DRAFT 12/08/99
TABLE OF CONTENTS
SECTION PAGE NO.
Additional Definitions .......................................................2
Distribution Activities - Authority ..........................................3
Distribution Activities - Appointment ........................................4
Distribution Activities - Duties .............................................4
Limitations on Authority .....................................................5
Sales Agreements .............................................................6
Forms, Applications, and Licensing............................................7
Marketing Materials ..........................................................8
Payment of Expenses ..........................................................9
The Distributor's Compensation ..............................................11
Representations and Warranties ..............................................13
Indemnification .............................................................14
Records .....................................................................19
Investigations and Proceedings ..............................................19
Term and Termination ........................................................19
Rights Upon Termination .....................................................21
Independent Contractor ......................................................22
Notices .....................................................................22
Arbitration .................................................................23
Confidentiality .............................................................23
Severability ................................................................24
Choice of Law ...............................................................24
No Waiver ...................................................................25
Agreement Non-Assignable ....................................................25
Schedules ...................................................................25
Headings ....................................................................25
Entire Agreement ............................................................25
DISTRIBUTION AGREEMENT
AGREEMENT made as of the day of 1999, by and between
Allmerica Financial Life Insurance and Annuity Company, a Delaware insurance
company ("AFLIAC"), First Allmerica Financial Life Insurance Company, a
Massachusetts insurance company ("FAFLIC" and, together with AFLIAC,
collectively, the "Insurance Companies"), Allmerica Investments, Inc., a
Massachusetts corporation (the "Underwriter") and First Union Securities, Inc.,
a Delaware corporation (the "Distributor"), on its own behalf and on behalf of
the individuals and entities listed on Schedule 1 to this Agreement (the
"Distributor Agency Affiliates"), as such Schedule may be amended from time to
time in accordance with this Agreement.
RECITALS:
WHEREAS, the Insurance Companies propose to issue certain variable annuity
contracts and variable life insurance policies; and
WHEREAS, certain of the variable annuity contracts and variable life insurance
policies to be issued by the Insurance Companies (the "Private Placements") may
be offered and sold in reliance upon exemptions from the registration
requirements of the Securities Act of 1933 (the "1933 Act") and the Investment
Company Act of 1940 (the "1940 Act"), while certain other variable annuity
contracts and variable life insurance policies to be issued by the Insurance
Companies may be offered and sold pursuant to Registration Statements (the
"Registered Products") and their related Prospectuses filed with and declared
effective by the Securities and Exchange Commission (the "Commission") under the
provisions of the 1933 Act and the 1940 Act (collectively, the "Private
Placements" and the "Registered Products" are referred to as the "Variable
Products") (Variable Products are identified in Schedule 2 to this Agreement, as
such Schedule may be amended from time to time); and
WHEREAS, the Distributor is registered as a broker-dealer with the Commission
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") that engages in the distribution of variable annuity contracts and
variable life insurance products; and
WHEREAS, the Insurance Companies and the Underwriter desire to retain the
Distributor to distribute the Variable Products through registered
broker-dealers ("Broker-Dealers") and their registered representatives
("Representatives"); and
WHEREAS, the Distributor desires to be retained by the Insurance Companies and
the Underwriter to distribute the Variable Products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties hereto agree as follows:
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1. ADDITIONAL DEFINITIONS
(a) AFFILIATE -- With respect to a person, any other person
controlling, controlled by, or under common control with, such
person.
(b) APPLICATIONS -- The forms used by a prospective purchaser to
apply for a variable life insurance policy or a variable
annuity contract.
(c) CONTRACTS -- The variable annuity contracts set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(d) FUNDS -- The funds set forth in Schedule 4 to this Agreement,
as such Schedule may be amended from time to time in
accordance with this Agreement, through which benefits
provided by the Variable Products are to be funded.
(e) FUND PROSPECTUS -- At any time while this Agreement is in
effect, the prospectus and statement of additional information
for each Fund most recently filed with the Commission pursuant
to Rule 497 under the 1933 Act.
(f) FUND REGISTRATION STATEMENT -- At any time while this
Agreement is in effect, the currently effective registration
statement filed with the Commission under the 1933 Act, or
currently effective post-effective amendment thereto, for
shares of each Fund.
(g) POLICIES -- The variable life insurance policies set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(h) PORTFOLIOS -- The underlying Fund portfolios, set forth in
Schedule 4 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(i) PREMIUM -- A payment made under a Policy by an applicant or
purchaser.
(j) PRIVATE PLACEMENT GUIDELINES -- The guidelines set forth in
Schedule 3 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(k) PRIVATE PLACEMENT MEMORANDUM -- The document through which the
Insurance Companies offer Private Placements. (For purposes of
Section 12 of this Agreement, however, the term "any Private
Placement Memorandum" means any document which is or at any
time was a Private Placement Memorandum within the meaning of
this Section 1(k)).
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(l) PRIVATE PLACEMENTS -- Contracts and Policies being offered and
sold in reliance upon exemptions from the registration
requirements of the 1933 Act and the 1940 Act for non-public
offerings.
(m) PROSPECTUS -- The prospectus, if any, included within a
Registration Statement or, if more recent, the prospectus
filed pursuant to Rule 497 under the 1933 Act. (For purposes
of Section 12 of this Agreement, however, the term "any
Prospectus" means any document which is or at any time was a
Prospectus within the meaning of this Section 1(m)).
(n) PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser.
(o) REGISTRATION STATEMENT -- At any time while this Agreement is
in effect, each currently effective registration statement, or
currently effective post-effective amendment thereto, relating
to the Contracts or Policies, including financial statements
included in, and all exhibits to, that registration statement
or post-effective amendment. (For purposes of Section 12 of
this Agreement, however, the term "Registration Statement"
means any document which is or at any time was a Registration
Statement within the meaning of this Section 1(o)).
(p) REGULATIONS -- The rules and regulations promulgated by the
Commission under the 1933 Act, the 1934 Act and the 1940 Act
as in effect at the time this Agreement is executed or
thereafter promulgated.
(q) VARIABLE ACCOUNTS -- Separate accounts established pursuant to
Delaware state insurance law (in the case of AFLIAC) or
Massachusetts state insurance law (in the case of FAFLIC)
supporting the Variable Products specified in Schedule 2 as in
effect at the time this Agreement is executed, or as such
Schedule may be amended from time to time in accordance with
this Agreement.
2. DISTRIBUTION ACTIVITIES -- AUTHORITY
(a) The Insurance Companies and the Underwriter authorize the
Distributor, and the Distributor accepts the authority, to act
as a distributor of the Variable Products, subject to any
applicable requirements of the 1933 Act and the 1940 Act.
The Insurance Companies hereby authorize the Distributor to
recommend to the Insurance Companies persons that may be
authorized to engage in solicitation activities with respect
to the Variable Products, including the recruitment and
appointment of Broker-Dealers and Representatives who, in
turn, may be authorized to engage in solicitation activities
involving the solicitation of Applications, Premiums and
Purchase Payments directly from prospective purchasers.
