SECURITY LIFE OF DENVER INSURANCE COMPANY EXHIBIT 1.A(3)(a)
DISTRIBUTION AGREEMENT
AGREEMENT made this 22nd day of September 1994, by and between Security
Life of Denver Insurance Company, a Colorado domestic insurance company
("Security Life") on its own behalf and on behalf of Security Life Separate
Account Al ("Separate Account Al") and Security Life Separate Account L1
("Separate Account L1" and both collectively referred to as "Separate
Accounts"), and SLD Equities, Inc., a Colorado corporation, ("SLD Equities")
WHEREAS, Security Life has established and maintains Separate account Al
and Separate Account L1, which are separate investment accounts, for the purpose
of selling variable annuity contracts and variable life contracts ("Contracts")
to commence after the effectiveness of the Registration Statements relating
thereto filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), through SLD Equities,
acting as general agent of Security Life;
WHEREAS, the Separate Accounts are registered as unit investment trusts
under the Investment Company Act of 1940 ("the 1940 Act");
WHEREAS, SLD Equities is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "Securities Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Security Life desires to retain SLD Equities as the Distributor
and Principal Underwriter to provide for the sale and distribution to the public
of the Contracts issued by Security Life and funded by interests in the General
Account of Security Life and in Separate Account Al or Separate Account L1, and
SLD Equities is willing to render such services:
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. Principal Underwriter. Security Life hereby appoints SLD Equities,
during the term of this Agreement, subject to the registration requirements of
the 1933 Act and the 1940 Act and the provisions of the Securities Exchange Act,
to be the Distributor and Principal Underwriter for the sale of Contracts to the
public in each state and other jurisdictions in which the Contracts may be
lawfully sold. Security Life also appoints SLD Equities as its independent
General Agent for sale of its Contracts (including any riders which Security
Life may make available in connection therewith or any contracts for which the
Contracts may be exchanged or converted) and for sale of such other insurance
contracts or annuity contracts as Security Life may, from time to time,
authorize in writing by amendment thereto. SLD Equities shall offer the
Contracts for sale and distribution at premium rates set by Security Life.
2. Selling Agreements. SLD Equities is hereby authorized to enter into
separate written agreements, on such terms and conditions as SLD Equities
determines are not inconsistent with this Agreement, with such organizations
which agree to participate as a general agent and/or broker-dealer in the
distribution of the Contracts and to use their best efforts to solicit
applications for Contracts. Any such broker-dealer (hereinafter "Broker") shall
be both registered as a broker-dealer under the Securities Exchange Act and a
member of the NASD. SLD Equities shall be responsible for ensuring that Broker
and its agents or representatives and general agent and its sub-agents
soliciting applications for Contracts shall be duly and appropriately licensed,
registered and otherwise qualified for the sale of the Contracts (and the riders
and other contracts offered in connection therewith) under the insurance laws
and any applicable blue sky laws of each state or other jurisdiction in which
such policies may be lawfully sold and in which Security Life is licensed to
sell such Contracts. Security Life shall undertake to appoint Broker's qualified
agents or representatives and general agent's sub-agents as life insurance
agents of Security Life, provided that Security Life reserves the right to
refuse to appoint any proposed representative, agent, or sub-agent, or once
appointed, to terminate such appointment. SLD Equities shall be responsible for
ensuring that Broker and general agent supervise its agents, representatives, or
sub-agents.
SLD Equities is also authorized to enter into separate written agreements,
on such terms and conditions as SLD Equities determines are not inconsistent
with this Agreement, with such organizations ("wholesalers") that agree to
participate in the distribution of the Contracts and to use their best efforts
to solicit Brokers and general agents that, in turn, will solicit applications
of the Contracts.
3. Life Insurance Agents. Security Life shall be responsible for ensuring
that Broker and its agents or representatives and general agent and its sub-
agents meet all qualifications and hold any Licenses or authorizations that may
be required for the solicitation or sale of the Contracts under the insurance
laws of the applicable jurisdictions.
4. Suitability. Security Life desires to ensure that Contracts will be
sold to purchasers for whom the Contract will be suitable. SLD Equities shall
take reasonable steps to ensure that the various representatives of Broker and
sub-agents of general agents shall not make recommendations to an applicant to
purchase a contract in the absence of reasonable grounds to believe the purchase
of the Contract is suitable for such applicant. While not limited to the
following, a determination of suitability shall be based on information
furnished to a representative or sub-agent after reasonable inquiry of such
applicant concerning the applicant's other security holdings, insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make any premium payments contemplated by the
Contracts and will keep the Policy in force for a sufficient period of time so
that Security Life's acquisition costs are amortized over a reasonable period of
time.
