Exhibit 1.A(3)(d)
MASTER SALES AND SUPERVISORY AGREEMENT
LIFE INSURANCE
THIS MASTER SALES AND SUPERVISORY AGREEMENT (the "Agreement") is made this ___
day of _____________, 20__, by and among Security Life of Denver Insurance
Company, Southland Life Insurance Company, Equitable Life Insurance Company of
Iowa and USG Annuity & Life Company (collectively, the "ING Insurers"), ING
America Equities, Inc. (the "ING Broker-Dealer"), ______________________(the
"Distributor") and the Distributor Agency or Distributor Agencies identified on
the signature page (the "Distributor Agency(ies)").
WITNESSETH
WHEREAS, the ING Insurers issue various life insurance contracts, both
registered under the federal securities laws and non-registered, (the
"Contracts"), and offer for sale such Contracts in accordance with federal
securities laws and/or the applicable laws of those states in which the
Contracts have been qualified for sale; and
WHEREAS, the ING Insurers have authorized the ING Broker-Dealer (which is
registered with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1934 (the "1934 Act") and is a member of the National
Association of Securities Dealers (the "NASD") as principal underwriter and
distributor of the variable Contracts to enter into, subject to the consent of
the ING Insurers, with distributors for the distribution of the Contracts; and
WHEREAS, the Distributor distributes registered and non-registered life
insurance contracts through its registered representatives (the
"Representatives") affiliated with the Distributor Agency(ies) in accordance
with applicable federal securities laws and applicable laws of those states in
which the Distributor does business; and
WHEREAS, the Distributor proposes to undertake certain supervisory and
administrative obligations discussed below in connection with the distribution
of the Contracts and is authorized to enter into dealer agreements for
distribution of Contracts;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
promises herein contained, the parties agree as follows:
1. Relationship of Parties. As set forth on Schedule 1, the ING Insurers
are the issuers of the Contracts covered by this Agreement. Each Insurer
shall have control over the offering of its Contracts and shall control
the availability and rules regarding the offering of the Contracts. The
ING Broker-Dealer is the principal underwriter and distributor of the
respective Contracts (also as set forth on Schedule 1). The Distributor
represents it is a registered broker-dealer under the 1934 Act and a
member of the NASD. The ING Insurers hereby authorize the Distributor
Agency under the insurance laws and each ING Insurer and ING
Broker-Dealer authorizes the Distributor under the securities laws to
distribute the Contracts. The Distributor agrees to supervise its
Representatives in connection with the distribution, solicitation and
sale of the Contracts and to perform other services as described below.
2. Responsibilities of the ING Insurers. The ING Insurers agree to:
(a) After receipt of the required license appointment application
forms, request all state life insurance appointments needed in
order for the Distributor Agency(ies) and its Representatives to
act as representatives of the ING Insurers.
1
(b) Review, accept, modify or reject applications for policies
received from the Distributor Agency(ies) and its
Representatives.
(c) Pay compensation to the Distributor and or Distributor Agencies
as outlined in Section 6 and on the Compensation Schedule.
(d) Provide service to policyowners and relevant information to the
Distributor, Distributor Agency(ies) and its Representatives
regarding the policies written under this agreement, on a
reasonable basis, as done in the normal course of business.
(e) Accept sole responsibility for reviewing and paying, or declining
to pay, all claims, according to the ING Insurers' normal
business practices and administrative policies and procedures.
3. Authority and Duties of the Distributor. The Distributor agrees that it
shall, at all times when performing functions under this Agreement, be
registered as a securities broker-dealer with the SEC and will maintain
its membership with the NASD. Additionally, the Distributor shall be
licensed or registered as a securities broker-dealer in the states
requiring such a license or registration in connection with supervision
and other services pertaining to its Contract sales activities. The
Distributor shall distribute the Contracts and shall have all attendant
duties, responsibilities and liabilities associated with that function
for compliance, supervision and servicing purposes. The Distributor
agrees to use its best efforts to find suitable purchasers for the
Contracts.
(a) Selection and Supervision of Representatives. The Distributor
shall select and employ Representatives and shall have full
responsibility for the training, supervision and control of such
Representatives as contemplated by Section 15(b)(4)(E) of the
1934 Act and applicable NASD Rules. Such Representatives shall be
subject to the control of the Distributor with respect to such
persons' securities-regulated activities in connection with the
Contracts (where such Contracts require such regulation). In the
case of registered Contracts, the Distributor shall cause its
Representatives to be NASD registered representatives,
appropriately licensed with the applicable state and appointed by
the relevant ING Insurers before such Representatives engage in
the solicitation of applications for such registered Contracts
and in the case of all registered and non-registered Contracts,
shall cause such Representatives to limit solicitation of
applications to jurisdictions where such Representatives are
licensed and appointed and where the Contracts being solicited
have been approved for sale.