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The Insurance Companies shall have the right to reject any
such recommendation, but shall not do so unreasonably, and
shall notify the Distributor of any such rejection.
(b) The Distributor shall enter into separate written "Sales
Agreements" with Broker-Dealers for distribution of the
Variable Products. These Sales Agreements will be in a form
mutually agreeable to the parties to this Agreement. The
standard form of Sales Agreement to be used on the effective
date of this Agreement is set forth in Schedule 5 to this
Agreement.
(c) Nothing in this Agreement precludes additional mutually
agreeable distribution and compensation arrangements among the
parties to this Agreement, including ones that may have
compensation arrangements that reward the Insurance Companies
for identifying and recruiting new Broker-Dealers to sell the
Variable Products, for identifying potential purchasers of the
Variable Products, or for providing superior support under
this Agreement.
3. DISTRIBUTION ACTIVITIES -- APPOINTMENT
(a) Where required by applicable state insurance law, the
Insurance Companies hereby appoint the Distributor as their
agent under that state insurance law to represent the
Insurance Companies in the distribution activities
contemplated by this Agreement. The Insurance Companies and
the Underwriter hereby authorize the Distributor under
applicable securities laws to engage in the activities
contemplated by this Agreement relating to the distribution of
the Variable Products.
(b) In states where the Distributor is not licensed as an
insurance agent and applicable state insurance law requires
that the Distributor be so licensed, the Insurance Companies
hereby appoint each Distributor Agency Affiliate listed on
Schedule 1 to this Agreement (as that Schedule may be amended
from time to time by the Distributor when required by
applicable state insurance law to reflect changes in the
licensing status of the Distributor or the Distributor Agency
Affiliates) as their agent under applicable state insurance
laws to represent the Insurance Companies in the distribution
activities contemplated by this Agreement.
4. DISTRIBUTION ACTIVITIES -- DUTIES
(a) The Distributor shall use its best efforts to market the
Variable Products through Broker-Dealers and Representatives
in accordance with the terms and conditions of this Agreement,
subject to applicable material market and regulatory
conditions.
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In addition, the Distributor (both on its own behalf and on
behalf of the Distributor Agency Affiliates) undertakes to use
its best efforts to recruit Broker-Dealers in accordance with
Section 3 of this Agreement, consistent with market conditions
and in compliance with its responsibilities under the federal
securities laws and NASD rules and regulations.
(b) The Distributor shall assist and provide information to
Broker-Dealers and their Representatives in connection with
the sale and servicing of Variable Products.
(c) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by Broker-Dealers or their Representatives to comply
with applicable law.
(d) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by Broker-Dealers or
their Representatives to comply with applicable law.
Notwithstanding the foregoing, the Distributor agrees to
indemnify the Insurance Companies and the Underwriter for any
such failure to comply with applicable law, as provided in
Section 12(a)(1)(viii) of this Agreement.
(e) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by the Insurance
Companies or the Underwriter to comply with applicable law.
(f) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by the Distributor to comply with applicable law.
5. LIMITATIONS ON AUTHORITY
(a) The Distributor shall not have the authority, and shall not
grant authority to Broker-Dealers or their Representatives, on
behalf of the Insurance Companies:
(1) to make, alter or discharge any Variable Product or
other contract entered into pursuant to a Variable
Product;
(2) to waive any Variable Product forfeiture provision;
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(3) to extend the time of paying any Purchase Payments,
or Premiums due under the Variable Products; and
(4) to receive any monies, Purchase Payments or
Premiums (except for the sole purpose of forwarding
monies, Purchase Payments or Premiums to the
appropriate Insurance Company).
(b) The Distributor shall not expend, nor contract for the
expenditure of, funds of the Insurance Companies.
(c) The Distributor shall not possess or exercise any authority on
behalf of the Insurance Companies other than that expressly
conferred on the Distributor by this Agreement.
6. SALES AGREEMENTS
(a) The Distributor shall not enter into any Sales Agreement with
a Broker-Dealer relating to the distribution of any Variable
Product, unless that Sales Agreement (i) is substantially
identical to the form of Sales Agreement mutually agreed to by
the parties to this Agreement (the standard form of Sales
Agreement in use on the effective date of this Agreement is
set forth in Schedule 5 hereto) or (ii) is approved by the
appropriate Insurance Company, provided that the approval of
the Insurance Company shall be deemed to have been given if no
written objection to the Sales Agreement has been delivered by
the Insurance Company to the Distributor within five (5)
business days after being provided by facsimile or express
courier with a copy of the proposed Sales Agreement.
(b) The Distributor shall provide to the appropriate Insurance
Company a copy of each Sales Agreement entered into by the
Distributor and a Broker-Dealer within five (5) business days
following execution thereof.
(c) The Insurance Companies agree to appoint Representatives of
Broker-Dealers as life insurance agents of the Insurance
Companies to the extent that such Representatives satisfy the
licensing and qualification requirements of applicable state
insurance laws, as well as the Insurance Companies' own
standards applicable to life insurance agents. The Insurance
Companies reserve the right, which right shall not be
exercised unreasonably, to refuse to appoint any
Representative as their life insurance agent. The Companies
reserve the right to terminate immediately the appointment of
any Representative as its life insurance agent if such
Representative fails to maintain his or her registration,
license or qualifications under federal and state securities
laws, as well as applicable state insurance laws, is subject
to disciplinary action by any governmental authority or
self-regulatory organization, fails to meet minimum sales
requirements established from time to time by the Insurance
Companies, or fails, in the reasonable view of the Insurance
Companies, to satisfy appropriate industry
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standards. The Insurance Companies shall promptly notify the
Distributor and the Broker-Dealer with which the
Representative is affiliated of their intent to terminate a
Representative and the reasons for such termination.
(d) AFLIAC and FAFLIC, as appropriate, will pay the initial and
renewal fees for agent appointments by the respective company
of the Distributor, duly licensed Distributor Agency
Affiliates and Broker-Dealers and their Representatives;
PROVIDED, HOWEVER, that the Insurance Companies reserve the
right to refuse to pay renewal fees for Representatives not
meeting such minimal sales requirements as may be established
from time to time by the Insurance Companies.
7. FORMS, APPLICATIONS, AND LICENSING
(a) The Insurance Companies, or their agent, shall forward to the
Distributor, Applications, other administrative forms, and any
amendments or supplements to the foregoing, necessary to carry
out the Distributor's distribution authority and
responsibilities with respect to the Variable Products.
(b) The Insurance Companies shall obtain all requisite regulatory
approvals of the Variable Products and shall comply with all
applicable laws, rules, regulations and orders of any
governmental authority relating to the issuance or sale of the
Variable Products.
