EXHIBIT 3(c)
MARKETING SERVICES AGREEMENT
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This Agreement is entered into effective September ______, 1995 among Security
Life of Denver Insurance Company ("Security Life"), ING America Equities, Inc.,
a broker-dealer registered with the Securities and Exchange Commission ("SEC")
under the Securities Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD") Financial Marketing Group, Inc., an insurance
agency licensed in the states listed on Schedule "A" to this Agreement
("Financial Marketing Group"), and FMG Distributors, Inc., a broker-dealer
registered with the SEC under the Securities Exchange Act of 1934 and a member
of the NASD ("FMG Distributors") (Financial Marketing Group and FMG Distributors
are collectively referred to herein as "Financial Marketing")
This Agreement gives Financial Marketing the non-exclusive right to represent
Security Life in the distribution of the Contracts. Subject to the limitations
of Section 3.1, Financial Marketing may represent Security Life in the
Distribution of the Contracts through affiliates of Designated Broker-Dealers in
accordance with the requirements set forth in Section 2.0 below.
1. DEFINITIONS
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1.1 "Affiliate" means, with respect to Designated Broker-Dealers, Security
Life or Financial Marketing, any person, corporation, partnership or
other entity, effective control of which may be exercised directly or
indirectly by the Designated Broker-Dealer, Security Life or Financial
Marketing as appropriate or any of the principal shareholders of
Security Life or Financial Marketing as appropriate.
1.2 "Contracts" means the contracts issued by Security Life or its
Affiliates listed in Schedule B to this Agreement and any subsequent
versions of such contracts.
1.3 "Designated Broker-Dealer" means any registered Broker-Dealer listed
in Schedule C to this Agreement, which has been appointed by Security
Life, or whose affiliated insurance agency has been appointed by
Security Life, to sell the Contracts as a result of the wholesaling
efforts of Financial Marketing.
1.4 "Exempted Agent" means any agent listed on Schedule D, and shall
include any agent who is a contracted insurance agent with Security
Life (an "M" or an "RVP" agent), or who is included in a Marketing
Services Agreement between Security Life and another marketer of the
Contracts.
Page 1 of 15 Pages
2. REQUIREMENTS AND RESTRICTIONS
-----------------------------
2.1 Financial Marketing shall only sell the Contracts directly through
Financial Marketing Group or other affiliated insurance agency, and
FMG Distributors or other affiliated broker-dealer.
2.2 Each Designated Broker-Dealer shall sell the Contracts through a
registered broker-dealer and a licensed insurance agency, each of
which must be, or must be affiliated with, the Designated Broker-
Dealer.
2.3 Each Designated Broker-Dealer shall have either (1) received an SEC
"no-action" letter stating that the staff of the SEC would not
recommend enforcement proceedings if commissions on the sale of the
Contracts are paid to the affiliated insurance agency instead of to
the Designated Broker-Dealer, or (2) obtained an opinion of counsel
satisfactory to Security Life in scope, form and substance that such a
no-action letter, if requested, would be granted.
2.4 Notwithstanding Section 2.2 above, a Designated Broker-Dealer may sell
the Contracts through a registered broker-dealer and a licensed
insurance agency, one of which is not affiliated with the Designated
Broker-Dealer, provided the Designated Broker-Dealer has obtained an
SEC "no-action" letter with respect to such factual situation.
2.5 Schedule C shall be updated periodically by written agreement of the
parties. No compensation shall be payable to Financial Marketing on
account of any Contracts unless and until the Designated Broker-Dealer
which produces the application is listed on Schedule C.
2.6 Schedule D shall be updated periodically by written agreement of the
parties. No compensation shall be payable to Financial Marketing on
account of any Contracts produced by an Exempted Agent during any time
period when he is listed on Schedule D.
3. MARKETING AND ADMINISTRATIVE SERVICES
-------------------------------------
3.1 Financial Marketing will negotiate with broker-dealers to sell the
Contracts. Security Life, at its discretion, may accept or reject any
such broker-dealer and, where accepted through the execution of a
Selling Agreement between such broker-dealer and Security Life, add
such broker-dealer to Schedule C, the list of Designated Broker-
Dealers covered under this Agreement. Financial Marketing is not
authorized to provide marketing services related to the Contracts to
broker-
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dealers which have not been designated by Security Life and/or
which do not have Selling Agreements with Security Life, except on a
referral basis.