The ING Insurers and Broker-Dealer shall not have any
responsibility for the supervision of any Representative or any
other associated person or affiliate of the Distributor. If the
act or omission of a Representative or any other associated
person or affiliate of the Distributor is the proximate cause of
any claim, damage or liability (including reasonable attorneys'
fees) to an ING Insurer or ING Broker-Dealer, the Distributor
shall be entirely responsible and liable therefor.
(b) Notice of Representative's Noncompliance. In the event a
Representative fails or refuses to submit to the supervision of
the Distributor, ceases to be a Representative of the
Distributor, or fails to meet the rules and standards imposed by
the Distributor on its Representatives, the Distributor shall
communicate such fact to the ING Insurers and ING Broker-Dealer
in writing immediately, and shall immediately notify such
Representative that he or she is no longer authorized to sell the
Contracts.
(c) Compliance with NASD Registration and Conduct Rules and Federal
and State Securities Laws. In the case of registered Contracts,
the Distributor shall fully comply with the
2
requirements of the 1934 Act and all other applicable federal or
state laws and with the rules of the NASD and shall establish
such rules and procedures as may be necessary to cause diligent
supervision of the securities activities of its Representatives.
The Distributor agrees to maintain appropriate books, records and
supervisory procedures as are required by the SEC, NASD and other
regulatory agencies having jurisdiction.
(d) Purchaser Suitability. In the case of all Contracts, the
Distributor shall be responsible for suitability and shall take
reasonable steps to ensure that its Representatives make
recommendations to applicants to purchase Contracts only if there
are reasonable grounds to believe the purchase of each Contract
is suitable for the applicant. The procedure shall include review
of all proposals and applications for Contracts for suitability
and completeness and correctness as to form as well as review and
endorsement on an internal record of the Distributor of the
transactions. Neither the Distributor nor its Representatives
shall engage, directly or indirectly, in the twisting or other
solicitation of the policyowners of the ING Insurers for the
purpose of inducing the termination or replacement of policies or
contracts issued by the ING Insurers unless such termination is
in the best interests of the policyowner.
(e) Prospectus and Statement of Additional Information. In the case
of registered Contracts, the ING Broker-Dealer shall provide the
Distributor with prospectuses and any supplements or amendments
thereto, and the Statement of Additional Information ("SAI")
describing the Contracts subject to this Agreement. Each ING
Insurer, with regard to Contracts it issues, is responsible for
maintaining in effect, in accordance with the requirements of the
SEC, each Registration Statement of which the prospectus is a
part. Each ING Insurer shall immediately notify the Distributor
of the issuance of any stop order or any federal or state
regulatory proceeding which would prevent the sale of their
respective Contracts in any state or jurisdiction. The
Distributor shall ensure compliance with the prospectus delivery
requirements of the 1933 Act. The Distributor agrees to deliver a
copy of the SAI concurrently with a copy of the prospectus to
Contract applicants in jurisdictions where such delivery may be
required.
(f) Advertising and Sales Promotion Materials. In the case of
registered Contracts, the Distributor and the Distributor
Agency(ies) shall perform the selling functions authorized by
this Agreement only in accordance with the terms and conditions
of the then current prospectus applicable to the Contracts and
shall make no representations not included in the prospectus or
in any authorized supplemental material, including illustrations.
In the case of all Contracts, the Distributor shall use, and
shall cause the Distributor Agency(ies) and its Representatives
to use, in the solicitation and sale of the Contracts, only those
advertising and sales materials, including illustrations, that
are or have been approved by the appropriate ING Insurer and ING
Broker-Dealer. In the event that the Distributor, Distributor
Agency(ies) or any of its Representatives create advertising and
sales promotion materials with respect to the Contracts, the
materials may only be used with the prior written approval of the
appropriate ING Insurer and ING Broker-Dealer.
(g) Securing Applications. Each application for a Contract shall be
made only on an application form provided by the appropriate ING
Insurer. The Distributor shall review all such applications for
completeness and for compliance with the conditions herein
including, in the case of registered Contracts, the suitability
and prospectus delivery requirements set forth above under
Sections 2(d) and (e). All payments collected by the Distributor,
or any of its Representatives, shall be remitted promptly, in
full, without deduction or reduction, together with such
application form and any other required documentation directly to
the appropriate ING Insurer at the address indicated on such
application or to such other address as may be designated by such
ING Insurer. All such payments and documents shall be the
property of the ING Insurers. Checks or
3
money orders in payment of such Contracts should be made payable
to the order of the ING Insurer issuing the Contracts. The ING
Insurers reserve the right to reject, in their sole discretion,
any Contract application and return any payment made in
connection with an application which is rejected. Unless
otherwise agreed, Contracts issued on applications accepted by an
ING Insurer shall be forwarded to the Representative of the
Distributor for prompt delivery to the policyowner.