(c) All Premiums and Purchase Payments paid by check or money
order that are collected by the Distributor or any
Broker-Dealer or Representative shall be remitted promptly,
and in any event not later than two business days, in full,
together with Applications, forms, and any other required
documentation, to the appropriate Insurance Company. Checks or
money orders in payment of Premiums and Purchase Payments
shall be drawn to the order of AFLIAC or FAFLIC, as
appropriate. If any Premium or Purchase Payment is held at any
time by the Distributor, Broker-Dealers, Representatives,
agents, or any affiliates, the Distributor, the
Broker-Dealers, the Representatives, the agents or the
affiliates shall hold that Premium or Purchase Payment in a
fiduciary capacity. All Premiums and Purchase Payments whether
by check, money order or wire, shall be the property of the
appropriate Insurance Company.
(d) The Distributor acknowledges that the Insurance Companies
shall have the unconditional right to reject, in whole or in
part, any Application. The Insurance Companies shall return
any monies received by them or from an applicant or purchaser
whose Application has been rejected. The Insurance Companies
shall notify the Distributor in writing one business day prior
to taking any action to return any such monies, which notice
shall identify, if applicable, the Representative who
submitted the rejected Application.
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(e) If a purchaser rescinds a Variable Product or exercises its
"free look right" under a Variable Product, any refund of
Premiums or Purchase Payments due as provided in that Variable
Product, shall be made by the issuing Insurance Company to the
purchaser. The Insurance Companies shall notify the
Distributor in writing one business day prior to taking any
action to refund any such Premiums or Purchase Payments, which
notice shall identify, if applicable the Broker-Dealer or the
Representative through which the Variable Product had been
purchased.
If a purchaser rescinds a Variable Product or exercises its
"free look" under a Variable Product, the Distributor will pay
to AFLIAC or FAFLIC, whichever is the issuing Insurance
Company, within five (5) business days of a written request
for repayment, the amount of any commission or other
compensation the Distributor or a Distributor Agency affiliate
received on the Premiums or Purchase Payments returned.
(f) The Distributor agrees to maintain all registrations,
licenses, and qualifications under federal and state
securities laws that are applicable to its activities and
those of its registered representatives in connection with the
performance of this Agreement. The Distributor also agrees to
maintain all registrations, licenses, and qualifications under
state insurance laws that are applicable to the activities of
the Distributor, the Distributor Agency Affiliates and their
agents and registered representatives in performing this
Agreement.
(g) The Distributor agrees to notify the Insurance Companies
within three (3) business days of obtaining actual knowledge
of any changes in the registrations, licenses, or
qualifications of the Distributor, the Distributor Agency
Affiliates, or the agents or registered representatives of the
Distributor or Distributor Agency Affiliates that would
adversely affect its performance of this Agreement.
(h) The Insurance Companies agree to obtain and maintain all
registrations, licenses, qualifications and approvals under
federal securities laws and state blue sky and insurance laws
in connection with qualifying the Variable Products for sale.
(i) The Insurance Companies agree to notify the Distributor within
three (3) business days of obtaining actual knowledge of any
changes in the registrations, licenses, qualifications, or
approvals of the Variable Products that would adversely affect
the offering of the Variable Products.
8. MARKETING MATERIALS
Except as otherwise agreed to by the Insurance Companies and the
Distributor, the Distributor shall be responsible for the design, the
cost of the design work and the printing costs of all promotional,
sales and advertising material relating to the Variable Products.
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Prior to use with any member of the public, the Distributor shall
provide to the Insurance Companies copies of all promotional, sales and
advertising material developed by the Distributor for the Insurance
Companies' review and written approval. Upon receipt of such material
from the Distributor, the Insurance Companies shall be given a
reasonable amount of time to complete their review. The Insurance
Companies will respond on a prompt and timely basis in approving any
such material. Failure to respond shall not relieve the Distributor of
the obligation to obtain the prior written approval of the Insurance
Companies.
The Insurance Companies shall be responsible for filing, as required,
all promotional, sales or advertising material related to the Variable
Products with the NASD and any federal and state securities,
governmental or regulatory agencies. The Insurance Companies shall also
be responsible for filing, as required, such material with any state
insurance department.
9. PAYMENT OF EXPENSES
(a) The Distributor will pay the following expenses related to its
distribution and other services contemplated by this
Agreement:
(i) all commissions and other compensation payable to
Broker-Dealers and their Representatives, related to
the sale and servicing of the Variable Products, as
provided in the Sales Agreement between the
Distributor and the Broker-Dealer;
(ii) the compensation, if any, of the Distributor's
employees, agents and registered representatives;
(iii) expenses associated with the licensing and
appointment, if any, and training of the
Distributor's employees, agents and representatives
involved in the distribution activities contemplated
by this Agreement;
(iv) expenses for design, development and printing of (1)
marketing kits and Variable Product Prospectus covers
in a design which is agreed upon by the Insurance
Companies and the Distributor, which meet regulatory
requirements as determined by the Insurance
Companies, and which are provided to the Insurance
Companies in a camera-ready format, and (2)
promotional and advertising materials;
(v) to the extent not paid by a Fund, the cost and
expenses for design, development and printing of the
Fund Prospectuses and semi-annual and annual reports;
(vi) the cost and expenses of printing Variable Product
Prospectuses, which Prospectuses will each contain a
copy of each Fund Prospectus;
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(vii) the cost and expense for design, development and
printing of Policy and Contract semi-annual and
annual reports;
(viii) the cost and expense of the mailing of any
promotional and advertising material and marketing
kits in connection with the distribution of the
Policies and Contracts;
(ix) fulfillment of marketing materials and forms (not
including Applications and other insurance forms) to
Broker-Dealers;
(x) any additions, inserts, or packaging enhancements to
the Insurance Companies' basic "Welcome Package";
(xi) expenses associated with telecommunications with the
Insurance Companies at the sites of the Distributor
or the Distributor Agency Affiliates, including site
installations and purchases, leases or rentals of
modems, terminals and other hardware, and lease line
telephone charges; and
(xii) any other expenses incurred by the Distributor or the
Distributor Agency Affiliates for the purpose of
carrying out the obligations of the Distributor
hereunder.
(b) The Insurance Companies will pay all expenses in connection
with:
(i) the preparation and filing with appropriate
governmental or regulatory agencies of the
Registration Statements and each preliminary
Prospectus and definitive Prospectus;
(ii) the preparation and issuance of the Policies and
Contracts, including the Companies' basic "Welcome
Package" (any additions, inserts, or packaging
enhancements to the Companies' "Welcome Package" shall
be at the expense of the Distributor, as set forth in
Section 9(a)(x) above);
(iii) any authorization, registration, qualification or
approval of the Policies and Contracts required under
the securities, blue-sky laws or insurance laws of
any state;
(iv) registration fees for the Policies and Contracts
payable to the Commission, the NASD or any other
governmental or regulatory agency;
(v) the mailing of Prospectuses and any supplements
thereto, as required by federal securities laws, and
periodic reports relating to the Variable Accounts to
Policy and Contract owners;
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(vi) the preparation and printing of administrative forms
utilized in connection with the distribution of the
Policies and Contracts, including but not limited to
the form of Application;
(vii) the preparation of Policies and Contract owner lists
for the purposes of proxy solicitations;
(viii) compensation payable to the Distributor, as provided
in Section 10 hereof; and
(ix) any other expenses related to the distribution of
Policies and contracts except those set forth in
Section 9(a) and except as provided in Section 9(c).