3.2 Financial Marketing will provide certain marketing and administrative
services for Security Life to promote the sale of the Contracts
through Designated Broker-Dealers.
3.2.1 Such services shall include assistance in the appointment
and contracting of agents; distribution of sales materials,
newsletters and field service bulletins, provided that all
such materials shall be approved by Security Life prior to
use; assist with sales promotional activities and Designated
Broker-Dealers; the training of sales staff and registered
representatives of Designated Broker-Dealers with respect to
the features of the Contracts. Compensation for such
services shall be as set forth in Schedule E hereto.
3.2.2 Such services shall not include any direct contact with any
member of the public, including any client of the Designated
Broker-Dealers. This limitation is more specifically set
forth under Section 6, Limitations of Authority, at
Paragraph 6.8.
3.3 In conjunction with marketing and sales promotion efforts, Security
Life will be responsible for the costs of producing and printing all
policy forms, related prospectuses and whatever basic sales
promotional literature it deems appropriate (e.g. client brochure,
product specifications sheet).
3.4 Financial Marketing will have responsibility for all other marketing
and sales promotional costs including, but not limited to:
3.4.1 All travel of Financial Marketing and its agents;
3.4.2 Any meetings held at the offices of Designated Broker-
Dealers or their Affiliates.
4. COMPENSATION
------------
4.1 Compensation to Financial Marketing for the marketing and initial
administrative services performed by Financial Marketing in accordance
with Section 3.0 above, will be as follows:
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4.1.1 A percentage, as determined under Schedule E, of purchase
payments made to Security Life on account of Contracts
issued upon applications procured through Designated Broker-
Dealers in accordance with this Agreement.
4.1.2 A percentage, payable on an annual basis as determined under
Schedule E, of the variable annuity assets in Security
Life's separate and general accounts, which are attributable
to Contracts issued upon applications procured through
Designated Broker-Dealers by agents who were not Exempted
Agents at the time the contracts were procured, in
accordance with this Agreement. After termination of this
Agreement, these payments shall continue to be made until
such time as the assets upon which such payments are based
as measured on December 31st of any year, fall below an
aggregate of $10 million.
4.2 Compensation pursuant to Schedule E is subject to change by Security
Life at any time, effective upon 30 days prior written notice to
Financial Marketing. No such change shall be effective for Contracts
issued upon applications received by Security Life prior to the
effective date of such change.
4.3 In the event FMG Distributors is disqualified for continued
registration with the NASD, Security Life shall not be obligated to
pay any commission, or service fee or additional compensation pursuant
to this Agreement, the payment of which would represent a violation of
NASD rules. In such event, Security Life shall hold any compensation
otherwise due in "escrow" from the date of such disqualification until
the termination of any litigation or administrative proceedings
relating to such disqualification, provided FMG Distributors commences
an appeal to the NASD within 180 days following the disqualification
notice and actively pursues such appeal. Should FMG Distributors'
registration be reinstated, all compensation due or becoming due FMG
Distributors during the period of disqualification shall be
immediately paid, provided that such payment does not violate any NASD
rules or regulations or other federal securities laws in effect at
such time.
4.4 Compensation will be earned by Financial Marketing or Designated
Broker-Dealers only for those applications accepted by Security Life,
as the case may be, and only after receipt by Security Life at its
Variable Annuity Service Center in Denver, Colorado, of the required
purchase payment.
4.5 Should Security Life for any reason return any purchase payment,
decline any application, make an erroneous payment, or should any
Contract be surrendered pursuant to a "cancellation," Financial
Marketing agrees to repay Security Life the
Page 4 of 15 Pages
total amount of any compensation which may have been paid to Financial
Marketing thereon within seven (7) business days of notice of such
return, declination, error or cancellation. For purposes of this
paragraph 4.5, "cancellation" means any return of premium or market
value for which Security Life would reverse commissions.
5. GENERAL PROVISIONS
------------------
5.1 FMG Distributors hereby represents and warrants that it is a member in
good standing of the NASD, is familiar with and will observe the NASD
Rules of Fair Practice, and that, wherever state insurance or
securities law requires, it or its affiliated agency, Financial
Marketing Group, is or will be duly licensed and authorized to provide
marketing services relating to the Contracts. Financial Marketing also
hereby represents and warrants that it is thoroughly familiar with the
statutes, rules and regulations of the United States, and of the
state(s) in which it is licensed or in which it is, or will be, or
will be deemed to be doing business, and that it shall transact all
authorized Security Life business in strict accordance therewith.
