Exhibit (c)(i)
PRINCIPAL UNDERWRITING AGREEMENT
This UNDERWRITING AGREEMENT made as of the 1st day of May, 1999, by and
between Walnut Street Securities, Inc. (hereinafter "the Underwriter") and
Security Equity Insurance Company (hereinafter "the Insurance Company"), on its
own behalf and on behalf of the Insurance Company's Separate Account(s)
(hereinafter "the Accounts"), as may be established and approved by the New York
Insurance Department from time to time.
WITNESSETH as follows:
WHEREAS, the Accounts shall be established under authority of a resolution
of the Insurance Company's Board of Directors, in order to set aside and invest
assets attributable to certain flexible premium variable life policies
(hereinafter "Policies") issued by the Insurance Company;
WHEREAS, such Accounts shall be registered or exempt from registration as
unit investment trusts or managed investment companies under the Investment
Company Act of 1940 (the "Investment Company Act") and the Policies shall be
registered or exempt from registration under the Securities Act of 1933;
WHEREAS, the Underwriter is registered as a broker-dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and is a member of the National
Association of Securities Dealers, Inc. (the "NASD") and is registered as a
broker/dealer under the laws of the State of New York; and
WHEREAS, the Insurance Company and the Accounts desire to have Policies
sold and distributed through the Underwriter and the Underwriter is willing to
sell and distribute such Policies under the terms stated herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Insurance Company grants to the Underwriter the right to be, and
the Underwriter agrees to serve as distributor and principal underwriter of the
Policies during the term of this Agreement. The Underwriter agrees to use its
best efforts to solicit applications for the Policies at its own expense, and
otherwise to perform all duties and functions which are necessary and proper for
the distribution of the Policies.
2. All premiums for Policies shall be remitted promptly to the
Insurance Company in full together with appropriate application forms and any
other required
documentation. Checks or money orders in payment of premiums shall be drawn to
the order of "Security Equity Life Insurance Company".
3. The Underwriter agrees to offer the Policies for sale in accordance
with the prospectus or private placement memorandum for them then in effect. The
Underwriter is not authorized to give any information or to make any
representations concerning the Policies other than those contained in the
current prospectus filed with the SEC, in the private placement memorandum, or
in such sales literature as may be developed and authorized by the Insurance
Company in conjunction with the Underwriter.
4. On behalf of the Accounts, the Insurance Company shall furnish the
Underwriter with copies of all prospectuses, financial statements, and other
documents which the Underwriter reasonably requests for use in connection with
the distribution of the Policies.
5. The Underwriter represents that it is duly registered as a
broker-dealer under the 1934 Act, and is a member in good standing of the NASD,
and -- to the extent necessary to offer the Policies - shall be duly registered
or otherwise qualified under the securities laws of any state or other
jurisdiction. The Underwriter shall be responsible for carrying out its sales
and underwriting obligations hereunder in continued compliance with the NASD
Rules of Fair Practice, and applicable federal and state securities laws and
regulations. Without limiting the generality of the foregoing, the Underwriter
agrees that it shall be fully responsible for:
(a) ensuring that no person shall offer or sell the Policies on its
behalf until such person is duly registered as a representative of the
Underwriter; duly licensed and appointed by the Insurance Company; and
appropriately licensed, registered, or otherwise qualified to offer and sell
such Policies under the federal securities laws and any applicable securities
laws of each state or other jurisdiction in which the Insurance Company is
licensed to sell the Policies, and in which such persons shall offer or sell the
Policies; and
(b) training, supervising, and controlling of all such persons for
purposes of complying on a continuous basis with the NASD Rules of Fair Practice
and with federal and state securities law requirements applicable in connection
with the offering and sale of the Policies. In this connection, the Underwriter
shall:
(1) conduct such training (including the preparation and
utilization of training materials) as in the opinion of the Underwriter
is necessary to accomplish the purposes of this Agreement;
(2) establish and implement reasonable written procedures for
supervision of sales practices of agents, representatives, or brokers
selling the Policies; and
(3) take reasonable steps to ensure that its associated
persons shall not make recommendations to an applicant to purchase a
Policy, and shall not sell a Policy, in the absence of reasonable
grounds to believe that the purchase of the Policy is suitable for such
applicant.