(c) The Insurance Companies alone shall be responsible for and
bear the cost of administration of the Contracts following
their issuance, including all Policy and Contract owner
service and communication activities, but the Distributor
shall be responsible for answering inquiries from
Broker-Dealers or Representatives regarding the investment
performance of the Policies and Contracts, as permitted by
applicable law.
(d) The Insurance Companies, as agent for the Underwriter, will
confirm to each applicant for and owner of a Policy or
Contract in accordance with Rule 10b-10 under the 1934 Act
their acceptance of Premiums and Purchase Payments and such
other transactions as are required by Rule 10b-10 or
administrative interpretations thereunder and in accordance
with Release 8389 under the 1934 Act.
10. THE DISTRIBUTOR'S COMPENSATION
(a) In consideration for the services rendered by the Distributor
pursuant to this Agreement, the Insurance Companies shall pay
the Distributor the compensation set forth in Schedule 6 to
this Agreement. Schedule 6 and/ or Schedule 2 may be modified
at any time, and from time to time, by adding or deleting
Policies or Contracts and changing the compensation payable
for those Policies and Contracts, provided that any such
modifications are mutually agreed upon by both the Insurance
Companies and the Distributor, in writing, and signed by both
parties. Modifications to the Variable Products listed in
Schedule 2 and the compensation described in Schedule 6 may be
requested by the Insurance Companies in the event that pricing
objectives are not achieved due to adverse experience or the
failure to meet the Insurance Companies' sales forecasts, and
the Distributor's consent shall not be unreasonably withheld.
Any such modification shall apply only to Policies and
Contracts applied for after the effective date of each such
modification.
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(b) In the event a Variable Product terminates within twelve (12)
months of the date of issue, the Insurance Companies reserve
the right to recover: (1) one hundred percent (100%) of the
compensation paid to the Distributor respecting the sale of
the Variable Product if that Variable Product terminates for
reasons other than death during the first twelve (12) months
following issue; (2) seventy five percent (75%) of the
compensation paid to the Distributor if a Variable Product
terminates for reasons other than death during the second
twelve (12) months following issue; (3) fifty percent (50%) of
the compensation paid to the Distributor if a Variable Product
terminates for reasons other than death during the third
twelve (12) months following issue; (4) twenty five percent
(25%) of the compensation paid to the Distributor if a
Variable Product terminates for reasons other than death
during the fourth twelve (12) months following issue; and (5)
nothing from the Distributor (i.e., no charge back) if the
Variable Product terminates thereafter. However,
notwithstanding any other provision of this Agreement, if
termination of a Variable Product at any time is due to the
willful or negligent wrongful actions or representations of
the Distributor, a Broker-Dealer or any Representative, the
Insurance Companies reserve the right to recover one hundred
percent (100%) of the compensation paid to the Distributor
respecting the sale of the Variable Product.
In the event a Variable Product owner makes a withdrawal from
or partially surrenders a Variable Product within forty-eight
(48) months following its date of issue, the charge back rules
described in the first paragraph of this Section 10(b) shall
apply, except that the amount of the charge back shall be
pro-rated. Any such pro-rated charge back shall be determined
in accordance with the following formula:
Charge Back = Charge Back Percentage* x Withdrawal Amount
-----------------
Variable Product
Cash Value**
*100% year one; 75% year two; 50% year three; 25% year four
** determined as of the date of the withdrawal
With respect to any other Variable Product terminations or
withdrawals, the Insurance Companies shall have no right to
recover any portion of the compensation paid to the
Distributor. In no event shall the Insurance Companies have
the right to recover any portion of any compensation received
by the Distributor as a basis point charge against investment
values under the Policies and Contracts. The Insurance
Companies shall have the right to set off any amounts owed by
the Distributor under this Section 10(b) against any amounts
owed by the Insurance Companies to the Distributor.
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11. REPRESENTATIONS AND WARRANTIES
(a) BY THE DISTRIBUTOR
The Distributor represents and warrants to, and covenants
with, the Insurance Companies as follows:
(1) The Distributor has taken all actions necessary
including without limitation, those necessary under
its articles of incorporation, by-laws and applicable
state corporate law, to authorize the execution,
delivery and performance of this Agreement and all
transactions contemplated hereunder.
(2) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, registered as a
broker-dealer under the 1934 Act, a member in good
standing of the NASD, and duly registered under
applicable state securities laws.
(3) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, in compliance with
the eligibility requirements for certain affiliated
persons and underwriters found in Section 9(a) of the
1940 Act.
(4) Prior to the sale of any Variable Product hereunder,
the Distributor and each Distributor Agency Affiliate
and their employees, agents and registered
representatives will have all necessary state
insurance licenses and other regulatory approvals to
perform the services required by this Agreement and
the Distributor will notify the Insurance Companies
and the Underwriter within three business days of
obtaining actual knowledge of any change in the
status of such licenses or regulatory approvals.
(5) While this Agreement remains in force and at any time
following termination of this Agreement for any
reason, the Distributor and the Distributor Agency
Affiliates agree that they will not take any action
designed or calculated to result in the transfer,
exchange or replacement of any Policy or Contract.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
The Insurance Companies and the Underwriter represent and
warrant to, and covenant with, the Distributor, as follows:
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(1) All necessary regulatory approvals and licenses from
any state or federal governmental body having
jurisdiction over the Insurance Companies, the
Underwriter or the Variable Products have been
obtained, and the Insurance Companies will notify the
Distributor within one business day of obtaining
actual knowledge of any change in the status of any
approvals or licenses related to the marketing, sale
or distribution of the Variable Products.
(2) The Insurance Companies and the Underwriter have
taken all actions necessary including, without
limitation, those necessary under their articles of
incorporation, bylaws and applicable state corporate
law, to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
(3) The Insurance Companies and the Underwriter are and
shall remain during the term of this Agreement in
compliance with the eligibility requirements for
certain affiliated persons and underwriters found in
Section 9(a) of the 1940 Act.