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5. Conformity With Registration Statement and Approved Sales Materials. In
performing its duties as Distributor, SLD Equities will act in conformity with
the Prospectus and with the instructions and directions of Security Life, the
requirements of the 1933 Act, the 1940 Act, the Securities Exchange Act, and all
other applicable federal and state laws and regulations. SLD Equities shall not
give any information nor make any representations, concerning any aspect of the
Contract or of Security Life's operations to any persons or entity unless such
information or representations are contained in the Registration Statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by Security Life. SLD
Equities will not use and will take reasonable steps to ensure Broker will not
use any sales promotion material and advertising which has not been previously
approved by Security Life.
6. Expenses. During the term of this Agreement, SLD Equities will bear all
of its expenses in complying with this Agreement, including the following
expenses:
(a) costs of sales presentations, mailings, sales promotion
materials, advertising, and any other marketing efforts by
SLD Equities in connection with the distribution or sale of
the Contracts; and
(b) any compensation paid to employees of SLD Equities and to
wholesalers, Brokers and general agents in connection with
the distribution or sale of the Contracts.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that Security Life shall at all times retain the ultimate responsibility
for and control of all functions performed pursuant to this Agreement, and for
marketing the Contract, and reserves the right to direct, approve or disapprove
any action hereunder taken on its behalf by SLD Equities.
7. Applications. Completed applications for Contracts solicited by such
Broker through its agents or representatives or by general agent through its
sub-agents shall be transmitted directly to Security Life. All payments under
the Contracts shall be made by check to Security Life, or by other method
acceptable to Security Life, and if received by SLD Equities, shall be held at
all times in a fiduciary capacity and remitted promptly to Security Life. All
such payments will be the property of Security Life. Security Life has the sole
authority to approve or reject such applications or payments and maintains
ultimate responsibility for underwriting. Anything in this Agreement to the
contrary notwithstanding, Security Life retains the ultimate right to control
the sale of the Contracts and to appoint and discharge life insurance agents of
Security Life.
8. Standard of Care. SLD Equities shall be responsible for exercising
reasonable care in carrying out the provisions of this Agreement.
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9. Reports. SLD Equities shall be responsible for maintaining the records
of Broker and general agent and their agents, representatives or sub-agents who
are licensed, registered and otherwise qualified to sell the Contracts;
calculating and furnishing the fees payable to Brokers or general agents; and
for furnishing periodic reports to Security Life as to the sale of Contracts
made pursuant to this Agreement.
10. Records. SLD Equities shall maintain and preserve such records as are
required of it by applicable laws and regulations. The books, accounts and
records of Security Life, the Separate Accounts and SLD Equities shall be
maintained so as to clearly and accurately disclose the nature and details of
the transactions, including such accounting information as necessary to support
the reasonableness of the amounts to be paid by Security Life hereunder.
11. Compensation. For the service rendered and product development in the
initial sales efforts and continuing obligations under this Agreement, Security
Life shall pay SLD Equities in the amounts set forth in Schedule A, which
schedule is incorporated herein. Security Life shall arrange for the payment of
commissions, through SLD Equities to those Brokers and general agents that sell
Contracts under agreements entered into pursuant to Section 2, hereof, and to
wholesalers that solicit brokers and general agents to sell Contracts under
agreements entered into pursuant to Section 2, hereof, in amounts as may be
agreed to by Security Life and SLD Equities specified in such written
agreements.
12. Investigation and Proceedings. SLD Equities and Security Life agree to
cooperate fully in any insurance regulatory investigation or proceeding or
judicial proceeding arising in connection with the Contracts distributed under
this Agreement. SLD Equities further agrees to furnish regulatory authorities
with any information or reports in connection with such services which may be
requested in order to ascertain whether the operations of Security Life and the
Separate Account are being conducted in a manner consistent with applicable laws
and regulations. SLD Equities and Security Life further agree to cooperate fully
in any securities regulatory investigation or proceeding with respect to
Security Life, SLD Equities, their affiliates and their agents or
representatives to the extent that such investigation or proceeding is in
connection with Contracts distributed under this Agreement. Without limiting the
foregoing:
(a) SLD Equities will be notified promptly of any customer
complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Security Life
with respect to SLD Equities or any agent, representative, or
sub-agent of a Broker or general agent or which may affect
Security Life's issuance of any Contract sold under this
Agreement; and
(b) SLD Equities will promptly notify Security Life of any customer
complaint or notice of any regulatory investigation or
proceeding received by SLD Equities or its affiliates with
respect to Security Life or any agent, representative, or sub-
agent of a Broker or general agent in connection
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with any Contract distributed under this Agreement or any
activity in connection with any such Contract.
