuebuilder Annuity program, including all modifications, renewals,
extensions and conversions thereof. The Contracts are set forth on
Schedule 1 to this Agreement. For purposes of Sections 3 and 14 of
this Agreement, Contracts shall include Premiums for the Contracts.
(d) CUSTOMER SERVICE CENTER - Prior to the Service Transfer Date, such
location as may be designated in writing from time to time by
Insurer; after the Service Transfer Date, such location as may be
designated in writing from time to time by the Reinsurer.
(e) DISTRIBUTOR -- A person registered as a broker-dealer and licensed
as a life insurance agent or affiliated with a person so licensed,
who will be authorized by Underwriter to distribute the Contracts.
For purposes of Section 14 of this Agreement, Distributor does not
include any person who is an Affiliate of Insurer.
(f) EFFECTIVE DATE -- The date as of which this Agreement is executed.
(g) FUND -- An investment company, underlying the Contracts as in effect
at the Effective Date, and such other investment companies that may
be added from time to time in accordance with Section 18 of this
Agreement.
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(h) PERSON -- An individual, corporation, partnership, limited liability
company, firm, joint venture, association, joint-stock company,
unincorporated organization, governmental or regulatory authority or
other entity.
(i) PREMIUM -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
(j) PROSPECTUS -- The prospectus and statement of additional
information, if any, included within a Registration Statement,
except that, if the most recently filed prospectus and statement of
additional information filed pursuant to Rule 497 under SA-33
subsequent to the date on which a Registration Statement became
effective differs from the prospectus and statement of additional
information included within such Registration Statement at the time
it became effective, the term "Prospectus" shall refer to the most
recently filed prospectus and statement of additional information
filed under Rule 497 under SA-33, from and after the date on which
they each shall have been filed. For purposes of Section 14 of this
Agreement, the term "any Prospectus" means any document which is or
at any time was a Prospectus within the meaning of this definition.
(k) REGISTRATION STATEMENT -- At any time that this Agreement is in
effect, each currently effective registration statement, or
currently effective post-effective amendment thereto, relating to
the Contracts, including financial statements included in, and all
exhibits to, such registration statement or post-effective
amendment. For purposes of Section 14 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 definition.
(l) REGULATIONS -- The rules and regulations promulgated by the SEC
under SA-33, SEA-34 and ICA-40.
(m) REPRESENTATIVE -- When used with reference to a Distributor, an
individual who is an associated person, as that term is defined in
SEA-34, thereof.
(n) SA-33 -- The Securities Act of 1933, as amended.
(o) SEC -- The Securities and Exchange Commission.
2. SALE OF CONTRACTS
-----------------
(a) PRINCIPAL UNDERWRITER
---------------------
Insurer, on its behalf and on behalf of the Separate Accounts,
authorizes Underwriter, and Underwriter accepts such authority, to
be the distributor and principal underwriter of the Contracts.
Underwriter shall act as distributor and principal underwriter of
the Contracts, subject to Insurer's control. As distributor and
principal underwriter, Underwriter shall have the right to authorize
third parties as Distributors and Distributor Representatives to
engage in distribution activities involving the solicitation of
Applications and Premiums directly from customers and prospective
customers, in each case as Underwriter may so provide or limit,
provided that Insurer reserves the right, which shall not be
exercised unreasonably, to require that Underwriter not enter into a
sales agreement with any proposed Distributor or appoint a
Distributor Representative
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that is under investigation by a state or federal regulator or that
has been subject to regulatory sanction for other than minor or
technical violations of law or regulation. Insurer shall authorize
Underwriter on its behalf to appoint in the appropriate states or
jurisdictions such Distributors or Distributor Representatives.
Underwriter shall be an independent contractor and neither
Underwriter, nor any of its officers, directors, employees, or
agents is or shall be an employee of Insurer in the performance of
Underwriter's duties hereunder. Underwriter is not hereby obligated
to register or maintain its registration as a broker or dealer under
the state securities laws of any jurisdiction if, in the discretion
of Underwriter, such registration is not practical, necessary for
its duties under this Agreement, or feasible, nor does it restrict
Underwriter from entering into distribution arrangements with other
issuers or investment companies.
(b) NO ALTERATION, DISCHARGE, ETC., OF CONTRACTS
--------------------------------------------
Underwriter shall not have authority, and shall not grant authority
to Distributors or Distributor Representatives, on behalf of
Insurer: to make, alter, waive, change or discharge any Contract or
other contract entered into pursuant to a Contract; to waive any
Contract forfeiture provision; to extend the time of paying any
Premium; to endorse checks or money orders payable to Insurer, or to
receive any monies or Premiums (except for the sole purpose of
forwarding monies or Premiums to Insurer or to Reinsurer if
appropriate). Underwriter shall not expend, nor contract for the
expenditure of, the funds of Insurer. Underwriter shall not possess
or exercise any authority on behalf of Insurer other than that
expressly conferred on Underwriter by this Agreement.
