Exhibit 10
WHOLESALING AGREEMENT
AGREEMENT dated as of October 24, 1996 by and between Allmerica Financial
Life Insurance and Annuity Company, a Delaware insurance company
("Company"), ALLMERICA INVESTMENTS, INC., a Massachusetts corporation (the
"Underwriter"), Western Capital Financial Group, Inc., a California
corporation (the "Distributor"), and the insurance agency affiliates of the
Distributor listed on Schedule 1 to this Agreement (hereinafter referred to
as "Distributor Agency Affiliates).
WITNESSETH:
WHEREAS, the Company proposes to register with the Securities and Exchange
Commission interests in certain variable annuity contracts and variable life
insurance contracts under the Securities Act of 1933 and to issue and sell such
contracts through Underwriter acting as the principal underwriter for such
contracts; and
WHEREAS, the Company, Underwriter and Distributor desire to establish an
arrangement whereby the Distributor will act as a wholesaler for such variable
annuity contracts and variable life insurance contracts and, as such, will
recruit business firms to distribute such contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
Underwriter and Distributor hereby agree as follows:
1. DEFINITIONS
A. ACCOUNT -- Each and any separate account established by the Company
and listed on Schedule 2 to this Agreement, as amended from time to time.
The phrase "Account supporting the Contracts" or "Account supporting a
class of Contracts" shall mean the separate account identified in such
Contracts as the separate account to which the Purchase Payments made under
such Contracts are allocated and as to which income, gains and losses,
whether or not realized, from assets allocated to such separate account,
are, in accordance with such Contracts, credited to or charged against such
separate account without regard to other income, gains, or losses of a
Company or any other separate account established by such Company.
B. CONTRACTS -- The variable annuity contracts or variable life
insurance contracts described more specifically on Schedule 3 to this
Agreement, as amended from time to time. The term "Contracts" shall
include any riders to such contracts and any other contracts offered in
connection therewith or any contracts for which such Contracts may be
exchanged or converted. The phrase "a class of Contracts" shall mean those
variable annuity contracts or variable life insurance contracts, as the
case may be, issued on the same policy form or forms and covered by the
same Registration Statement, as shown on Schedule 3 to this Agreement.
C. REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the SEC
under the 1933 Act, or currently effective post-effective amendment
thereto, relating to a class of Contracts, including financial statements
included in, and all exhibits to, such registration statement or
post-effective amendment (for purposes of Sections 5.A and 11 of this
Agreement; however, the term "Registration Statement" means any document
that is or at any time was a Registration Statement within the meaning of
this Section 1.C).
D. PROSPECTUS -- The prospectus and any statement of additional
information included within a Registration Statement, except that, if the
prospectus and statement of additional information most recently filed with
the SEC pursuant to Rule 497 under the 1933 Act after the date on which the
Registration Statement became effective differs from the prospectus and
statement of additional information included within the Registration
Statement at the time it became effective, the term "Prospectus" shall
refer to the most recently filed prospectus and statement of additional
information filed under Rule 497 under the 1933
1
Act from and after the date on which they each shall have been filed.
(For purposes of Sections 5.A and 11 of this Agreement; however, the
term "any Prospectus" means any document that is or at any time was a
Prospectus within the meaning of this Section l.C).
E. FUND -- The Palladian Trust
F. FUND REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the SEC
under the 1933 Act, or currently effective post-effective amendment
thereto, for shares of the Fund (for purposes of Section 11 of this
Agreement; however, the term "Fund Registration Statement" means any
document that is or at any time was a Fund Registration Statement within
the meaning of this Section l.F).
G. FUND PROSPECTUS -- At any time while this Agreement is in effect, the
prospectus and statement of additional information for the Fund most
recently filed with the SEC pursuant to Rule 497 under the 1933 Act (for
purposes of Section 11 of this Agreement;, however, the term "Fund
Prospectus" means any document that is or at any time was a Fund Prospectus
within the meaning of this Section l.G).
H. 1933 ACT -- The Securities Act of 1933, as amended.
I. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
J. 1940 ACT -- The Investment Company Act of 1940, as amended.
K. SEC -- The Securities and Exchange Commission.
L. NASD -- The National Association of Securities Dealers, Inc.
M. REGULATIONS -- The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time this
Agreement is executed or thereafter promulgated, and as they may be
amended from time to time.