4. Authority and Duties of the Distributor Agency(ies)
(a) Responsibilities of the Distributor Agency(ies)
i. The Distributor agrees to procure applications for the ING
Insurer's Contracts. Production must be through the
Distributor Agency(ies) and Representatives of the
Distributor Agency(ies), which are duly licensed and
appointed by the ING Insurers in the applicable states.
ii. The Distributor Agency(ies) shall recommend
Representatives for appointment by the ING Insurers by
causing such Representatives to complete any and all
application forms required by the ING Insurers and to
submit any other requirements that may be required under
applicable law or by the ING Insurers. The Distributor
Agency(ies) covenants and agrees that it and all of its
Representatives appointed pursuant to this Agreement shall
not solicit nor aid, directly or indirectly, in the
solicitation of any application for any Contract until
they are fully licensed by the proper authorities and
appointed by the relevant ING Insurers under the
applicable insurance laws within the applicable
jurisdictions where the Distributor Agency(ies) and its
Representatives propose to offer Contracts. The
Distributor Agency(ies) further covenants and agrees that
solicitations will only take place where the applicable
ING Insurer is authorized to conduct business and where
the Contracts may be lawfully sold.
iii. The Distributor Agency(ies) shall periodically provide the
ING Insurers with a list of all Representatives appointed
by the Distributor Agency(ies) and the jurisdictions where
such Representatives are licensed to solicit sales of the
Contracts. The Distributor Agency(ies) shall provide
immediate notice to the ING Insurers of any
Representatives terminating their relationship with the
Distributor Agency(ies). Upon such notice, the
Representative's appointment with the ING Insurers shall
be terminated and the Representative will no longer be
authorized to represent the ING Insurers as contemplated
by this Agreement. Notwithstanding such termination, the
ING Insurers or any of them may, in their sole discretion
reappoint and/or re-contract such Representatives.
iv. The Distributor Agency(ies) shall prepare and transmit the
appropriate appointment forms to the applicable ING
Insurer at the address provided on the license appointment
form. The ING Insurers may refuse, by written notice to
the Distributor Agency(ies), for any reason, to apply for
the appointment of a Representative and may cancel any
existing appointment at any time. Upon receipt of such
notice, the Distributor Agency(ies) agrees to immediately
cause such Representative to cease solicitation of sales
for the Contracts.
v. The Distributor Agency(ies) shall supervise all
Representatives appointed pursuant to this Agreement to
solicit sales of the Contracts and shall bear
responsibility for all acts and omissions of each
Representative. The Distributor Agency(ies) shall comply
with and exercise all responsibilities required by
applicable federal and state law and regulations. The
Distributor Agency(ies)
4
shall train and supervise its Representatives to ensure
that purchase of a Contract is only recommended to an
applicant if there are reasonable grounds to believe the
purchase of the Contract is suitable for that applicant.
While not limited to the following, a determination of
suitability shall be based on information furnished to a
Representative after reasonable inquiry of such applicant
concerning the applicant's insurance and investment
objectives, financial situation and needs, and the
likelihood that the applicant will continue to make any
premium payments contemplated by the Contract and will
keep the Contract in force.
vi. The Distributor Agency(ies) agrees to treat money received
or collected for the ING Insurer who issued the Contract
as property held in trust, and to remit such money
promptly in full, together with the application form and
any other required documentation, to such ING Insurer's
Customer Service Center at the address shown on the
application form for the Contract. All such payment and
documents shall be the property of the applicable ING
Insurer.
vii. The Distributor Agency(ies) agrees to adhere to the "cash
with application" requirements as set forth in each ING
Insurer's rules and regulations, copies of which the
Distributor Agency(ies) acknowledges it has received. The
Distributor Agency(ies) further agrees, when applicable,
to provide the proper form of interim coverage and inform
the applicant of the specific conditions of the coverage.
viii. The Distributor Agency(ies) agrees to comply with the
underwriting and issue requirements of the ING Insurers,
as published by the ING Insurers, and the applicable
insurance laws and regulations of the state or states in
which the Distributor Agency(ies) operates. Such laws and
regulations include, but are not limited to, those
pertaining to client funds, privacy and confidentiality,
licensing, rebating, replacements, exchanges, solicitation
and advertising.
ix. The Distributor Agency(ies) agrees to inform the ING
Insurers of all material facts of which it is aware
relating to insurance of insureds or proposed insureds.