3. SOLICITATION ACTIVITIES, APPLICATIONS AND PREMIUMS
--------------------------------------------------
Underwriter agrees that its solicitation activities with respect to the
Contracts shall be subject to applicable laws and regulations and the
rules set forth herein:
(a) Underwriter shall use Applications and other materials approved by
Insurer for use in the solicitation activities with respect to the
Contracts.
(b) All Premiums paid by check or money order that are collected by
Underwriter and attributable to a Separate Account shall be remitted
promptly (and in any event not later than two business days) to the
Insurer. Checks or money orders in payment of Premiums shall be
drawn to the order of "Nationwide Life Insurance Company." Premiums
may be transmitted by wire order from Underwriter to the Insurer in
accordance with the procedures reasonably agreed upon by the
parties. If any Premium is held at any time by Underwriter,
Underwriter shall hold such Premium in a fiduciary capacity and such
portion of the Premium attributable to a Separate Account shall be
remitted promptly, and in any event not later than two business
days, to Insurer. All such Premiums attributable to the Separate
Account, whether by check, money order or wire, shall be the
property of Insurer.
(c) All Premiums paid by check or money order that are collected by
Insurer and not attributable to a Separate Account shall be remitted
promptly (and in any event not later than two business days) to the
Reinsurer. Premiums may be transmitted by wire order from Insurer to
the Underwriter in accordance with the procedures reasonably agreed
upon by the parties.
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(d) Underwriter acknowledges that Insurer shall have the right to
reject, in whole or in part, any Application, but only for
reasonable cause and only after giving prior notice to Underwriter.
In the event an Application is rejected, any Premium submitted
therewith shall be returned by Insurer to the applicant. Insurer
shall promptly notify Underwriter and, if applicable, the
Distributor who submitted the Application, of such action. In the
event that a purchaser exercises his or her free look right under
their Contract, any amount to be refunded as provided in such
Contract shall be so refunded to the purchaser by Insurer. Insurer
shall notify Underwriter and, if applicable, the Distributor who
solicited the Contract, of such action.
(e) All solicitation and sales activities engaged in by Underwriter in
regard 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.
(f) Underwriter shall not offer, attempt to offer, or solicit
Applications for the Contracts or deliver the Contracts, in any
state or other jurisdiction as to which Insurer has notified
Underwriter that such Contracts may not legally be sold or offered
for sale.
4. ADMINISTRATION
--------------
Prior to the Service Transfer Date:
(a) Insurer shall administer the Contracts in accordance with the terms
of the Administrative Services Agreement and applicable laws and
regulations.
(b) Insurer, as agent for Underwriter, shall confirm to each applicant
for and purchaser of a Contract in accordance with Rule 10b-10 under
SEA-34 acceptance of premiums and such other transactions as are
required to be confirmed by Rule 10b-10 or administrative
interpretations thereunder, or any NASD requirements.
(c) Insurer shall maintain and preserve such books and records with
respect to the Contracts in conformity with the requirements of
Rules 17a-3 and 17a-4 under SEA-34 including, to the extent such
requirements apply, all books and records with respect to
confirmations provided under Rule 10b-10. Insurer shall maintain all
such books and records, which shall be considered the joint property
of Insurer and Underwriter, and Insurer acknowledges that such books
and records are at all times subject to inspection by the SEC and
the NASD in accordance with Section 17(a) of SEA-34 and shall
provide copies thereof upon Underwriter's request.
(d) Insurer shall not sub-contract with another person other than an
affiliate of Insurer to perform any of the functions contemplated by
this Section or maintain any information, books and records
contemplated by this Agreement without first obtaining such person's
undertaking, in writing, to comply with the provisions of this
Agreement to keep confidential all proprietary information obtained
by such person.
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5. MARKETING
---------
Underwriter shall have responsibility for the marketing arrangements,
marketing materials and marketing practices, respecting the Contracts.
Underwriter shall be responsible for the design and preparation of all
promotional, sales and advertising material relating to the Contracts.
Insurer shall make available for use by Underwriter all existing marketing
materials with respect to the Contracts and shall provide Underwriter with
the following in such quantities as it shall reasonably request: (1)
copies of the current Prospectus and Statement of Additional Information
for the Contracts; (2) applications for the Contracts; and (3) sales
literature for the Contracts. No promotional, sales or advertising
material may be used by any party without the approval of the other party.
Prior to any use with members of the public, the following procedures
shall be observed:
(a) Each party shall provide to the other party copies of all
promotional, sales and advertising material developed by such party,
if any, for such other party's review and written approval, and each
party shall be given a reasonable amount of time to complete its
review.
(b) Each party shall respond on a prompt and timely basis in approving
any such material and shall act reasonably in connection therewith.
(c) Underwriter shall be responsible for filing all promotional, sales
or advertising material, whether developed by Underwriter or
Insurer, as required, with any state insurance regulatory
authorities.