6. Notwithstanding anything in this Agreement to the contrary, the
Underwriter is hereby authorized to enter into sales agreements with other
independent broker-dealers for the sale of the Policies. All such sales
agreements entered into by the Underwriter shall provide that each independent
broker-dealer will assume full responsibility for continued compliance by itself
and its associated persons with the NASD Rules of Fair Practice and applicable
federal and state securities laws. All associated persons of such independent
broker-dealers soliciting applications for the Policies shall be duly and
appropriately licensed or appointed by the Insurance Company for the sale of the
Policies under the insurance laws of the applicable states or jurisdictions in
which such persons shall offer or sell the Policies.
7. The Insurance Company shall apply for the proper insurance licenses
in the appropriate states or jurisdictions for persons associated with the
Underwriter; or with other independent broker-dealers which have entered into
agreements with the Underwriter for the sale of the Policies and are designated
to sell the Policies, provided that the Insurance Company reserves the right to
refuse to appoint any proposed associated person as an agent or broker, and to
terminate an agent or broker once appointed.
8. The Insurance Company and the Underwriter shall cause to be
maintained and preserved for the periods prescribed such account, books, and
other documents as are required of them by the Investment Company Act, the 1934
Act, and any other applicable laws and regulations. The books, accounts and
records of the Insurance Company, the Account, and the Underwriter as to all
transactions hereunder shall be maintained so as to disclose clearly and
accurately the nature and details of the transactions. The Insurance Company
shall maintain such books and records of the Underwriter pertaining to the sale
of the Policies and required by the 1934 Act as may be mutually agreed upon from
time to time by the Insurance Company and the Underwriter; provided that such
books and records shall be the property of the Underwriter, and shall at all
times be subject to such reasonable periodic, special, or other examination by
the SEC and all other regulatory bodies having jurisdiction. The Insurance
Company shall be responsible for sending all required confirmations on customer
transactions in compliance with applicable regulations, as modified by an
exemption or other relief obtained by the Insurance Company. The Underwriter
shall cause the Insurance Company to be furnished with such reports as the
Insurance Company may reasonably request for the purpose of meeting its
reporting and recordkeeping obligations under the insurance laws of the State of
New York and any other states or jurisdictions.
9. The Underwriter shall have the responsibility for paying (i) all
commissions or other fees to associated persons of the Underwriter which are due
for the sale of the
Policies and (ii) any compensation to other independent broker-dealers and their
associated persons due under the terms of any sales agreements between the
Underwriter and such broker-dealers. Notwithstanding the preceding sentence, no
associated person or broker-dealer shall have an interest in any deductions or
other fees payable to the Underwriter as set forth herein.
10. For furnishing the services, materials and supplies, required by
the terms of this Agreement, the Underwriter shall receive the compensation
specified in Exhibit A for the policies listed in Exhibit A.
11. The Insurance Company agrees to indemnify the Underwriter for any
losses incurred as a result of any action taken or omitted by the Underwriter,
or any of its officers, agents, or employees, in performing their
responsibilities under this Agreement in good faith and without willful
misfeasance, gross negligence, or reckless disregard of such obligations.
12. The Insurance Company undertakes to guarantee the performance of
all of Underwriter's obligations imposed by Section 27(f) of the Investment
Company Act, as amended, and Rule 27d-2 adopted by the SEC, to make refunds of
the premiums or charges to owners of Policies required by Section 27(f) or the
conditions of any exemptions therefrom.
13. (a) This Agreement may be terminated by either party hereto upon 60
day's written notice to the other party.
(b) This Agreement may be terminated upon written notice of one
party to the other party hereto in the event of bankruptcy or insolvency of such
party to which notice is given.
(c) This Agreement may be terminated at any time upon the mutual
written consent of the parties thereto.
(d) The Underwriter shall not assign or delegate its
responsibilities under this Agreement without the written consent of the
Insurance Company.
(e) Upon termination of this Agreement, all authorizations, rights,
and obligations shall cease except the obligation to settle accounts hereunder,
including payments (or premiums or contributions) subsequently received for
Policies in effect at the time of termination or issued pursuant to applications
received by the Insurance Company prior to termination.
14. This Agreement shall be subject to the provisions of the Investment
Company Act and the 1934 Act and the rules, regulations, and rulings thereunder
and of the NASD, from time to time in effect, including such exemptions from the
Investment Company Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in
accordance therewith. Without limiting the generality of the foregoing, the term
"assigned" shall not include any transaction exempted from section 15(b)(2) of
the Investment Company Act.