12. INDEMNIFICATION
(a) BY THE DISTRIBUTOR
(1) The Distributor agrees to indemnify and hold harmless
the Insurance Companies, each Affiliate of the
Insurance Companies and the Underwriter and each of
their directors, officers, employees or agents and
each person, if any, who controls the Insurance
Companies or the Underwriter within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section 12
(a)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Distributor) or
litigation (including legal and other expenses) to
which the Indemnified Parties may become subject
under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect
thereof) or settlements are related to the offer or
sale of the Variable Products or the operation of the
Variable Accounts and:
(i) arise out of, or are based upon,
violation(s) by the Distributor of federal
or state securities law(s) or regulation(s),
applicable banking law(s) or regulation(s),
insurance law(s) or regulation(s) or any
rule or requirement of the NASD; or
14
(ii) arise out of, or are based upon, any
tortious conduct (including oral or written
misrepresentation), or any unlawful sales
practices concerning the Variable Products
by the Distributor; or
(iii) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission to state a material fact required
to be stated therein or necessary to make
the statements therein not misleading, in
light of the circumstances in which they
were made, contained in any advertising,
sales literature, or other promotional
material designed, developed, and produced
by the Distributor and used by it in the
distribution of the Variable Products;
PROVIDED THAT the Distributor shall not be
liable in any such case to the extent that
such losses, claims, damages, liabilities or
expenses arises out of, or are based upon,
an untrue statement or alleged untrue
statement or omission or alleged omission
made in reliance upon information furnished
in writing to the Distributor by the
Insurance Companies or the Underwriter
specifically for use in the preparation of
any such promotional material; or
(iv) arise out of, or are based upon, claims by
Broker-Dealers, Representatives or
employees, agents or registered
representatives of the Distributor for
commissions or other compensation or
remuneration of any type; or
(v) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to submit Premiums, Purchase
Payments, or Applications to the Insurance
Companies, or to submit the correct amount
of a Premium or Purchase Payment, on a
timely basis and in accordance with this
Agreement, subject to applicable law; or
(vi) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to deliver the Variable
Products to purchasers thereof on a timely
basis; PROVIDED THAT the Distributor shall
not be liable in any such case to the extent
that such losses, claims, damages,
liabilities or expenses arise as a result of
any failure on the part of the issuing
Insurance Company to perform its obligations
under this Agreement on a timely basis; or
(vii) arise as a result of a material breach by
the Distributor of any provisions of this
Agreement; or
15
(viii) arise as a result of actions of a
Broker-Dealer or its Representatives;
as limited by and in accordance with the provisions
of Sections 12(a)(2) and 12 (a)(3) hereof.
(2) The Distributor shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation ("Losses"
for purposes of this Section 12 (a)(2)) incurred or
assessed against an Indemnified Party that may arise
from any Indemnified Party's willful misfeasance or
bad faith. The Distributor's liability for Losses in
the event of its breach of this Agreement shall be
limited to that portion of Losses caused by its
breach, and the Distributor shall not be liable for
that portion of Losses caused by breach of this
Agreement by an Indemnified Party or from any act or
omission by an Indemnified Party.
(3) The Distributor shall not be liable under this
indemnification provision with respect to any claim
made against an Indemnified Party unless that
Indemnified Party shall have notified the Distributor
in writing within a reasonable time after the summons
or other first legal process giving information of
the nature of the claim shall have been served upon
that Indemnified Party (or after the Indemnified
Party shall have received notice of such service on
any designated agent). Notwithstanding the foregoing,
the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Distributor
of its obligations hereunder except to the extent
that the Distributor has been prejudiced by such
failure to give notice. In addition, any failure by
the Indemnified Party to notify the Distributor of
any such claim shall not relieve the Distributor from
any liability which it may have to the Indemnified
Party against whom the action is brought otherwise
than on account of this indemnification provision. In
case any such action is brought against the
Indemnified Parties, the Distributor shall be
entitled to participate, at its own expense, in the
defense of the action. The Distributor also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action;
PROVIDED, HOWEVER, that if the Indemnified Party
shall have reasonably concluded that there may be
defenses available to it which are different from or
additional to those available to the Distributor, the
Distributor shall not have the right to assume said
defense, but shall pay the costs and expenses thereof
(except that in no event shall the Distributor be
liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with
any one action or separate but similar or related
actions in the same jurisdiction arising out of the
same general allegations or circumstances). After
notice from the Distributor to the Indemnified Party
of the Distributor's election to assume the defense
16
thereof, and in the absence of such a reasonable
conclusion that there may be different or additional
defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the
Distributor will not be liable to that party under
this Agreement for any legal or other expenses
subsequently incurred by the party independently in
connection with the defense thereof other than
reasonable costs of investigation.
(4) The Indemnified Parties will notify the Distributor
within a reasonable time, not to exceed five (5)
business days, of the receipt of service of process
in any litigation or proceedings against them in
connection with the offer or sale of the Variable
Products or the operation of the Variable Accounts.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
(1) The Insurance Companies and the Underwriter agree,
jointly and severally, to indemnify and hold harmless
the Distributor and each director, officer, employee
or agent of the Distributor, and each person, if any,
who controls the Distributor within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section
12(b)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Insurance Companies
and the Underwriter) or litigation (including legal
and other expenses) to which the Indemnified Parties
may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the
offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission to state a material fact required
to be stated therein or necessary to make
the statements therein not misleading, in
light of the circumstances in which they
were made, contained in any: (A)
Registration Statement or Prospectus; (B)
blue-sky application or other document
executed by the Insurance Companies
specifically for the purpose of exempting
the Private Placements from, or qualifying
any or all of the Registered Products for
sale under, the securities laws of any
jurisdiction; or (C) information furnished
in writing to the Distributor specifically
for the purpose of being included in any
advertising, sales literature, or other
promotional material to be used in
connection with the distribution of the
Variable Products; PROVIDED THAT neither the
Insurance Companies nor the Underwriter
shall be
17
liable in any such case to the extent that
such losses, claims, damages, liabilities or
expenses arise out of, or are based upon, an
untrue statement or alleged untrue statement
or omission or alleged omission made in
reliance upon information furnished in
writing to the Insurance Companies by the
Distributor specifically for use in the
preparation of any such document,
application, or promotional material; or
(ii) result because of the provisions of any
Variable Product or because of any material
breach by the Insurance Companies or the
Underwriter of any provision of this
Agreement or of any Variable Product or
which result from any wrongful activities of
the Insurance Companies' or the
Underwriter's officers, directors, employees
or agents or their wrongful failure to take
any action in connection with the sale,
processing or administration of the Variable
Products including, without limitation,
obtaining auditors' reports, computing
accurate separate account and/or underlying
fund performance data, preparation and
timely filing and delivery, as required, of
annual and semiannual reports and reports on
Form NSAR and the timely payment of all
state and federal registration fees; as
limited by and in accordance with the
provisions of Sections 12 (b)(1) and 12
(b)(2) hereof.
(2) Neither the Insurance Companies nor the Underwriter
shall be liable under this indemnification provision
with respect to any losses, claims, damages,
liabilities or litigation ("Losses" for purposes of
this Section 12 (b)(2)) incurred or assessed against
an Indemnified Party that may arise from any
Indemnified Party's willful misfeasance or bad faith.