(d) Underwriter shall be responsible for filing all promotional, sales
or advertising material, whether developed by Underwriter or
Insurer, as required, with the NASD, and state securities regulatory
authorities.
(e) Each party shall notify the other party expeditiously of any
comments provided by the NASD or any securities or insurance
regulatory authority on such material, and will cooperate
expeditiously in resolving and implementing any comments, as
applicable.
The parties acknowledge that such material, to the extent it identifies or
discusses a Fund, may be subject to review and approval procedures
implemented by that Fund. Each party reserves the right, after having
approved a piece of material, to object to further use of such material
and may require the other party to cease use of such material.
6. EXPENSES
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(a) UNDERWRITER
-----------
With respect to this Agreement, Underwriter shall pay (or will enter
into arrangements providing that persons other than Underwriter
shall pay) the following expenses related to its distribution of the
Contracts:
(1) the compensation of Distributors, if any;
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(2) the costs of any promotional, sales and advertising material,
including Applications and any other materials used in
connection with the sale of the Contracts; and
(3) expenses of printing and mailing the Prospectuses for the
Contracts and the Funds (and any supplements thereto) for
distribution to prospective customers.
(b) OTHER EXPENSES
--------------
Other than as specifically provided in this Agreement, Insurer
shall pay all expenses that it incurs in connection with this
Agreement, and Underwriter shall pay all expenses that it
incurs in connection with this Agreement; it being understood
that any expenses relating to the processing of Contracts,
Premiums or Applications, are governed by the terms of the
Administrative Services Agreement.
8. REPRESENTATIONS AND WARRANTIES OF INSURER
-----------------------------------------
(a) Insurer represents and warrants to Underwriter on the Effective Date
that:
(1) Insurer has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of
Ohio with full power and authority to own, lease and operate
its properties and conduct its business, is duly qualified to
transact the business of a life insurance company and to issue
variable insurance products, and is in good standing, in each
state or jurisdiction listed on Schedule 2.
(2) The execution and delivery of this Agreement and the
consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate action by Insurer,
and when so executed and delivered this Agreement shall be the
valid and binding obligation of Insurer enforceable in
accordance with its terms.
(3) The consummation of the transactions contemplated herein, and
the fulfillment of the terms of this Agreement, shall not
conflict with, result in any breach in any material respect of
any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default in any material
respect under, the articles of incorporation or bylaws of
Insurer, or any indenture, agreement, mortgage, deed of trust,
or other instrument to which Insurer is a party or by which it
is bound, or, to the best of Insurer's knowledge, violate in
any material respect any law, any order, rule or regulation
applicable to Insurer of any court or of any federal or state
regulatory body, administrative agency or any other
governmental instrumentality having jurisdiction over Insurer
or any of its properties.
(b) Insurer further represents and warrants to Underwriter on the
effective date of the most recent Registration Statement for the
Contracts, and undertakes to use its best efforts to ensure as of
the effective date of each subsequent Registration Statement, that:
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(1) Insurer has filed with the SEC all statements, notices and
other documents required for registration of the Contracts (or
the interests therein) and the Separate Accounts under the
provisions of ICA-40 and SA-33 and the Regulations thereunder;
further, there are no contracts or documents of Insurer or
relating to the Contracts or the Separate Account which are
required to be filed as exhibits to such Registration
Statement by SA-33, ICA-40 or the Regulations which have not
been so filed.
(2) Such Registration Statement has been declared effective by the
SEC or has become effective in accordance with the
Regulations.
(3) Insurer has not received any notice from the SEC with respect
to such Registration Statement pursuant to Section 8(e) of
ICA-40 and no stop order under SA-33 has been issued and no
proceeding therefor has been instituted or threatened by the
SEC.
(4) Insurer has obtained, or prior to the commencement of the
offering of the Contracts will obtain, all necessary or
customary orders of exemption or approval from the SEC to
permit the distribution of the Contracts pursuant to this
Agreement and to permit the operation of the Separate Accounts
supporting such Contracts as contemplated in the related
Prospectuses.
(5) Insurer has represented in the Registration Statement that the
fees and charges deducted under the Contracts, in the
aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks
assumed by the Insurer. In addition, Insurer complies with all
other applicable provisions of Section 26 of the ICA-40, as if
it were trustee or custodian of the Separate Accounts; Insurer
has filed with the insurance regulatory authority for the
State of Ohio an annual statement of its financial condition,
which indicates that Insurer has capital and surplus or
unassigned surplus of not less than $1 million or such other
amount as prescribed by SEC rule; and Insurer, together with
its registered separate accounts, is supervised and examined
periodically by the insurance authority of Ohio.