N. TERRITORY -- The fifty states of the United States, the District of
Columbia, and all other territories of the United States.
O. STATE -- any state or commonwealth of the United States, the District
of Columbia or any other territory of the United States.
P. BROKER-DEALER -- An entity registered as a broker-dealer and licensed
as a life insurance agent or affiliated with an entity so licensed, and
recruited by the Distributor and subsequently authorized by the Company and
Underwriter to distribute the Contracts pursuant to a sales agreement with
the Company and Underwriter entered into in accordance with Section 3 of
this Agreement.
Q. ASSOCIATED PERSON -- This term as used in this Agreement shall have the
meaning assigned to it in the 1934 Act.
R. REPRESENTATIVE -- An Associated Person of the Distributor or a Broker-
Dealer registered with the NASD as a registered representative or principal
of the Distributor or Broker-Dealer, as the case may be.
S. PURCHASE PAYMENT -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
T. PROCEDURES -- The administrative procedures prepared and distributed by
the Company, as such may
2
be amended or supplemented from time to time, relating to the
solicitation, sale and delivery of the Contracts.
U. PARTICIPATION AGREEMENT -- The agreement dated as of October 24, 1996
among the Company, Distributor and the Fund relating to the investment of
assets of the separate accounts of the Company in the Fund.
2. APPOINTMENT AND WHOLESALING RIGHT
A. The Company hereby authorizes the Distributor to represent the Company
in the wholesaling activities contemplated by this Agreement. Where
required by relevant state insurance law, the Company hereby appoints the
Distributor as an agent under such state insurance laws to represent the
Company in the wholesaling activities contemplated by this Agreement. In
those states in which the Distributor is not licensed as an insurance agent
and the relevant state insurance law requires that the Distributor be
licensed as an insurance agent, the Company hereby appoints the appropriate
entity or individual ("Distributor Agency Affiliate") affiliated with the
Distributor (as set forth on Schedule 1 to this Agreement, as such Schedule
may be amended from time to time by the Distributor to reflect changes in
the licensing status, if any, as required by relevant state insurance law
of the Distributor or Distributor Agency Affiliates) as its agent under the
insurance laws to engage in such wholesaling activities. The Underwriter
hereby authorizes the Distributor under applicable securities laws to
engage in the activities contemplated in this Agreement relating to the
wholesaling of the Contracts for which the Underwriter acts or may act as
principal underwriter.
B. The Distributor (both on its own behalf and on behalf of 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 compliance with its responsibilities under the
federal securities laws and NASD rules and regulations. The obligations of
the Distributor and Distributor Agency Affiliates hereunder are further
subject to the accuracy of the representations and warranties of the
Company and Underwriter contained in this Agreement and to the performance
by the Company of its obligations hereunder.
C. The appointment and authorization of the Distributor and Distributor
Agency Affiliates to engage in wholesaling activities pursuant to this
Agreement is exclusive as to the Contracts listed on Schedule 3, as amended
from time to time in accordance with Section 2.E of this Agreement.
Neither the Company nor Underwriter shall authorize any other person (as
principal underwriter or otherwise) to engage in wholesaling or
distribution activities with respect to the Contracts or to recruit
business firms to engage in wholesaling or distribution activities with
respect to the Contracts (other than business firms recommended by the
Distributor pursuant to Section 3 of this Agreement) without the
Distributor's prior written consent, nor shall the Company or Underwriter
separately engage in wholesaling or distribution activities relating to the
Contracts.
The Company shall design the Contracts, subject to consultation with the
Distributor and subject to the Distributors's right to refuse to engage in
wholesaling activities with respect to a class of Contracts that the
Distributor reasonably determines to be unattractive from a marketing or
business perspective. The Contracts shall be issued by the Company and the
variable portion thereof shall be supported by the Accounts. The Company
alone shall be responsible for filing the initial Registration Statements
and any amendments thereto with the SEC in accordance with the 1933 Act,
1934 Act, 1940 Act and the Regulations to register interests in each class
of Contracts. The Company will not make any amendment or rider to the
Contracts or a class of Contracts, or file a Registration Statement, or
make an amendment to a Registration Statement or supplement to a
Prospectus, without the Distributor having been given the opportunity to
review any such filing, amendment, rider or supplement. However, such
opportunity to review shall not make the Distributor responsible for the
content of any such filing, amendment, rider or supplement; the Company
alone shall be responsible for such content.