(b) Limitation of Authority.
i. The Distributor Agency(ies) shall have no authority and
agrees not to bind any ING Insurer by any promise or
agreement; incur any debt, expense, or liability whatever
in its name or account; or receive any money due or to
become due to ING Insurer except first premiums on
applications or Contracts and except where an ING Insurer
otherwise agrees in writing.
ii. The Distributor Agency(ies) shall have no authority and
agrees not to deliver any policy or allow any policy to be
delivered until the first premium has been paid in full.
No delivery shall take place if, after an inquiry, the
Distributor Agency(ies) or Representative is aware that
any person proposed for insurance is not in the same
condition of health, habits, occupation and other facts as
are represented in the application.
iii. The Distributor Agency(ies) shall have no authority and
agrees not to make, modify or discharge any Contract, or
bind an Insurer by making any promises respecting any
Contract, except when authorized in writing to do so by an
authorized officer of an ING Insurer.
5
iv. The Distributor Agency(ies) shall have no authority and
agrees not to authorize or allow a Representative to do
any act prohibited under this Agreement.
c) General Provisions.
i. The Distributor Agency(ies) may not assign the rights to
procure applications or be relieved of the obligations of
the Distributor Agency(ies) under this Agreement without
an ING Insurer's prior written consent.
ii. There is no intention by either party under this
Agreement, to create any third party beneficiary of this
Agreement.
iii. The Distributor Agency(ies) shall be solely responsible
for hiring any staff it may desire and for maintaining
office space and meeting necessary expenses without
reimbursement from any ING Insurer.
iv. The Distributor Agency(ies) and its Representatives shall
be free to exercise independent judgment as to the time,
place and means of performing all acts under this
Agreement, and the relationship of the Distributor
Agency(ies) and its Representatives to the ING Insurers
shall be that of an independent contractor. Nothing in
this Agreement shall be construed to create the
relationship of employer and employee between the
Distributor Agency(ies) (or any of its Representatives)
and an ING Insurer.
v. Each ING Insurer and the Distributor Agency(ies) recognize
and respect each other's respective interest in providing
continuing service to those who purchase Contracts. Each
party agrees to provide the others relevant information
regarding the Contracts on a reasonable basis, as done in
the normal course of business.
vi. Failure of the Distributor Agency(ies) or any ING Insurer
to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a
waiver of any such conditions.
vii. No oral promises or representations shall be binding nor
shall this Agreement be modified except by agreement in
writing, executed on behalf of the ING Insurers and the
ING Broker-Dealer by duly authorized officers of each of
them.
viii. This Agreement supersedes all previous contracts and
agreements between or among the Distributor Agency(ies)
and the ING Insurers made for the procurement of
Contracts, but it shall not affect the economic
obligations of either party under such previous contracts
and agreements.
ix. The provisions under this Section shall survive any
termination of this Agreement.
x. The Distributor Agency(ies) hereby grants a limited Power
of Attorney to the Distributor, to execute any amendments,
modifications or waivers with respect to this Agreement.
5. Property of ING Insurers. All money payable in connection with any of
the Contracts whether as premium, purchase payment or otherwise and
whether paid by or on behalf of any policyowner or anyone else having an
interest in the Contracts is the property of the ING Insurer which
issued the Contract and shall be transmitted immediately in accordance
with the administrative
6
procedures of such ING Insurer without any
deduction or offset for any reason including, but not limited to, any
deduction or offset for compensation claimed by the Distributor or the
Distributor Agency(ies).
6. Compensation.
(a) While this Agreement is in force, the ING Broker-Dealer shall
arrange for payment to the Distributor of compensation payable on
sales of the registered Contracts solicited in accordance with
the Compensation Schedule attached hereto, as in effect at the
time the Contract premiums or purchase payments (both referred to
as "Premiums") are received by an ING Insurer. Payment of
compensation for sales of non-registered Contracts is payable to
the Distributor Agency(ies) in accordance with the Compensation
Schedule attached hereto. No compensation of any kind may be
earned, paid, credited or accrued in any way with respect to
sales in the State of New York.
(b) After termination of this Agreement, payment of compensation
shall be made in the same manner as if the Agreement had remained
in force. However, the Distributor shall continue to be liable
for any charge-backs pursuant to the provisions of the
Compensation Schedules and for any other amount advanced by or
otherwise due an ING Insurer or ING Broker-Dealer.
(c) The ING Insurers shall not have responsibility for payment of any
compensation whatsoever to any Representative of the Distributor.
Compensation from the Distributor Agency(ies) to the
Representative for Contracts solicited and sold by the
Representative shall be governed by a separate agreement between
the Distributor and its Representative, and to the extent deemed
necessary by the Distributor, by an agreement between the
Distributor and the Distributor Agency(ies).