The Insurance Companies' and the Underwriter's
liability for Losses in the event of its (or their)
breach of this Agreement shall be limited to that
portion of Losses caused by its (or their) breach,
and that party shall not be liable for that portion
of Losses caused by breach of this Agreement by an
Indemnified Party or from any act or omission by an
Indemnified Party.
(3) The Insurance Companies and the Underwriter shall not
be liable under this indemnification provision with
respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have
notified the Insurance Companies and the Underwriter
in writing within a reasonable time after receiving
the summons or other first legal process giving
information of the nature of the claim against the
Indemnified Party (a "Claim"). Notwithstanding the
foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve the
Insurance Companies or the Underwriter of their
obligations hereunder except to the extent that they
have been prejudiced by the failure of the
18
Indemnified Party to give notice. In addition, any
failure by the Indemnified Party to notify the
Insurance Companies or the Underwriter of any Claim
shall not relieve the Insurance Companies or the
Underwriter from any liability which they may have to
the Indemnified Party against whom the action is
brought otherwise than on account of this
indemnification provision. In case any Claim is
brought against the Indemnified Parties, the
Insurance Companies and the Underwriter shall be
entitled to participate, at their own expense, in the
defense of the Claim. The Insurance Companies and the
Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the
party named in the Claim. After notice to the
Indemnified Party of the Insurance Companies' and the
Underwriter's election to assume a defense to a
Claim, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it,
and neither the Insurance Companies nor the
Underwriter will be liable to the Indemnified Party
under this Agreement for any legal or other expenses
subsequently incurred by the Indemnified Party
independently in connection with the defense of a
Claim other than the reasonable costs of
investigation.
13. RECORDS
The parties to this Agreement shall maintain such accounts, books and
records and other documents as are required to be maintained under
applicable laws and regulations and shall preserve such accounts, books
and records, and other documents for the periods prescribed by such
laws and regulations. Each party shall have the right to inspect and
audit the accounts, books and records and other documents of the other
party that pertain to the Variable Products during normal business
hours upon reasonable written notice to the other party. Any party
requesting such an audit shall bear the expense of the audit, including
the reasonable costs (other than overhead costs or costs for time spent
on audit-related matters by officers, directors, or employees of the
other party) borne by the other party in connection with the audit.
14. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement shall notify each other promptly of any
insurance or securities regulatory investigation, administrative or
judicial proceeding, or material complaint arising in connection with
the offer or the sale of the Variable Products. The parties shall
cooperate fully in the resolution of any insurance or securities
investigation, administrative or judicial proceeding, or material
complaint.
15. TERM AND TERMINATION
(a) TERM -- This Agreement shall be effective from the date hereof
through December 31, 2002, which term shall automatically be
extended for a period of
19
three (3) years unless this Agreement is sooner terminated in
accordance with the termination provisions in Section 15(b) of
this Agreement.
(b) TERMINATION -- No party hereto may terminate this Agreement
except as expressly provided in this Section 15(b).
(1) The Insurance Companies and the Underwriter (as one
party) or the Distributor may terminate this
Agreement effective at the close of business on
December 31, 2002 upon written notice delivered to
the other party not less than 30 nor more than 60
days prior to such date, which notice shall specify
that it is being given pursuant to this Section
15(b)(1).
(2) A party (the "Terminating Party") may terminate this
Agreement for cause if:
(i) another party (the "Breaching Party")
materially breaches this Agreement,
(ii) the Terminating Party has delivered to the
Breaching Party a notice specifying the
nature of the breach and that this notice is
being given pursuant to this Section
15(b)(2), and
(iii) the Breaching Party has not cured the breach
within 30 days after the delivery of the
notice.
(3) A Terminating Party may terminate this Agreement
immediately for cause:
(i) in the event of the voluntary institution by
the Distributor of bankruptcy proceedings or
the voluntary institution by an Insurance
Company of insolvency or rehabilitation
proceedings under any state insurance laws
or regulations (each an "Insolvent Party"),
or
(ii) in the event of a formal order or written
finding by a court of competent jurisdiction
that the Insolvent Party is bankrupt or
insolvent, there is a degradation of the
Insolvent Party's reputation that would
materially impair the ability of the
Insolvent Party to carry out its obligations
under this Agreement, or
(iii) if the Commission institutes a formal cease
and desist order or proceeding prohibiting
the offer of the sale of the Variable
Products or the operation of a Variable
Account, or a governmental or regulatory
authority of a state or other jurisdiction
institutes a formal order or proceeding
prohibiting the offer or the sale of the
20
Variable Products or the operation of a
Variable Account; PROVIDED, that this
Agreement will be terminated only with
respect to the particular state or
jurisdiction issuing such order or
proceeding, or
(iv) if the Commission, the NASD, or any other
government authority or self-regulatory
organization revokes or suspends the
registration or license of the Distributor,
or the Distributor's ability to do business
is so materially impaired, in the reasonable
view of the Insurance Companies or the
Underwriter, that it could not perform its
obligations under this Agreement, or
(v) if a state insurance commissioner suspends
or revokes an Insurance Company's ability to
do business or the Insurance Company's
ability to do business is so materially
impaired, in the reasonable view of the
Distributor, that it could not perform its
obligations under this Agreement.
(c) SOLICITATION AFTER TERMINATION -- After termination of this
Agreement for any reason, the Distributor and the Distributor
Agency Affiliates agree that they will not take any action
designed or calculated to result in the transfer, exchange or
replacement of any Policy or Contract.
(d) SURVIVAL -- The provisions of Sections 11, 12, 16, 19 and 20
(Representations and Warranties, Indemnification, Rights Upon
Termination, Arbitration, and Confidentiality, respectively)
shall survive the termination of this Agreement.
16. RIGHTS UPON TERMINATION
(a) In no event will any further compensation be paid to the
Distributor should the Insurance Companies or the Underwriter
terminate this Agreement for cause pursuant to Section
15(b)(2) or Section 15(b)(3).
(b) As of the date of termination, the Insurance Companies shall
have the right to set off against any monies they owe the
Distributor any amounts owed by the Distributor to an
Insurance Company. In the event that the amounts owed by the
Distributor exceed the amounts owed by the Insurance
Companies, the difference shall become immediately due and
payable by the Distributor.
(c) In the event that either party does not pay within 45 days
after resolution of the net amount payable, then the net
amount owed will accrue interest, compounded daily, at the
fluctuating prime interest rate charged by The Chase Manhattan
Bank, N.A., plus two percent (2%).