5.2 Each party shall cooperate with the other in the investigation and
settlement of all claims against either or all of them. Each party
shall promptly forward to the other, notice of claim or other relevant
information which may come into its possession.
5.3 Financial Marketing and Security Life shall each keep full and
accurate records of the business transacted by it under this
Agreement. Each party will allow the other reasonable access to
conduct any audit or inspection of said books and records.
5.4 Financial Marketing shall keep a duplicate copy of all records it
maintains pursuant to Section 5.3 above, at a second location, where
they can be retrieved in the event of a natural or other disaster that
causes the original records to be lost or damaged. The duplicate copy
of the records shall be updated at least weekly, and may be maintained
on a computer disc, microfilm, microfiche, or other easily retrievable
medium.
5.5 All applications for purchase of the Contracts shall be subject to
acceptance by Security Life as the case may be. Security Life reserves
the right in its sole discretion to modify, change or discontinue the
offering of any form of Contract at any time. Financial Marketing
shall have no greater authority than is herein expressly granted and
no such greater authority shall be implied.
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5.6 Security Life shall furnish Financial Marketing with information
regarding states in which the Contacts (and which version thereof) may
be sold, and warrants that such information is correct.
5.7 Except as is otherwise explicitly provided herein, Financial Marketing
and Security Life shall each bear their own expenses incurred in the
performance of this Agreement.
5.8 Security Life represents and warrants that all Contracts issued by
Security Life will be in full compliance with all applicable state and
federal insurance and securities statutes, rules and regulations and
that all disclosure material (including prospectuses) delivered by
Security Life to Financial Marketing or Financial Marketing's
customers will be full and adequate disclosure of all material facts.
6.0 LIMITATIONS OF AUTHORITY
------------------------
6.1 Financial Marketing may not produce, use or authorize Designated
Broker-Dealers or their Affiliates to use any sales, advertising or
promotional materials unless such materials are furnished, or approved
in advance, in writing, by Security Life. Where necessary, Security
Life will submit such advertising material to the NASD (or other
regulatory agency) for review.
6.1.1 Use of unapproved sales or advertising material shall be
deemed grounds for immediate termination of this Agreement
if, after written notice to Financial Marketing by Security
Life that Financial Marketing has produced, used or
authorized the use of unapproved advertising or promotional
materials, Financial Marketing does not promptly take
adequate steps to remedy the situation and assure further
compliance.
6.2 Neither Financial Marketing nor Security Life is authorized, and each
is expressly forbidden, to act as agent for or otherwise on behalf of
each other, to incur any indebtedness or liability, or to make, alter
or discharge agreements, or to waive forfeitures, extend the time of
payment of any purchase payment, waive payment in cash, or to receive
any money due or to become due to Financial Marketing or Security
Life, as the case may be, except as herein provided.
6.3 In the event any legal process or notice is served on Financial
Marketing in a suit or proceeding against Security Life, Financial
Marketing shall forward forthwith such process or notice to the
offices of Security Life, in Denver, Colorado, by registered mail.
Notwithstanding the above, Financial Marketing is not authorized to
act as Agent for Service of Process of Security Life.
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6.4 In any event any legal process or notice is served on Security Life in
a suit or proceeding against Financial Marketing, Security Life shall
forward forthwith such process or notice to the offices of Financial
Marketing in Little Rock, Arkansas, by registered mail.
Notwithstanding the above, Security Life is not authorized to act as
Agent for Service of Process of Financial Marketing.
6.5 Financial Marketing shall indemnify and hold Security Life harmless
from any loss or expense on account of any unauthorized act or
transaction by Financial Marketing or persons employed by Financial
Marketing which was not authorized by Security Life and which
adversely affects Security Life. Financial Marketing shall make any
such payments to Security Life within 60 days of receipt of
appropriate documentation of the loss or expense.