In the case of a meritorious customer complaint, SLD Equities and Security Life
will cooperate in investigating such complaint and any response will be sent to
the other party 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 or telegraph.
13. Indemnification. Security Life hereby agrees to indemnify and hold
harmless SLD Equities and its officers and directors, and employees for any
expenses (including legal expenses), losses, claims, damages, or liabilities
incurred by reason of any untrue or alleged untrue statement or representation
of a material fact or any omission or alleged omission to state a material fact
required to be stated to make other statements not misleading, if made in
reliance on any prospectus, registration statement, post-effective amendment
thereof, or sales materials supplied or approved by Security Life or the
Separate Accounts. Security Life shall reimburse each such person for any legal
or other expenses reasonably incurred in connection with investigating or
defending any such loss, liability, damage, or claim. However, in no case shall
Security Life be required to indemnify for any expenses, losses, claims,
damages, or liabilities which have resulted from the willful misfeasance, bad
faith, negligence, misconduct, or wrongful act of SLD Equities.
SLD Equities hereby agrees to indemnify and hold harmless Security Life,
its officers, directors, and employees, and the Separate Accounts for any
expenses, losses, claims, damages, or liabilities arising out of or based upon
any of the following in connection with the offer or sale of the contracts: 1)
except for such statements made in reliance on any prospectus, registration
statement or sales material supplied or approved by Security Life or the
Separate Accounts, any untrue or alleged untrue statement or representation
made; 2) any failure to deliver a currently effective prospectus; 3) the use of
any unauthorized sales literature by any officer, employee, agent, or sub-agent
of SLD Equities, Broker or general agent; or 4) any willful misfeasance, bad
faith, negligence, misconduct or wrongful act. SLD Equities shall reimburse each
such person for any legal or other expenses reasonably incurred in connection
with investigating or defending any such loss, liability, damage, or claim.
Promptly after receipt by a party entitled to indemnification ("indemnified
party") of notice of the commencement of any action, if a claim for
indemnification in respect thereof is to be made against Security Life or SLD
Equities ("indemnifying party") such indemnified party will notify indemnifying
party in writing of the commencement thereof, but failure to notify the
indemnifying party of any claim shall not relieve it from any liability which it
may have to the person against whom such action is brought otherwise than on
account of this agreement contained in this Section 13. The indemnifying party
will be entitled to participate in the defense of the indemnified party and such
participation will not relieve such indemnifying party of the obligation to
reimburse the indemnified party, for reasonable legal and other expenses
incurred by such indemnified party in defending himself.
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14. Agent of Security Life or Separate Accounts. Any person, even though
also an officer, director, employee, or agent of SLD Equities, who may be or
become an officer, director, employee, or agent of Security Life or the Separate
Accounts shall be deemed, when rendering services to Security Life or the
Separate Accounts or acting in any business of Security Life or the Separate
Accounts, to be rendering such services to or acting solely for Security Life or
the Separate Accounts and not as an officer, director, employee, or agent or one
under the control or direction of SLD Equities even though paid by SLD Equities.
Likewise, any person, even though also an officer, director, employee, or agent
of Security Life or the Separate Accounts, who may be or become an officer,
director, employee, or agent of SLD Equities shall be deemed, when rendering
services to SLD Equities or acting in any business of SLD Equities to be
rendering such services to or acting solely for SLD Equities and not as an
officer, director, employee, or agent or one under the control or direction of
Security Life or the Separate Accounts even though paid by Security Life or the
Separate Accounts.
15. Books and Records. It is expressly understood and agreed that all
documents, reports, records, books, files and other materials relating to this
Agreement and the services to be performed hereunder shall be the sole property
of Security Life and the Separate Accounts and that such property shall be held
by SLD Equities as agent, during the effective term of this Agreement. This
material shall be delivered to Security Life upon the termination of this
Agreement free from any claim or retention of rights by SLD Equities. During the
term of this Agreement and for a period of three years from the date of
termination of this Agreement, SLD Equities will not disclose or use any records
or information and will regard and preserve as confidential all information
related to the business of Security Life or the Separate Accounts that may be
obtained by SLD Equities from any source as a result of this Agreement and will
disclose such information only if Security Life or the Separate Accounts have
authorized such disclosure, or if such disclosure is expressly required by
applicable federal or state regulatory authorities. SLD Equities further
acknowledges and agrees that, in the event of a breach or threatened breach by
it of the provisions of this article, Security Life will have no adequate remedy
in moneys or damages and, accordingly, Security Life shall be entitled in its
discretion to seek an injunction against such breach. However, no specification
in this Agreement of a specific legal or equitable remedy shall be construed as
a waiver or prohibition against any other legal or equitable remedy in the event
of a breach of a provision of this Agreement.