(6) Such Registration Statement and the related Prospectus comply
in all material respects with the provisions of SA-33 and
ICA-40 and the Regulations, and neither the Registration
Statement nor the Prospectus contains an untrue statement of a
material fact or omits 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; provided, however, that none of the representations and
warranties in this Section 8(b)(6) shall apply to statements
or omissions from a Registration Statement or Prospectus made
in reliance upon and in conformity with information furnished
to Insurer in writing by Underwriter expressly for use in such
Registration Statement or Prospectus.
(7) Each Separate Account has been duly established by Insurer and
conforms to the description thereof in the Registration
Statement and the Prospectus for the Separate Account.
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(8) The form of the Contracts has been approved to the extent
required by the Ohio Insurance Commissioner and by the
governmental agency responsible for regulating insurance
companies in each other state or jurisdiction listed on
Schedule 2 as such Schedule is in effect on the pertinent date
of each Registration Statement.
(9) The Contracts have been duly authorized by Insurer and conform
to the descriptions thereof in the Registration Statements for
the Contracts and the related Prospectuses and, when issued as
contemplated by such Registration Statements, shall constitute
legal, validly issued and binding obligations of Insurer in
accordance with their terms.
(10) No other consent, approval, authorization or order of any
court or governmental authority or agency is required for the
issuance or sale of the Contracts, the establishment or
operation of the Separate Accounts, or for the consummation of
the transactions contemplated by this Agreement, that has not
been obtained.
9. UNDERTAKINGS OF INSURER
-----------------------
Insurer undertakes as follows:
(a) Insurer shall use its best efforts to maintain the registration of
the Contracts (or interests therein) and the Separate Accounts with
the SEC and to maintain any registrations and approvals of the
Contracts and the Separate Accounts with any state securities or
insurance regulatory bodies, administrative agencies, or any other
governmental instrumentalities of any state or other jurisdiction
listed on Schedule 2 whose securities or insurance laws, in
Insurer's reasonable judgment, require registration or approval of
the Contracts or the Separate Accounts, and Insurer shall maintain
the registration of the Contracts (or interests therein) and the
Separate Accounts with such state securities regulatory bodies and
any other governmental instrumentalities of any state or
jurisdiction listed on Schedule 2 as Insurer deems appropriate.
(b) Insurer shall take all action necessary to cause the Contracts to
comply, and to continue to comply, as annuity contracts under state
insurance laws and federal tax laws. In the event of a change in
applicable law that renders it impracticable or impossible to
maintain the Contracts as annuity contracts, Insurer shall consult
with Underwriter concerning appropriate action in connection with
the Contracts.
(c) Insurer shall take all action necessary to cause the Separate
Account to comply, and to continue to comply, with the provisions of
ICA-40 and the Regulations applicable to the Separate Account as a
registered investment company classified as a unit investment trust
and a separate account, and deemed to be issuing periodic payment
plan certificates.
(d) Insurer shall provide Underwriter with preliminary drafts of any
amendments to Registration Statements or supplements to Prospectuses
relating to the Contracts. Insurer shall provide Underwriter with a
reasonable opportunity to review and comment on such drafts before
any such materials are filed with the SEC. Insurer shall furnish
Underwriter with copies of any such materials or amendments thereto
and any exemptive applications or no-action requests to be filed
with the SEC in connection with the Contracts, the
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Separate Accounts, or both, as filed with the SEC, promptly after
the filing thereof, and any SEC communications or orders with
respect thereto, promptly after receipt thereof. Insurer shall
maintain and keep on file in its principal executive office any file
memoranda or any supplemental materials referred to in such
Registration Statements, exemptive applications and no-action
requests and shall maintain and, as necessary, amend such memoranda
or materials and shall provide or otherwise make available copies of
such memoranda and materials to Underwriter.
(e) Insurer shall notify Underwriter immediately upon discovery or in
any event as soon as possible under the following circumstances:
(1) Of any event which makes any material statement made in the
Registration Statement or the Prospectus untrue in any
material respect or results in a material omission in the
Registration Statement or the Prospectus;
(2) Of any request by the SEC for any amendment to the
Registration Statement, or any supplement to the Prospectus,
or statement of additional information;
(3) Of the issuance by the SEC of any notice pursuant to Section
8(e) of ICA-40, any stop order with respect to the
Registration Statement or any amendment thereto, or the
initiation of any proceedings for that purpose or for any
other purpose relating to the registration and/or offering of
the Contracts;
(4) Of any event of the Contracts' or the Separate Account's
noncompliance with the applicable requirements of the Internal
Revenue Code or regulations, rulings, or interpretations
thereunder that could jeopardize the Contracts' status as
annuity contracts;
(5) Of any change in applicable insurance laws or regulations of
any state or jurisdiction listed on Schedule 2 materially
adversely affecting the insurance status of the Contracts or
Underwriter's obligations with respect to the distribution of
the Contracts;
(6) Of any loss or suspension of the approval of the Contracts or
distribution thereof by a state securities or insurance
regulatory body, administrative agency, or any other
governmental instrumentality of any state or jurisdiction
listed on Schedule 2 authorizing the sale of the Contracts,
any loss or suspension of Insurer's certificate of
authorization to do business or to issue variable insurance
contracts in such state or jurisdiction, or of the lapse or
termination of the Contracts' or the Separate Account's
registration, approval or clearance in any such state or
jurisdiction;
(7) Of any termination of the authorization or approval of the
sale of the Contracts in the states and jurisdictions listed
on Schedule 2;
(8) Of any material adverse change in the condition (financial or
otherwise) of Insurer or the Separate Account that would cause
the information in the Registration Statement to be materially
misleading; and
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(9) Of any event which causes a representation or warranty of
Insurer contained in this Agreement to no longer be true.