6.6 Security Life shall indemnify and hold Financial Marketing harmless
from any loss or expense on account of an unauthorized act or
transaction by Security Life or persons employed or appointed by
Security Life which was not authorized by Financial Marketing and
which adversely affects Financial Marketing. Security Life shall make
any payments to Financial Marketing within 60 days of receipt of
appropriate documentation of the loss or expense.
6.7 Security Life and Financial Marketing shall not offer or pay, or
encourage others to offer or pay, any illegal rebate of purchase
payments or make any offer of any other inducement not specified in
the Contract, to the extent any such payment, inducement or offer
thereof is prohibited by applicable law, to any persons to insure with
Security Life. Security Life and Financial Marketing shall not make or
encourage others to make any misrepresentation or incomplete
comparison for the purpose of inducing a policyholder in any other
company to lapse, forfeit or surrender its insurance therein.
6.8 FMG Distributors and Financial Marketing Group each agree that they
will not solicit or sell the Contracts in any state in which they are
not properly registered and licensed to do so, and in furtherance
thereof, that they will not have any direct contact with any client of
the Designated Broker-Dealers or other members of the public, in
connection with the solicitation and sale of the Contracts.
7.0 INDEBTEDNESS; RIGHT OF SETOFF
-----------------------------
7.1 Security Life may at any time deduct from any monies due Financial
Marketing under this Agreement, every indebtedness or monetary
obligation of Financial Marketing to Security Life. On termination of
this Agreement any outstanding indebtedness to Security Life shall
become immediately due and payable.
Page 7 of 15 Pages
7.2 Financial Marketing may, at any time, deduct from any monies due
Security Life under this Agreement, every indebtedness or monetary
obligation of Security Life to Financial Marketing. On termination of
this Agreement, any outstanding indebtedness to Financial Marketing
shall become immediately due and payable.
8.0 ASSIGNMENT
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8.1 No assignment of this Agreement or of compensation payable hereunder
shall be valid unless authorized in writing by Security Life. In any
event, every assignment shall be subject to: (a) the payment in full
of any indebtedness and monetary obligation of Financial Marketing
that may be due or become due to Security Life and (b) any applicable
NASD, SEC, or state insurance or securities statutes, rules and
regulations pertaining to such assignments.
9.0 RELATIONSHIP
------------
9.1 Nothing contained herein is intended to create the relation of
employer and employee between the parties hereto. Financial Marketing
and the agents appointed by or assigned to Financial Marketing shall
be independent contractors and free to exercise their own judgment as
to the time, place and means of performing all acts hereunder, but to
the extent such do not unreasonably interfere with such freedom of
action or judgment, Financial Marketing and the agents shall conform
to all regulations of Security Life of which Financial Marketing has
knowledge.
10.0 TERMINATION
-----------
10.1 This Agreement shall have an initial term of one (1) year during which
time it may not be terminated except pursuant to the provisions of
Section 10.2 below. This Agreement shall automatically renew for five
(5) successive one (1) year terms thereafter. During any renewal term,
this Agreement may be terminated by any party effective sixty (60)
days after written notice to the other parties. The provisions of
Paragraphs 4.1.2, 6.5, 6.6 and 7 of this Agreement shall continue in
effect after the termination of this Agreement.
10.2 Notwithstanding any provision in this Agreement to the contrary, this
Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
Page 8 of 15 Pages
10.2.1 When and if Financial Marketing is disqualified for
continued membership in the NASD or for continued
registration with the Securities and Exchange Commission or
the effectiveness of its registration or ability to conduct
business is suspended or limited.
10.2.2 When and if Financial Marketing commits fraud or malfeasance
in the performance of any duties imposed upon it by this
Agreement or wrongfully withholds or misappropriates for its
own use funds of Security Life, its policyholders or
applicants.
10.2.3 If Financial Marketing breaches this Agreement, has been
notified of such breach in writing by Security Life and has
not remedied such breach within 30 days of receipt of such
notice.
10.2.4 When and if Financial Marketing violates the insurance or
securities laws of a state in which it transacts business
and as a result of such violation fails to maintain or is
unable to obtain a necessary license.
10.2.5 When and if Financial Marketing Group or FMG Distributors is
acquired by or merged into another entity, a majority
interest in either corporation is acquired by or transferred
to another entity, or a majority of the board of directors
of either company is replaced.