(d) The Distributor represents that no commissions or other
compensation based upon a percentage of premiums or based upon a
percentage of assets or other valuable consideration will be paid
for services rendered in soliciting the purchase of the Contracts
to any person or entity which is not duly licensed and registered
by the required authority and appointed by the ING Insurers to
sell the Contracts in the state of such solicitation or sale;
provided, however, that this representation shall not prohibit
the payment of compensation to the surviving spouse or other
beneficiary of a person entitled to receive such compensation
pursuant to a bona fide written contract that calls for such
payment. The Distributor agrees that no compensation of any kind
other than described in this Section 6 of this Agreement is
payable by an ING Insurer or ING Broker-Dealer to the
Distributor.
(e) The amount of compensation, if any, and its time of payment for
replacements, changes, conversions, exchanges, term renewals,
term conversions, premiums paid in advance, policies issued on a
"guaranteed issue" basis, or other special cases and programs,
shall be governed by the ING Insurer's underwriting and
administrative rules then in effect.
7. Refund of Compensation. No compensation shall be payable, and the
Distributor and the Distributor Agency(ies) jointly and severally agree
to reimburse the ING Broker-Dealer promptly, and in any event within 30
days, for any compensation paid to the Distributor or its
Representatives under each of the following conditions: a) if an ING
Insurer, in its sole discretion, determines not to issue the Contract
applied for; b) if an ING Insurer refunds the premiums or purchase
payments upon the applicant's surrender or withdrawal pursuant to any
"free-look" privilege; c) if an ING Insurer refunds the premiums or
purchase payments paid by applicant as a result of a complaint by
applicant, recognizing that the ING Insurer has sole
7
discretion to refund premiums or purchase payments; d) if an ING Insurer
determines that any person signing an application who is required to be
licensed and appointed or any other person or entity receiving
compensation for soliciting purchase of the Contracts is not duly
licensed and appointed to sell the Contracts in the jurisdiction of such
sale or attempted sale; and e) as may be otherwise provided in the
Compensation Schedule.
8. Indebtedness and Right of Setoff. Nothing contained herein shall be
construed as giving the Distributor or its Representatives the right to
incur any indebtedness on behalf of the ING Insurers or the ING
Broker-Dealer. The Distributor hereby authorizes any ING Insurer and ING
Broker-Dealer to set off liabilities, however created, of the
Distributor and its Representatives to any ING Insurer and/or ING
Broker-Dealer against any and all amounts otherwise payable to the
Distributor.
9. Termination.
(a) This Agreement may not be assigned except by written mutual
consent and shall continue for an indefinite term, subject to the
termination by any party upon ten-days' advance written notice to
the other parties (subject to any longer time period if
prescribed by state law), except that in the event that an ING
Broker-Dealer or the Distributor ceases to be a registered
broker-dealer or a member of the NASD, this Agreement shall
immediately terminate.
(b) This Agreement shall be immediately terminated upon:
i. A breach of this Agreement by the Distributor.
ii. The sale, dissolution, termination or other
discontinuation of the Distributor, unless the ING
Insurers and the ING Broker-Dealer have given written
permission to the continuation of this Agreement, which
consent will not be unreasonably withheld.
iii. Bankruptcy of the Distributor.
(c) Upon termination of this Agreement, all authorizations, rights
and obligations shall cease, except the agreements in Sections 3,
4, 5, 6, 7, 8,12, 13, and 14 and the payment of any accrued but
unpaid compensation to the Distributor or refund of compensation
due to the ING Broker-Dealer and the ING Insurers.
(d) Also, upon termination of this Agreement, Distributor agrees to
return to the ING Insurers all marketing materials, including
illustration software, as well as all applicable confidential
items listed in Section 13 of this Agreement that may be in the
possession of the Distributor or its Representatives.
10. Non-Employee Relationship. For the purpose of compliance with any
applicable federal or state securities laws or regulations, the
Distributor acknowledges and agrees that in performing the services
covered by this Agreement, it is acting in the capacity of an
independent "broker" or "dealer" as defined in the By-Laws of the NASD
and not as an agent or employee of the ING Insurers or the ING
Broker-Dealer or any registered investment company. In furtherance of
its responsibilities as a broker or dealer, The Distributor acknowledges
that it is responsible for statutory and regulatory compliance in
securities transactions involving any business produced by its
Representatives concerning the Contracts.
8
11. Non-Exclusivity. The Distributor agrees that no territory or Contract is
assigned exclusively hereunder and that the ING Insurers and ING
Broker-Dealer reserve the right in their discretion to enter into
selling agreements with other broker-dealers and distributors, and to
contract with or establish one or more insurance agencies in any
jurisdiction in which the Distributor transacts business hereunder.