(f) Insurer shall notify Underwriter in a reasonably timely manner under
the circumstances:
(1) When a Registration Statement has become effective or any
post-effective amendment with respect to a Registration
Statement becomes effective thereafter;
(2) When any registration of the Contracts (or interests therein)
under the securities or blue sky laws of the states or
jurisdictions listed on Schedule 2 have become effective to
the extent not yet obtained as of the Effective Date;
(3) When approval of the Contract forms under the applicable
insurance laws of the states or jurisdictions listed on
Schedule 2 have been obtained to the extent not yet obtained
as of the Effective Date; and
(4) In which states or jurisdictions listed on Schedule 2 the
Contracts may not be lawfully sold.
(g) Insurer shall provide Underwriter access to such records, officers
and employees of Insurer at reasonable times as is necessary to
enable Underwriter to fulfill its obligation, as the underwriter
under SA-33 for the Contracts and as principal underwriter for the
Separate Account under ICA-40, to perform due diligence and to use
reasonable care.
(h) Insurer shall use its best efforts to timely file each
post-effective amendment to a Registration Statement, Prospectus,
annual reports on Form N-SAR, and all other reports, notices,
statements and amendments required to be filed by or for Insurer and
the Separate Accounts with the SEC under SA-33, SEA-34 and/or ICA-40
or any applicable Regulations. Insurer shall timely file Rule 24f-2
notices required to be filed by or for Insurer and the Separate
Account with the SEC under SA-33 and/or ICA-40 or any applicable
Regulations. To the extent there occurs an event or development
(including, without limitation, a change of applicable law,
regulation or administrative interpretation) warranting an amendment
to the Registration Statement or supplement to the Prospectus,
Insurer shall endeavor to promptly prepare and file such amendment
or supplement with the SEC.
(j) Insurer shall deliver to Underwriter, as soon as practicable after
it becomes available, the annual statement for Insurer and for the
Separate Accounts in the form filed with the State of Ohio.
(k) Insurer shall furnish to Underwriter without charge promptly after
filing a complete copy of each Registration Statement and any
post-effective amendment thereto, including financial statements and
all exhibits not incorporated therein by reference.
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10. REPRESENTATIONS AND WARRANTIES OF UNDERWRITER
---------------------------------------------
Underwriter represents and warrants to Insurer on the Effective Date as
follows:
(a) Underwriter has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Kansas
with full power and authority to own, lease and operate its
properties and to conduct its business, and is in good standing, in
each state in which its business so requires.
(b) The execution and delivery of this Agreement and the consummation of
the transactions contemplated herein have been duly authorized by
all necessary corporate action by Underwriter, and when so executed
and delivered this Agreement shall be the valid and binding
obligation of Underwriter enforceable in accordance with its terms.
(c) The consummation of the transactions contemplated herein, and the
fulfillment of the terms of this Agreement, shall not conflict with,
result in any breach in any material respect of any of the terms and
provisions of, or constitute (with or without notice or lapse of
time) a default in any material respect under, the articles of
incorporation or bylaws of Underwriter, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which Underwriter is
a party or by which it is bound, or to the best of Underwriter's
knowledge violate in any material respect any law, or, to the best
of Underwriter's knowledge, any order, rule or regulation applicable
to Underwriter of any court or of any federal or state regulatory
body, administrative agency or any other governmental
instrumentality having jurisdiction over Underwriter or any of its
properties.
(d) Underwriter is registered as a broker-dealer under SEA-34, is a
member of the NASD, and is duly registered as a broker-dealer under
the securities laws of the states or jurisdictions, under each to
the extent required, holding all requisite Series licenses in
connection with its obligations under this Agreement.
(e) Underwriter is and shall remain during the term of this Agreement in
compliance with Section 9(a) of ICA-40.
11. UNDERTAKINGS OF UNDERWRITER
---------------------------
Underwriter undertakes as follows:
(a) Underwriter will use its best efforts to maintain its registration
as a broker-dealer under SEA-34 and its membership with the NASD,
and will use its best efforts to maintain its registration as a
broker-dealer with the applicable securities authorities under the
laws of any applicable state or jurisdiction listed on Schedule 2
where necessary in connection with its obligations under this
Agreement.