16. Employees. SLD Equities will not employ, except with the prior written
approval of the Commissioner of Insurance of the state of Colorado, in any
material connection with the handling of the Separate Accounts' assets any
person who, to the knowledge of SLD Equities:
(a) in the last 10 years has been convicted of any felony or
misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or
securities, or involving violations of Sections 1341, 1342, or
1343 of Xxxxx 00, Xxxxxx Xxxxxx Code; or
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(b) within the last 10 years has been found by any state regulatory
authority to have violated or has acknowledged violation of any
provision of any state insurance law involving fraud, deceit,
or knowing misrepresentation or
(c) within the last 10 years has been found by any federal or state
regulatory authorities to have violated or have acknowledged
violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
17. Termination. This Agreement shall terminate automatically upon its
assignment without the prior written consent of both parties. This Agreement may
be terminated at any time, for any reason, by either party on 60 days' written
notice to the other party, without the payment of any penalty. Upon termination
of this Agreement, all authorizations, rights and obligations shall cease except
the obligation to settle accounts hereunder, including commissions on premiums
subsequently received for Contracts in effect at time of termination, and the
agreements contained in Sections 12 and 13 hereof.
18. Regulation. This Agreement shall be subject to the provisions of the
1940 Act and the Securities Exchange Act and the rules, regulations and rulings
thereunder, and of the applicable rules and regulations of the NASD, and
applicable state insurance law and other applicable law, from time to time in
effect, and the terms hereof shall be interpreted and construed in accordance
therewith.
19. Independent Contractor. SLD Equities shall act as an independent
contractor and nothing herein contained shall constitute SLD Equities or its
agents, officers or employees as agents, officers, or employees of Security Life
in connection with the sale of the Contacts.
20. Notices. Notices of any kind to be given to SLD Equities by Security
Life or the Separate Accounts shall be in writing and shall be duly given if
mailed, first class postage prepaid, or delivered to SLD Equities at 0000
Xxxxxxxx, Xxxxxx, Xxxxxxxx 00000, or at such other address or to such individual
as shall be specified by SLD Equities. Notices of any kind to be given to
Security Life or the Separate Accounts shall be in writing and shall be duly
given if mailed, first class postage prepaid, or delivered to them at 0000
Xxxxxxxx, Xxxxxx, Xxxxxxxx 00000, or at such other address or to such individual
as shall be specified by Security Life.
If any provisions 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.
21. Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SECURITY LIFE OF DENVER INSURANCE COMPANY
By: /s/ V. S. Benfell
PRESIDENT
ATTEST:
/s/ Xxxxxx X. Xxxxxxxx
SECRETARY
SLD EQUITIES, INC.
By: /s/ Xxxxx Xxxxxxx
PRESIDENT
WITNESS:
/s/ Xxxxxx X. Xxxxxx
VICE PRESIDENT
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SCHEDULE "A"
COMPENSATION SCHEDULE
This Schedule "A" to the Distribution Agreement between Security Life of Denver
Insurance Company ("Security Life") and SLD Equities, Inc. ("SLD Equities"),
dated September 22, 1994, sets forth the compensation to be paid to SLD Equities
for its services as underwriter and distributor of the following products, as
follows:
1. EXCHEQUER ANNUITY
A Flexible Premium Deferred Combination Fixed & Variable Annuity Contract
Form 1192(VA)
Total Gross Dealer Concessions earned in the first year by Selling Broker-
Dealer pursuant to its Selling Agreement with Security Life and SLD Equities
(pursuant to the Selling Broker-Dealer's election, this will be either 5% or
6% of funds actually received and accepted by Security Life during the first
year of the contract), plus an additional 1% of funds actually received and
accepted by Security Life during the first year of the contract.
After the first year, all Trail Commissions calculated by Security Life to
be due and payable to the Selling Broker-Dealers under the Selling
Agreements.
2. FIRSTLINE
Variable Life Policy
Form 1191(VUL)
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant to
its Selling Agreement with Security life and SLD Equities (this will be 95%
of all premium allocated to the first target, regardless of policy year),
plus 10% of all such target premium.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling Broker-
Dealers under the Selling Agreements.
All commissions shall be paid only on an earned basis, as calculated on the next
Commission cycle.
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