12. Cooperation in Investigation. The Distributor, the Distributor
Agency(ies), the ING Broker-Dealer and the ING Insurers jointly agree to
cooperate fully in any insurance, securities or other regulatory
investigation or proceeding or judicial proceeding arising in connection
with any Contract without limiting the foregoing:
(a) The Distributor shall promptly notify the ING Insurers and the
ING Broker-Dealer of any customer complaint or notice of any
regulatory authority investigation or proceeding or judicial
proceeding which it might receive with respect to any Contract.
(b) In the case of a substantive customer complaint, the parties
shall cooperate in investigating and responding to such
complaint. Any response shall be sent to the other parties to
this Agreement for approval not less than five business days
prior to its being sent to the customer or regulatory authority,
except that if a more prompt response is required, the proposed
response shall be communicated by telephone, email or facsimile
transmission.
13. Confidentiality of Information. Distributor and the Distributor
Agency(ies) acknowledge that each may acquire information relating to
the products, strategies, systems, marketing plans, customers and
personnel of ING Insurers and the ING Broker-Dealer and that such
information is considered by the ING Insurers and the ING Broker-Dealer
to be confidential and proprietary. The Distributor and the Distributor
Agency(ies) shall hold all such information in strictest confidence and
shall not (and shall cause its Representatives to not) (a) disclose such
information to any third party; or (b) utilize such information for
their commercial benefit or to the detriment of the ING Insurers or the
ING Broker-Dealer. The Distributor and the Distributor Agency(ies)
acknowledge that a breach of this provision would result in significant
and irreparable harm to the ING Insurers and the ING Broker-Dealer and
hereby agree and consent to an injunction in addition to any other
remedies that the ING Insurers and the ING Broker-Dealer may have at law
or in equity.
14. Indemnification.
(a) The ING Insurers and ING Broker-Dealer (referred to jointly in
this Section 13 as "ING") agree to indemnify and hold harmless
the Distributor and the Distributor Agencies (referred to jointly
in this Section 13 as the "Selling Group") and such associated
persons as its officers, directors, agents and employees, against
any losses, claims, damages or liabilities, joint or several, to
which Selling Group or such associated persons may become subject
under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact required
to be stated therein or necessary to make the statements therein
not misleading contained (i) in any Registration Statement, any
prospectus or any document executed by ING specifically for the
purpose of qualifying a Contract for sale under the laws of any
jurisdiction or (ii) in any written information or sales material
authorized for and supplied or furnished to Selling Group and its
Representatives by ING, their employees or agents, in connection
with the sale of the Contracts. ING shall reimburse Selling Group
and each such associated person for legal or other expenses
reasonably incurred by Selling Group or
9
such associated person in connection with investigating or
defending any such loss, claim, damage, liability or action.
(b) The Selling Group jointly and severally agree to indemnify and
hold harmless ING and their affiliates and such associated
persons as their officers, directors, agents and employees,
against any losses, claims, damages or liabilities to which ING
and any such associated person may become subject under the 1933
Act, the 1934 Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon:
i. any unauthorized use of sales materials or any oral or
written misrepresentations or any unlawful sales practices
concerning a Contract by the Selling Group, its officers,
directors, employees, agents, Representatives or
associated persons; and
ii. claims by agents or Representatives or employees of the
Selling Group for commissions or other compensation or
remuneration of any type; and
iii. failure by agents, Representatives or employees of the
Selling Group to comply with all applicable state
insurance laws and regulations including but not limited
to state licensing requirements, rebate statutes and
replacement regulations, and the provisions of this
Agreement; and
iv. telephone instructions by a Representative to ING in
connection with any Contract.
The Selling Group shall reimburse ING and any director, officer,
employee or agent for any legal or other expenses reasonably
incurred by ING or such associated person in connection with
investigating or defending any such loss, claim, damage,
liability or action. This indemnity provision shall be in
addition to any liability which the Selling Group may otherwise
have.
(c) After a party entitled to indemnification receives notice of the
commencement of any action, if a claim in respect thereof is to
be made against any person obligated to provide indemnification,
such indemnified party shall notify the indemnifying party in
writing of the commencement thereof as soon as practicable
thereafter. However, the omission to so notify the indemnifying
party shall not relieve it from any liability except to the
extent that the omission results in a failure of actual notice to
the indemnifying party, and such indemnifying party is damaged
solely as a result of the failure to give such notice.