21
(d) If the Insurance Companies and the Underwriter terminate this
Agreement pursuant to Section 15(b)(1), the Insurance
Companies shall continue to:
(1) pay the Distributor the compensation set forth in
Schedule 6 to this Agreement; and
(2) offer all of the Variable Products then identified on
Schedule 2 to this Agreement for a period of one (1)
year from the date of termination of this Agreement,
during which period of time (i) the Insurance
Companies shall employ at least the same level of
effort in offering and supporting the Variable
Products as they did before the termination of this
Agreement and (ii) the terms of this Agreement shall
remain in full force and effect as though the
Agreement had not been terminated. The parties
further agree that such compensation shall only be
based on the Variable Products that have not lapsed
or been surrendered, due to 1035 exchanges or other
means, whether such lapse or surrender occurred
before or after the termination date.
(e) If the Distributor terminates this Agreement pursuant to
Section 15(b)(1), the Insurance Companies shall continue to
pay the Distributor the compensation set forth in Schedule 6
to this Agreement. The parties further agree that such
compensation shall only be based on the Variable Products that
have not lapsed or been surrendered, due to 1035 exchanges or
other means, whether such lapse or surrender occurred before
or after the termination date.
17. INDEPENDENT CONTRACTOR
The Distributor shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and
nothing herein contained shall constitute the Distributor,
Broker-Dealers, Representatives or employees or officers of the
Distributor or Broker-Dealers as employees of AFLIAC, FAFLIC or the
Underwriter in connection with the distribution of the Variable
Products.
18. NOTICES
Any notice required or permitted under this Agreement shall be
delivered personally or sent by facsimile or by registered or certified
mail, return receipt requested, with all postage prepaid:
(a) TO THE DISTRIBUTOR:
First Union Securities, Inc.
Attention:
Fax:
22
(b) TO THE INSURANCE COMPANIES:
First Allmerica Financial Life Insurance Company
Attention:
Fax:
(c) TO ALLMERICA INVESTMENTS, INC.:
Attention:
Fax:
A party may change its address or fax number for the delivery of
notices by delivering a written notice to the other party at its last
specified address. All notices shall be effective upon delivery;
PROVIDED that any notice sent by facsimile shall be deemed ineffective
unless a copy of the notice is also delivered personally or sent by
express courier or mail for delivery on the same or next business day.
19. ARBITRATION
Any dispute between the Distributor and an Insurance Company or between
the Distributor and the Underwriter arising under or relating to this
Agreement shall be settled by compulsory arbitration before a single
arbitrator experienced in the insurance industry in accordance with the
Commercial Arbitration Rules then in force of the American Arbitration
Association. The arbitration shall take place in Charlotte, North
Carolina unless some other location is mutually agreed upon by the
parties in dispute. Each party shall bear its own costs and expenses in
any such arbitration, except that the expenses of the arbitrators'
services shall be divided equally between the Distributor and the other
party to the dispute (either one or both of the Insurance Companies
and/or the Underwriter).
20. CONFIDENTIALITY
(a) GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will
safeguard it as provided herein. The party receiving
Confidential Information will not, directly or indirectly,
report, publish, distribute, disclose, or otherwise
disseminate the Confidential Information, or any portion
thereof, to any third party including its Affiliates, and will
not use the Confidential Information, or any portion thereof,
for the benefit of itself or any third party including its
Affiliates or for any purpose, except only as necessary to
perform its duties and exercise its rights hereunder, or as
expressly authorized in writing by the party who owns such
Confidential
23
Information. Disclosure of Confidential Information internally
by a recipient will be limited to those of its and its
Affiliates' officers, directors, employees, and agents on ab
"need to know" basis who must have access to the Confidential
Information to enable such party to perform its duties and
exercise its rights hereunder. In order to safeguard the
Confidential Information, each party shall (i) inform each
recipient of the Confidential Information of the confidential
nature thereof and of the requirements of this Agreement, (ii)
direct such recipients to comply with the terms of this
Agreement, and (iii) exercise any other precautions necessary
to prevent any improper use or disclosure of Confidential
Information.
(b) DEFINITION. "Confidential Information" shall mean: (i)
information regarding a party's or such party's Affiliates',
financial condition, information systems, business operations,
plans and strategies, products or services, customers and
prospective customers, and marketing and distribution plans,
methods and techniques; (ii) information that is marked
"confidential", "proprietary" or in like words, or that is
summarized in writing as being confidential prior to or
promptly after disclosure to the other party; (iii) any and
all related research; and (iv) any and all designs, ideas,
concepts, and technology embodied therein. Confidential
Information of the Distributor or its Affiliates that is to be
kept confidential by the Insurance Companies shall also
include: (v) any information regarding the pricing strategies
of each Broker-Dealer; (vi) specific marketing and training
materials of each Broker-Dealer; and (vii) any information of
the Distributor or its Affiliates in any form whatsoever that
is covered by a patent issued by the United States Patent and
Trademark Office.
Information is not considered confidential or proprietary if
such information: (1) is or becomes generally available to the
public other than as a result of disclosure by the recipient;
(2) was available to or already known by the recipient on a
non-confidential basis prior to its receipt from the party
claiming confidentiality; (3) is developed by the recipient
independently of any information or data acquired from the
party claiming confidentiality; or (4) is, or is required to
be, disclosed pursuant to a court order or the requirement of
any federal or state regulatory, judicial, or government
authority.
(c) REMEDIES. Each party acknowledges and agrees that monetary
damages would not be a sufficient or adequate remedy for a
breach or anticipated breach of this Section and that, in
addition to any other legal or equitable remedies which may be
available, each party shall be entitled to specific
performance and injunctive relief for any breach or
anticipated breach of this Section.
(d) SURVIVAL. The provisions of this Section shall survive the
expiration or other termination of this Agreement.
21. SEVERABILITY
24
If any provision of this Agreement is held to be unenforceable or
invalid, that provision shall be severed from this Agreement and the
remainder of this Agreement shall remain in full force and effect.
22. CHOICE OF LAW
This Agreement and any disputes, actions or other proceedings arising
under or relating to it shall be governed by law of the State of North
Carolina without regard to its principles of conflicts of law.
23. NO WAIVER
No failure or delay on the part of any party hereto in exercising any
power or right under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of such power or right
preclude any other or further exercise thereof or the exercise of any
other power or right. No waiver by any party of any provision of this
Agreement, nor of any breach or default, shall be effective unless in
writing and signed by the party against whom such waiver is to be
enforced.
24. AGREEMENT NON-ASSIGNABLE
Any assignment of this Agreement in whole or in part by a party without
the prior written consent of the other parties thereto shall be void
and shall vest no rights in the assignee.
25. SCHEDULES
The Schedules to this Agreement are a part of this Agreement as if set
forth in full herein. With the exception of Schedule 6, all other
schedules attached to this agreement may be revised by the Insurance
Companies and the Underwriter, subject to review by the Distributor.
26. HEADINGS
The headings herein are for the purpose of convenience only and have no
legal force, meaning or effect.
27. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements (other than on matters related to
confidentiality), understandings, negotiations and discussions, whether
oral or written, of the parties and there are no warranties,
representations and/or agreements between the parties in conjunction
with the subject matter hereof except as set forth in this Agreement.