11.0 NOTICES
-------
11.1 Where notice is required it shall be in writing and mailed to the last
known address of Financial Marketing appearing on Security Life's
records, or, in the event of termination of this Agreement by
Financial Marketing, to the office of Chief Counsel, Security Life of
Denver Insurance Company, Xxxxxx, Xxxxxxxx, 00000, and shall be
effective as of the time the notice is deposited in the United States
mail provided such notice is actually received, or the time of actual
receipt of such notice if delivered by means other than mail.
12.0 WAIVER
------
12.1 No waiver or modification of this Agreement shall be effective unless
it is in writing and signed by a duly authorized officer of Security
Life and Financial Marketing.
Page 9 of 15 Pages
12.2 The failure of Security Life to enforce any provisions of this
Agreement shall not constitute a waiver of any such provision. The
past waiver of a provision by Security Life shall not constitute a
course of conduct or a waiver in the future of that same provision.
13.0 SUPPLEMENTS AND SCHEDULES
-------------------------
13.1 This agreement, as of its effective date, includes the following
supplements and schedules:
Schedule A - States where Financial Marketing Group is licensed to
sell variable contracts.
Schedule B - Contracts covered by the Agreement
Schedule C - Designated Broker-Dealers
Schedule D - Exempted Agents
Schedule E - Compensation Schedule
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement.
FMG DISTRIBUTORS, INC. SECURITY LIFE OF DENVER INSURANCE
COMPANY
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------- --------------------------
Title: President Title: Senior Vice President
----------------------- -----------------------
Date: October 1, 1995 Date: October 30, 1995
------------------------ ------------------------
FINANCIAL MARKETING GROUP, INC. ING AMERICA EQUITIES, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx
-------------------------- --------------------------
Title: President Title: Vice President
----------------------- -----------------------
Date: October 1, 1995 Date: October 30, 1995
------------------------ ------------------------
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SCHEDULE A
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States where Financial Marketing Group is licensed to sell Variable Contracts
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Connecticut
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SCHEDULE B
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Contracts Covered by the Agreement
----------------------------------
Financial Marketing is authorized to assist in the marketing of the following
contracts or the subsequent versions thereof:
1. "Exchequer" - A Variable Annuity contract issued by Security Life.
Page 12 of 15 Pages
SCHEDULE C
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Designated Broker-Dealers
-------------------------
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SCHEDULE D
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Exempted Agents
---------------
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SCHEDULE E
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Compensation Schedule
---------------------
There will be two stages of compensation payments. The first stage will govern
contracts sold up until the time Security Life is able to implement and
administer the payment of trail commissions to Financial Marketing. The second
state will govern contracts sold after the point in time when Security Life is
able to implement and administer the payment of these trail commissions. At the
point in time when the parties are ready to make the change over to the second
stage, a date for the change over will be mutually agreed upon in writing by way
of an addendum to this Agreement.
4.1.1 During stage one, Financial Marketing shall receive compensation of at
least 1.05% out of a total of 7.05% of initial purchase payments. In
no event shall the Selling Broker-Dealer receive more than 6% of the
total initial purchase payments. To the extent Financial Marketing is
able to negotiate a reduction in the Selling Broker-Dealer's
compensation under the Compensation Schedule to the Broker-Dealer's
Selling Agreement to an amount below 6%, Financial Marketing's
compensation shall increase by an amount proportionate to the
reduction, so that the total compensation to Financial Marketing and
the Selling Broker-Dealer shall always be 7.05%.
During stage two, Financial Marketing shall receive compensation of at
lease 0.7% out of a total of 6.7% of initial purchase payments. To the
extent Financial Marketing is able to negotiate a reduction in the
Selling Broker-Dealer's compensation under the Compensation Schedule
to the Broker-Dealer's Selling Agreement to an amount below 6%,
Financial Marketing's compensation shall increase by an amount
proportionate to the reduction, so that the total compensation to
Financial Marketing and the Selling Broker-Dealer shall always be
6.7%.
4.1.2 There shall be no additional compensation paid to Financial Marketing
during stage one.
During stage two, Financial Marketing shall receive additional
compensation equivalent to 10 basis points on an annual basis, paid in
quarterly installments, based on the variable annuity assets as
defined in Paragraph 4.1.2 of the Agreement, calculated as of the end
of each calendar quarter, and payable on or before the 15th of them
month following the end of the calendar quarter.
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