15. Fidelity Bond and Errors and Omissions Insurance. The Distributor shall
secure and maintain a fidelity bond (including coverage for larceny and
embezzlement), issued by a reputable bonding company, covering all of
its directors, officers, agents, Representatives, associated persons and
employees who have access to funds of an ING Insurer or ING
Broker-Dealer. This bond shall be maintained at the Distributor's
expense in at least the amount prescribed under Article III, Section 32
of the NASD Rules of Fair Practice or future amendments thereto. The
Distributor shall provide the ING Broker-Dealer with a copy of said bond
or verification of an applicable exception upon request. The Distributor
shall also secure and maintain errors and omissions insurance acceptable
to the Insurer and covering the Distributor and its Representatives. The
Distributor hereby assigns any proceeds received from a fidelity bonding
company, errors and omissions or other liability coverage, to an ING
Insurer or ING Broker-Dealer as their interest may appear, to the extent
of their loss due to activities covered by the bond, policy or other
liability coverage. If there is any deficiency amount, whether due to a
deductible or otherwise,
10
the Distributor hereby indemnifies and holds harmless an ING Insurer and
ING Broker-Dealer from any such deficiency and from the costs of
collection thereof, including reasonable attorneys' fees. Alternatively,
in the event that the Distributor self-insures this liability, it shall
submit such proof to the ING Insurers and the ING Broker-Dealer as such
parties deem satisfactory to demonstrate the adequacy of such financial
resources.
16. Notices. All notices required hereunder shall be duly given if mailed
to:
Office of General Counsel
ATTN: Variable Attorney
c/o Security Life of Denver
ING Insured Investor Group
0000 Xxxxxxxx
Xxxxxx, XX 00000
All notices to the Distributor shall be duly given if mailed to:
[Distributor name and address]
17. Disputes; Arbitration.
(a) If a dispute arises between the parties, the parties agree that
their respective representatives shall meet and consult in good
faith and attempt to settle the dispute, within thirty (30) days
of written notice thereof, as a condition precedent to the
initiation of arbitration proceedings as set forth herein.
Notwithstanding any other provision of this Agreement to the
contrary, the parties hereto agree that any and all disputes with
respect to any claim pursuant to the provisions of this
Agreement, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association by a panel of three (3) arbitrators appointed
pursuant to such Rules, and judgment upon the award rendered by
such arbitrators may be entered in any court having jurisdiction.
Such arbitrators shall not have the authority or power to reform,
alter, amend or modify any of the terms or conditions of this
Agreement or to enter an award which reforms, alters, amends or
modifies such terms or conditions. Notwithstanding the forgoing,
the arbitrators shall have no authority to award any punitive
damages except upon proof of fraud with intent to deceive. The
decision of such arbitrators shall be in writing, setting forth
both findings of fact and conclusions of law, and shall be final
and conclusive upon the parties; and no suit at law or in equity
based on such dispute, controversy or claim shall be instituted
by any party hereto, other than to enforce the award of such
arbitrators. Such arbitration shall be conducted in Denver,
Colorado or in such other location as the parties thereto may
agree.
(b) In the event of a dispute, the prevailing party shall be entitled
to be reimbursed by the non-prevailing party or parties for such
prevailing party's reasonable attorney's fees and other expenses.
(c) The parties agree that as precondition to the commencement of
arbitration by any party, the dispute must be submitted to
non-binding mediation with a mediator agreed to by both parties.
If the parties cannot agree on a mediator within fourteen (14)
days from the date of a request for mediation, the dispute will
be mediated by a person selected in accordance with the rules of
the American Arbitration Association.
18. Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
11
19. Entire Agreement; Amendment of Agreement. This Agreement including any
Exhibits and Schedules attached hereto contains the entire agreement
among the parties concerning the subject matter hereof and supercedes
any and all prior agreements, understandings, negotiations,
correspondence or other written or oral communications among the parties
respecting the subject matter. The ING Insurers or the ING Broker-Dealer
may amend this Agreement, including any Exhibits and Schedules hereto,
upon at least ten (10) days' prior written notice to the Distributor,
unless otherwise stated in such Schedule. The submission of an
application for the Contracts by the Distributor after the effective
date of any such amendment shall constitute agreement to such amendment.
Additional Distributor Agencies may be added as parties to this
Agreement at any time by a written amendment signed by the ING Insurers,
the ING Broker-Dealer, the Distributor and such additional Distributor
Agencies. All Distributor Agencies, which are parties to this Agreement
at the time of such amendment, hereby consent and agree in advance to
the addition of such additional Distributor Agencies.
20. Binding Effect. This Agreement shall be binding on and shall inure to
the benefit of the parties to it and their respective successors in
interest. If any provision of the Agreement conflicts with any other
provision, or if any provision shall be held of made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
21. Effective Date. This Agreement shall be effective as of the date it is
fully executed by all parties.
22. Execution in Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which taken together will
constitute one and the same instrument.
In reliance on the representations set forth and in consideration of the
undertakings described, the parties represented below do hereby contract and
agree.