The Underwriter shall submit to all regulatory and administrative
bodies having jurisdiction over the operations of the Account, present or
future; and will provide any information, reports or other material which any
such body by reason of this Agreement may request or require pursuant to
applicable laws or regulations.
15. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
16. This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officials thereunder duly authorized and seals to be
affixed, as of the day and year first above written.
WALNUT STREET, INC.
Attest:
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
-------------------------- -----------------------------
Xxxxxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxx,
Assistant Secretary President and Chief Executive
Officer
Attest: SECURITY EQUITY LIFE INSURANCE
COMPANY
/s/ Xxxxxxxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
------------------------------- -----------------------------
Xxxxxxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx,
Secretary and General Counsel President
Exhibit A
Registered Products
Flexible Premium Variable Life Insurance Contract
Product name: Large Case Life II
Contract/ Riders
Large Case Life II
Contract Year
Issue Ages 1 2-10 11-15 16+
---------- ----- ---- ----- ----
20 - 51 28.00% 8.00% 6.00% 2.00%
52 - 59 28.00% 6.33% 4.00% 2.00%
60 - 67 28.00% 4.66% 4.00% 2.00%
68 - 80 19.00% 4.00% 4.00% 2.00%
81 - 85 13.00% 4.00% 4.00% 2.00%
Joint & Last
Survivor Rider
Issue Ages 1 2-10 11-15 16+
---------- ----- ---- ----- ----
20 - 51 28.00% 8.00% 6.00% 2.00%
52 - 59 28.00% 6.33% 4.00% 2.00%
60 - 67 28.00% 4.66% 4.00% 2.00%
68 - 80 19.00% 4.00% 4.00% 2.00%
81 - 85 13.00% 4.00% 4.00% 2.00%
Supplemental Term
Insurance Rider 0% commission all years
Joint & Last Survivor
Supplemental Term
Insurance Rider 0% commission all years
In the event, the contract is issued with only $10,000 Large Case Life II
coverage, the compensation will be 0%.
A-1
Exhibit A (continued)
Flexible Premium Variable Life Insurance Contract
Product Name: Large Case Life II- R
For all premiums paid up to the target premium (defined as five percent (5%) of
the Guideline Annual Premium), the following commission schedule is applicable:
Contract Year
Issue Ages 1 2-10 11-15 16+
---------- ----- ---- ----- ----
20 - 51 28.00% 8.00% 6.00% 2.00%
52 - 59 28.00% 6.33% 4.00% 2.00%
60 - 67 28.00% 4.66% 4.00% 2.00%
68 - 80 19.00% 4.00% 4.00% 2.00%
81 - 85 13.00% 4.00% 4.00% 2.00%
For all premiums paid in excess of the target premium and up to the seven pay
premium, the following commission schedule is applicable:
Contract Year
Issue Ages 1 2-10 11+
---------- ----- ---- ----
20 - 51 14.00% 5.50% 2.00%
52 - 59 14.00% 5.50% 2.00%
60 - 67 14.00% 4.66% 2.00%
68 - 80 14.00% 4.00% 2.00%
81 - 85 13.00% 4.00% 2.00%
For all premiums paid in excess of the seven pay premiums, the following
commission schedule is applicable.
Contract Year
Issue Ages 1 2+
---------- ---- ----
20 - 51 2.50% 0.00%
52 - 59 2.50% 0.00%
60 - 67 2.50% 0.00%
68 - 80 2.50% 0.00%
81 - 85 2.50% 0.00%
A-2
Exhibit A (continued)
Non Registered Products
Group Flexible Premium Variable Life Insurance Contracts
Product Name: Large Case Life I- Group
Fee Only Planners- 0% Compensation
Agent Distribution - 2% Compensation on premiums paid in all certificate years
Money Manager Distribution- Percentage of Aggregate Premium
4% of the first $.5 million
3.5% of the next $1.5 million
3% of the next $15 million
2% of the next $30 million
1.5% of the next $53 million
Flexible Premium Variable Life Insurance Contract
Product Name: Large Case Life I
The maximum allowable commission payable on this product is:
10% on all premium payments; and
.35% asset bonus compensation based on the average assets
of the insurance contract, payable at the end of the
second year
A-3