(b) Underwriter shall be responsible for its own conduct and the
employment, control, and conduct of its officers, employees and
agents and for injury to such officers, employees or agents or to
others through its officers, employees or agents. Underwriter
assumes full responsibility for its officers, employees and agents
under applicable laws, rules and
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<PAGE> 13
regulations and agrees to pay all employee taxes thereunder.
Underwriter shall maintain a system for supervision of same pursuant
to NASD rules.
(c) Underwriter will notify Insurer if its SEC or state broker-dealer
registration or NASD membership is terminated or if it is the
subject of any proceeding that, in its reasonable judgment, is
likely to result in such termination.
(d) Underwriter shall notify Insurer immediately upon discovery or in
any event as soon as possible under the following circumstances:
(1) Of any material adverse change in the condition (financial or
otherwise) of Underwriter that would materially affect
Underwriter's obligations with respect to the distribution of
the Contracts; and
(2) Of any event which causes a representation or warranty of
Underwriter contained in this Agreement to no longer be true.
12. RECORDS
-------
Insurer and Underwriter each shall maintain such accounts, books, records
and other documents as are required to be maintained by each of them by
applicable laws and regulations and shall preserve such accounts, books,
records and other documents for the periods prescribed by such laws and
regulations. Each party shall have the right to inspect and audit such
accounts, books, records and other documents of the other party during
normal business hours upon reasonable written notice to the other party.
Each party shall keep confidential all information obtained pursuant to
such an inspection or audit, and shall disclose such information to third
parties only upon receipt of written authorization from the other party or
as otherwise described in Section 15, below.
13. INVESTIGATIONS AND PROCEEDINGS
------------------------------
(a) COOPERATION
-----------
Underwriter and Insurer shall cooperate fully in any insurance or
securities regulatory investigation or proceeding or judicial
proceeding with respect to Insurer, Underwriter, their Affiliates
and their agents, Representatives or employees to the extent that
such investigation or proceeding is in connection with the offering,
sale or distribution of the Contracts distributed under this
Agreement. Without limiting the foregoing, Insurer and Underwriter
shall notify each other promptly of any notice of any regulatory
investigation or proceeding or judicial proceeding, arising in
connection with the offering, sale or distribution of the Contracts
distributed under this Agreement, received by either party with
respect to Insurer, Underwriter or any of their Affiliates, agents,
Representatives or employees or which may affect Insurer's issuance
or Underwriter's distribution of any Contract marketed under this
Agreement.
(b) CUSTOMER COMPLAINT
------------------
Insurer and Underwriter shall notify each other promptly in the case
of a substantive customer complaint arising in connection with the
offering, sale or distribution of the
-13-
<PAGE> 14
Contracts distributed under this Agreement. In addition, Underwriter
and Insurer shall cooperate in investigating such complaint and any
response by either party to such complaint shall be sent to the
other party for written approval not less than five business days
prior to its being sent to the customer or any regulatory authority,
except that if a more prompt response is required, the proposed
response shall be communicated by telephone or facsimile. In any
event, neither party shall release any such response without the
other party's prior written approval.
14. INDEMNIFICATION
---------------
(a) BY UNDERWRITER
--------------
Underwriter agrees to indemnify and hold harmless Insurer and each
of its directors and officers and each person, if any, who controls
Insurer within the meaning of Section 15 of SA-33 (collectively, the
"Indemnified Parties" for purposes of this Section 14(a)), against
any and all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written consent of
Underwriter) or litigation (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute
or regulation, at common law, or otherwise, insofar as such losses,
claims expenses, damages, liabilities (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any 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 Registration Statement or in any
Prospectus; to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission: (i) was made in reliance upon information
furnished in writing to Insurer by Underwriter specifically
for use in the preparation of any such Registration Statement
or any amendment thereof or supplement thereto; or (ii) was
contained in any promotional, sales or advertising material or
written information relating to the Contracts authorized by
Underwriter; or
(2) result because of any use by Underwriter or any Distributor or
Distributor Representative of promotional, sales or
advertising material not authorized by Insurer or any written
or oral misrepresentations by Underwriter or any Distributor
or Distributor Representative or any unlawful sales practices
concerning the Contracts by Underwriter or any Distributor or
Distributor Representative under federal securities laws or
NASD regulations or other applicable law; or
(3) result from any claims by Distributors or Distributor
Representatives or agents or employees of Underwriter for
commissions or other compensation or remuneration of any type;
or
(4) arise out of or result from any material breach by Underwriter
of any provision of this Agreement.
-14-
<PAGE> 15
This indemnification shall be in addition to any liability that
Underwriter may otherwise have; provided, however, that no
Indemnified Party shall be entitled to indemnification pursuant to
this provision if such loss, claim, expense, damage, liability or
litigation is due to the willful misfeasance, bad faith or gross
negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to Insurer.