[ING Insurers] [ING Broker-Dealer]
By: _________________________ By: _________________________
Title: ________________________ Title: ________________________
[Distributor]
By: __________________________
Name: ________________________
Title: _________________________
Date: _________________________
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
12
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
[Distributor Agency] [Distributor Agency]
By: __________________________ By: __________________________
Name: ________________________ Name: ________________________
Title: _________________________ Title: _________________________
Date: _________________________ Date: _________________________
13
Firm Compensation by Plan
Effective immediately, and subject to the terms of the Master Sales and
Supervisory Agreement, the gross Broker/Dealer compensation for the sale of each
of the variable products included shall be at the percentages of premium shown
on the following pages.
PCA (PRIMARY COMMISSIONABLE AMOUNT) is equal to the first year target premium.
Gross premiums paid up to the PCA in any year are commissioned at the full PCA
rate. If the gross premium paid in year one is less than the PCA, that
difference is carried over to the second year. Premiums received in year two or
later up to this difference, if any, are commissioned at the full PCA commission
rate. A new PCA is generated any time a new coverage segment is created, except
as a result of a change in death benefit option, only PCA and RCA. Premium
dollars are allocated first to PCA, then to SCA, and then to RCA.
SCA (SECONDARY COMMISSIONABLE AMOUNT) is equal to the difference between the
gross premiums paid in segment year one and the PCA.
RCA (RENEWABLE COMMISSIONABLE AMOUNT) equals zero in the first policy year. In
renewal years, the RCA equals the gross premium paid less the PCA for that year,
but never less than zero.
If a policy for which compensation has been paid is lapsed, surrenders or has a
death benefit decrease in the first six months after issue, repayment of 100% of
the compensation paid is due from the SELLING BROKER-DEALER. The reimbursement
may be deducted by ING AMERICA EQUITIES from the next, or any subsequent,
commission payment to SELLING BROKER-DEALER. If the amount to be reimbursed
exceeds compensation otherwise due, SELLING BROKER-DEALER shall promptly
reimburse ING AMERICA EQUITIES before the next commission cycle.
The Waiver of Cost of Insurance Rider, Additional Insured Rider and Waiver of
Specified Premium Rider are commissionable and will have a separate target
premium which is set at issue and is level thereafter.
If the Stated Death Benefit has been increased since the policy date, premiums
received are allocated to the coverage segments in the same proportion that the
guideline annual premium for each segment bears to the total guideline policy.
Premiums received within 15 days prior to policy anniversary will result in the
agent receiving commissions at the same rate as if the premium was paid on the
anniversary date. If a premium payment accompanies a request for a Stated Death
Benefit increase or is receive while a request is pending, the payment will be
applied to the policy but commissions shall not be payable until the increase is
effective. The commission shall then be payable based on the premium being
allocated among all segments as it would normally and the new target premium
after the increase.
Compensation on initial premium shall be due tot he SELLING BROKER-DEALER at the
time of the issuance of the policy and for all other premium payments at the
time of the receipt and acceptance of premium by Security Life, except that the
amount, if any, and the time of payment of compensation on stated death benefit
increases, replacements, reissues, changes, conversions, exchanges, term
renewals, term conversions, premiums paid in advance, policies issued on a
"guaranteed issue" basis, policies requiring facultative reinsurance
arrangements, and other special cases and programs shall be governed by Security
Life's underwriting and administrative rules then in effect. The Compensation
shall be payable to the SELLING BROKER-DEALER in accordance with the Schedules
in effect at the time of issue of the policy.
Plan Type 1st Policy Yr 2-10 Policy Yrs
Strategic Advantage II VUL PCA 15.00% 12.00%
Strategic Advantage II VUL SCA 3.0% 3.00%
Strategic Advantage II VUL RCA N/A N/A
A trail commission of 0.15% on an annualized basis is calculated at the end of
each month based on the policy's net account value at the end of the prior
month. The trail commission begins on the sixth anniversary.
The trail commission is payable annually at the end of a policy year provided
the policy is in force (and not subject to the Grace Period provision) on such
date.
Commission rates for Guaranteed Issue are the same as for fully underwritten
cases.
In the event that a policy for which a commission has been paid is lapsed,
surrendered or has a requested decrease to the Stated Death Benefit within the
first three policy years, SECURITY LIFE and ING AMERICA EQUITIES shall require
reimbursement from SELLING BROKER-DEALER. The chargebacks are based on the
lesser of the target premium or the actual premium paid in that policy year.
Commission Chargeback Table
Strategic Advantage Strategic Advantage II
Percent of Annual Percent of Annual
Policy Year Target Premium Paid Target Premium Paid
----------- ------------------- -------------------
1 8% 10%
2 4% 7%
3 2% 2%
4 0% 0%
If a premium payment for which a commission has been paid is refunded by
SECURITY LIFE, a reimbursement of the commission paid on the amount refunded
will be due from the SELLING BROKER-DEALER.