This Agreement, including any Schedule hereto, may be
25
amended or modified only by written instrument, executed by duly
authorized officers of the parties.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
as of the date first above written.
FIRST UNION SECURITIES, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
ALLMERICA INVESTMENTS, INC.
26
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Date:
------------------------
SCHEDULE 1
DISTRIBUTOR AGENCY AFFILIATES
[TO BE ADDED]
27
SCHEDULE 2
VARIABLE PRODUCTS
Product Policy/Certificate Description
Number
VARIABLE ANNUITY SURROGATE
SCHEDULE 3
PRIVATE PLACEMENT GUIDELINES
The Insurance Companies rely on exemptions under the 1933 Act and the 1940 Act
in the issuance of certain of their variable annuity contracts and variable life
insurance policies. Reliance on these exemptions generally depends upon the
number and identity of the purchasers, the number of securities offered, the
size of the offering, the manner of the offering, and whether the securities are
being purchased only for investment purposes (and not for the purpose of
distributing or reselling them).
SECTION 3(c)(7)
Section 3(c)(7) exempts from the registration requirements of the 1940 Act
certain companies owned exclusively by an unlimited number of "qualified
purchasers", as defined in amended Section 2(a)(51) of the 1940 Act. Section
2(a)(51) establishes asset tests for four categories of "qualified purchasers":
(1) a natural person who owns at least $5 million in investments; (2) a family
investment vehicle that owns at least $5 million in investments; (3) a trust
whose trustees and settlers are qualified persons, provided that the trust was
not formed for the purpose of investing in the Section 3(c)(7) company; and (4)
any other person who owns and invests on a discretionary basis, for itself or
other qualified purchasers, at least $25 million in "investments."
In order to preserve their right to rely on Section 3(c)(7) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require each prospective purchaser to represent and warrant
(in response to a questionnaire) that it owns sufficient "investment securities"
(as defined in Rule 2a 51-1 under the 1940 Act) to meet the financial
requirements and otherwise meet the requirements of the appropriate definition
of "qualified purchaser" in Section 2(a)(51) of the 1940 Act.
In addition, if the Private Placement will be used by a corporation to assist it
in funding its obligation to employees under a non-funded deferred compensation
plan, the Insurance Companies therefore, will impose certain additional
conditions on the purchase and will request additional information from the
purchaser in order to insure compliance with Section 3(c)(7). These additional
requirements also are designed to insure that the employer is and remains the
sole beneficial owner of the Private Placement for purposes of the 1940 Act.
SECTION 3(c)(1)
Certain of the Variable Accounts for the Private Placements are not registered
under the 1940 Act in reliance on Section 3(c)(1) of the 1940 Act. Section
3(c)(1) exempts from the registration requirements of the 1940 Act certain
companies who are issuers whose outstanding securities (other than short-term
paper) are beneficially owned by not more than one hundred persons and which are
not making and do not presently propose to make a public offering of their
securities.
29
In order to preserve their right to rely on Section 3(c)(1) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require its Representatives to comply with the requirements
of a non-public offering and monitor the number of prospective purchasers to
whom offers of sales have been made.
REGULATION D - RULE 501
With respect to the Private Placements, each prospective purchaser must also be
qualified as an "accredited investor" or otherwise be a "suitable investor,"
prior to offering the Private Placements to that prospective purchaser. An
"accredited investor" is: (a) a natural person, (i) whose individual net worth,
or joint net worth with the person's spouse, at the time of purchase exceeds
$1,000,000; or (ii) who has had individual income in excess of $200,000 in each
of the two (2) most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and who reasonably expects an income
in excess of such amounts in the current year; (b) a bank or savings and loan
association, whether acting in an individual or fiduciary capacity; (c) a
registered broker or dealer; (d) an insurance company; (e) a registered
investment company; (f) a Small Business Investment Company; (g) any plan
established by a state or municipal agency or government for the benefit of its
employees, with total assets in excess of $5,000,000; (h) certain employee
benefit plans (within the meaning of ERISA) with total assets in excess of
$5,000,000; (i) a private business development company; (j) a charitable
organization, corporation, business trust, any trust whose purchase is directed
by a person with knowledge and experience in financial and business matters, or
partnerships, not formed to acquire the securities offered, with total assets in
excess of $5,000,000; or (k) an entity in which all of the equity owners are
accredited investors.
Because resales of securities acquired in a private offering generally are
prohibited (with the exception of offerings pursuant to Rule 144A of the 1933
Act, which expressly permits resales to certain institutional investors),
Representatives must ensure that each prospective purchaser understands the
long-term nature of the Private Placement investment, does not intend to resell
the investment and is financially able to retain the securities purchased.
2
SCHEDULE 4
AVAILABLE FUNDS AND FUND
PORTFOLIOS
[TO BE ADDED]
SCHEDULE 5
STANDARD FORM OF SALES AGREEMENT
[The draft "Selling Group Agreement" funished by First Union Securities, Inc. is
currently being reviewed by Allmerica Financial's Legal Department. Once the
form has been agreed to, it will be set forth on this Schedule 5]
SCHEDULE 6
COMPENSATION SCHEDULE
NOTE: This Scheudle has not yet been reviewed or approved by Allmerica's Actuary
Variable Annuity Surrogate -
SIMPLIFIED ISSUE CASES
Year % of Premium
1-4 8.5%
5-10 4%
11+ 2%; plus
100% of the Revenue Sharing paid by Investment Managers in excess of 15 basis
points annually. Revenue Sharing means the fees received by Insurance Company
from the Investment Managers under the respective participation agreements as
reimbursement for administrative services performed by the Insurance Company.
This amount will be calculated after each calendar year based on the aggregate
amounts received from all Investment Managers using the average assets in the
separate accounts underlying the product; plus 0.35% of all premiums written
above $100 million dollars.
FULLY UNDERWRITTEN CASES
Year % of Premium
1-5 8.5%
5-11 4%
11+ 2%; plus
100% of the Revenue Sharing paid by Investment Managers in excess of 15 basis
points annually. Revenue Sharing means the fees received by Insurance Company
from the Investment Managers under the respective participation agreements as
reimbursement for administrative services performed by the Insurance Company.
This amount will be calculated after each calendar year based on the aggregate
amounts received from all Investment Managers using the average assets in the
separate accounts underlying the product; plus 0.35% of all premiums written
above $100 million dollars.
For any Variable Product, the Insurance Company may elect from time to time to
make advances of compensation to Distributor. Any such advance shall be deemed a
loan, payable upon demand, and secured by a first lien (security interest) upon
compensation payable by Insurance Company to Distributor, without the necessity
of execution of any further document, and Insurance Company shall be entitled to
set off any amounts owed to it by Distributor against any amounts owed to the
Distributor by the Insurance Company.
SCHEDULE 5
AVAILABLE FUNDS AND FUND
PORTFOLIOS
[TO BE ADDED]