Underwriter shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Underwriter in writing
within a reasonable time after the summons or other first legal
process giving information of the nature of the claim shall have
been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated
agent), but failure to notify Underwriter of any such claim shall
not relieve Underwriter from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such
action is brought against the Indemnified Party, Underwriter will be
entitled to participate, at its own expense, in the defense thereof.
Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action. After
notice from Underwriter to such party of Underwriter's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional legal counsel retained by it,
and Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof
other than reasonable costs of investigation.
Underwriter agrees to promptly notify Insurer of the commencement of
any litigation or proceedings against it or any of Underwriter's
directors, officers, employees or agents in connection with the sale
of any Contracts.
(b) BY INSURER
----------
Insurer agrees to indemnify and hold harmless Underwriter and each
of its directors and officers and each person, if any, who controls
Underwriter within the meaning of Section 15 of SA-33 (collectively,
the "Indemnified Parties" for purposes of this Section 14(b)),
against any and all losses, claims expenses, damages, liabilities
(including amounts paid in settlement with the written consent of
Insurer) or litigation (including legal and other expenses) to which
the Indemnified Parties may become subject under any statute or
regulation, at common law, or otherwise, insofar as such losses,
claims expenses, damages, liabilities (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any 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 Insurer shall not be liable in any
such case to the extent that such loss, liability, damage,
claim or expense arises out of, or is based upon, an untrue
statement or alleged untrue statement or omission or alleged
omission: (i) was made in reliance upon information furnished
in writing to Insurer by Underwriter specifically for use in
-15-
<PAGE> 16
the preparation of any such Registration Statement or any
amendment thereof or supplement thereto; or (ii) was contained
in any promotional, sales or advertising material or written
information relating to the Contracts authorized by
Underwriter; or
(2) result because of the terms of any Contract or because of any
material breach by Insurer or any of its officers, directors,
employees or agents (which, for these purposes, shall not
include Distributor Representatives) of any provision of this
Agreement or of any Contract; or
(3) result because of any written or oral misrepresentations by
Insurer, its officers, directors, employees or agents (which,
for these purposes, shall not include Distributor
Representatives), or any unlawful sales practices concerning
the Contracts by Insurer, its officers, directors, employees,
or agents (which, for these purposes, shall not include
Distributor Representatives) under the federal securities laws
or NASD regulations or other applicable law; or
(4) arise out of or result from any material breach by Insurer of
any provision of this Agreement.
This indemnification shall be in addition to any liability that
Insurer may otherwise have; provided, however, that no Indemnified
Party shall be entitled to indemnification pursuant to this
provision if such loss, claim, expense, damage, liability or
litigation is due to the willful misfeasance, bad faith or gross
negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to Underwriter.
Insurer shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified Insurer in writing within
a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but
failure to notify Insurer of any such claim shall not relieve
Insurer from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account
of this indemnification provision. In case any such action is
brought against the Indemnified Party, Insurer will be entitled to
participate, at its own expense, in the defense thereof. Insurer
also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
Insurer to such party of Insurer's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of
any additional legal counsel retained by it, and Insurer will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
Insurer agrees to promptly notify Underwriter of the commencement of
any litigation or proceedings against it or any of its directors,
officers, employees or agents in connection with the sale of any
Contracts.
-16-
<PAGE> 17
(c) SURVIVAL OF INDEMNIFICATION
---------------------------
The indemnification provisions contained in this Section 14 shall
remain operative in full force and effect, regardless of (1) any
investigation made by or on behalf of Insurer or Underwriter or by
or on behalf of any controlling person thereof, (2) delivery of any
Contracts and Premiums therefor, and (3) any termination of this
Agreement. A successor by law of Underwriter or Insurer, as the case
may be, shall be entitled to the benefits of the indemnification
provisions contained in this Section 14.
15. CONFIDENTIAL AND PROPRIETARY INFORMATION
----------------------------------------
(a) At all times throughout the term of this Agreement, and following
any termination or expiration of this Agreement, each party and all
of its respective Affiliates, and each officer, director,
shareholder, employee or agent thereof, shall maintain the
confidentiality of (i) this Agreement, (ii) the transactions and
other matters contemplated herein, (iii) any proprietary or other
information provided by one party to the other party to facilitate
the transactions contemplated herein, provided that this obligation
of confidentiality shall not apply to: (i) disclosures required to
be made to any regulatory bodies, administrative agencies or other
governmental instrumentalities or disclosures deemed by such party
to be desirable to disclose to any such entity; (ii) disclosures
made to attorneys, accountants and other representatives in order to
assist in the consummation of the transactions and other matters
contemplated herein; (iii) disclosures otherwise required by
applicable law; or (iv) disclosures to which the other party
consents; provided further that, with respect to the immediately
foregoing clauses (i) and (iii), any party that makes such a
disclosure shall so notify the other party prior to or
simultaneously with making such disclosure to the extent reasonably
practicable; and provided further that, with respect to the
foregoing clause (ii), a party shall make disclosures regarding this
Agreement and the transactions contemplated herein only to such
party's attorneys, accountants and other third party representatives
who agree to keep such information confidential in accordance with
this Section.
(b) Insurer shall maintain the confidentiality of the names of all of
the Distributors and Distributor Representatives. Insurer shall not
use the names of the Distributor Representatives for any purpose and
will not contact any Distributor Representative unless it has the
prior written consent of Underwriter or it has a pre-existing
relationship with the Distributor Representative. Insurer
acknowledges that a breach of confidentiality under this Section
15(b) will cause Underwriter irreparable harm.
16. DURATION AND TERMINATION OF THIS AGREEMENT
------------------------------------------
(a) TERM
----
This Agreement shall become effective upon the Effective Date and
shall remain in effect until such time as Reinsurer obtains approval
in the fifty states for issuance and sale of its own NEA
Valuebuilder contracts.
-17-
<PAGE> 18
(b) ASSIGNMENT
----------
This Agreement will automatically terminate in the event of its
assignment, as such term is defined in ICA-40, without the prior
written consent of the other party.
(c) TERMINATION UPON MATERIAL BREACH
--------------------------------
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 made in this
Agreement, unless such breach has been cured within 30 days after
receipt of notice of breach from the non-breaching party.
(d) TERMINATION OF REINSURANCE AGREEMENT
------------------------------------
This Agreement will automatically terminate in the event of
termination of the Reinsurance Agreement between Insurer and
Reinsurer.
(e) EFFECT OF TERMINATION
---------------------
Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (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 Insurer prior to
termination; and (2) the obligations contained in Sections 7, 8(b),
9 (but not clause (h) thereof), 12, 13, 14, and 15 hereof.
17. AMENDMENT OF THIS AGREEMENT
---------------------------
No provisions of this Agreement may be changed, waived, discharged, or
terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge, or
termination is sought.
18. AMENDMENT OF SCHEDULES
----------------------
The parties to this Agreement may amend Schedules 1 and 2 to this
Agreement from time to time to reflect additions of or changes in any
class of Contracts, Separate Accounts, subaccounts and Funds that have
been agreed upon. The provisions of this Agreement shall be equally
applicable to each such class of Contracts, Separate Accounts, subaccounts
and Funds that may be added to the Schedules, unless the context otherwise
requires.
19. MISCELLANEOUS
-------------
(a) CAPTIONS
--------
The captions in this Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
-18-
<PAGE> 19
(b) COUNTERPARTS
------------
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(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) 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 Kansas without
giving effect to principles of conflict of laws.
(e) 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.
(f) REGULATION
----------
This Agreement shall be subject to the provisions of SA-33, SEA-34
and ICA-40 and the Regulations and the rules and regulations of the
NASD, from time to time in effect, including such exemptions from
ICA-40 as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith. Without limiting
the generality of the foregoing, the term "assigned" shall not
include any transaction exempted from Section 15(b)(2) of ICA-40.
-19-
<PAGE> 20
20. NOTICE, CONSENT AND REQUEST
---------------------------
Any notice, consent or request required or permitted to be given by either
party to the other shall be deemed sufficient if sent by facsimile
transmission followed by Federal Express or other overnight carrier, or if
sent by registered or certified mail, postage prepaid, addressed by the
party giving notice to the other party at the following address (or at
such other address for a party as shall be specified by like notice):
if to Insurer:
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215-2220
Attn: General Counsel
Fax No.: (614) 249-2418
and if to Underwriter:
Security Distributors, Inc.
700 SW Harrison Street
Topeka, Kansas 66636
Attn: General Counsel
Fax No.: (785) 431-3080
IN WITNESS WHEREOF, Insurer and Underwriter have each duly executed this
Agreement as of the day and year first above written.
NATIONWIDE LIFE INSURANCE COMPANY
By Its Authorized Officer
By:
-----------------------------------------------
Mark R. Thresher, Senior Vice President-Finance
Date:
---------------------------------------------
SECURITY DISTRIBUTORS, INC.
By Its Authorized Officer
By:
-----------------------------------------------
Greg Garvin, President
Date:
---------------------------------------------
-20-
<PAGE> 21
SCHEDULE 1
----------
CONTRACTS SUBJECT TO AGREEMENT
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
CONTRACT MARKETING NAME CONTRACT FORM NOS. SEC REGISTRATION NO.
-----------------------------------------------------------------------------------------
<S> <C> <C>
NEA Valuebuilder File No. 33-
File No. 811-
NEA Valuebuilder Select File No. 33-
File No. 811-
NEA Valuebuilder Future File No. 33-
File No. 811-
-----------------------------------------------------------------------------------------
</TABLE>
-21-
<PAGE> 22
SCHEDULE 2
----------
LIST OF JURISDICTIONS IN WHICH INSURER
IS QUALIFIED TO OFFER THE CONTRACTS
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
U.S. Virgin Islands
Virginia
Washington
West Virginia
Wisconsin
Wyoming
-22-