3
Each Company shall register its Accounts with the SEC. The subaccounts of
each Account available under the Contracts or a class of Contracts are
listed on Schedule 3 to this Agreement, as amended from time to time. All
amounts available under the Contracts shall be invested only in the Fund
(through the Account(s) supporting the Contracts) and/or allocated to the
Company's general account, provided that such amounts may also be invested
in an investment company or investment vehicle other than the Fund if: (1)
such other investment company is advised by the Fund's investment adviser;
(2) the Fund and/or Distributor, in their sole discretion, consents to the
use of such other investment company or investment vehicle; (3) there is a
substitution of the Fund made in accordance with Section 10.1(e) of the
Participation Agreement; or (4) the Participation Agreement is terminated
pursuant to Article X of the Participation Agreement. The Company will not
take action to operate any Account, or any subaccount(s) of an Account
listed on Schedule 3 to this Agreement, as amended from time to time, as a
management investment company under the 1940 Act without the Fund's and
Distributor's prior written consent.
D. The Company shall obtain appropriate authorizations, to the extent
necessary, whether by registration, qualification, approval or otherwise,
for the issuance and sale of the Contracts in each State in the Territory
(provided, however, that it shall be within the Company's discretion
whether to obtain such authorization in Guam). From time to time, the
Company shall notify the Distributor in writing of all States in the
Territory in which each class of Contracts can then lawfully be offered.
To the extent that the Company is not authorized to issue the Contracts or
any class of Contracts in any State in the Territory, the Company shall
employ all reasonable efforts to obtain such authorization in such State
(provided, however, that it shall be within such Company's discretion
whether to obtain such authorization in Guam).
E. The Distributor may unilaterally amend Schedule 1 from time to time
pursuant to Section 2.A of this Agreement. The parties to this Agreement
may amend Schedules 2 and 3 to this Agreement from time to time by mutual
agreement to reflect changes in or relating to the Contracts and the
Accounts and to add new classes of variable annuity contracts and variable
life insurance contracts to be issued by the Company or which the
Distributor will act as wholesaler. The provisions of this Agreement shall
be equally applicable to each such class of Contracts, unless the context
otherwise requires. Schedule 4 to this Agreement may be amended only by
mutual agreement of the parties to this Agreement pursuant to Section 9 of
this Agreement.
3. RECRUITMENT OF BROKER-DEALERS AND RELATED RESPONSIBILITIES
A. The Company and Underwriter hereby authorize the Distributor and any
Distributor Agency Affiliates to contact and recommend business firms to
act as Broker-Dealers for the sale of the Contracts. The Company shall
have the right to reject any such recommendation, but shall not do so
arbitrarily or unreasonably.
B. The Company and Underwriter shall have the responsibility for: (i)
executing appropriate sales agreements with the business firms recommended
by the Distributor or Distributor Agency Affiliates and (ii) except as
limited in Section 9.C of this Agreement, appointing such business firms,
and/or Associated Persons of such firms, as insurance agents of the Company
in those States where such business firms and/or Associated Persons possess
insurance agent licenses. None of the Distributor, Distributor Agency
Affiliates, the Company or Underwriter shall have responsibility for, or
bear the cost of, any registration or licensing of Broker-Dealers or any of
their Associated Persons with the SEC, NASD or any state insurance
governmental or regulatory agency. The costs of appointment shall be borne
as provided in Section 9.C hereof. The Company shall maintain the
appointment records of all agents appointed by the Company to distribute
the Contracts or, if required by relevant state law, to engage in the
wholesaling activities contemplated by this Agreement.
C. Any sales agreement entered into by the Company and/or Underwriter with
a Broker-Dealer shall provide that:
4
(i) The Broker-Dealer (or an affiliated person duly registered as a
broker-dealer with the SEC) shall train, supervise, and be solely
responsible for the conduct of all of its Associated Persons in
the proper method of solicitation, sale and delivery of the
Contracts for the purpose of complying on a continuous basis with
the NASD Rules of Fair Practice and with federal and state
securities and insurance law requirements applicable in
connection with the offering and sale of the Contracts;
(ii) Purchase Payments shall be made payable to the Company and shall
be delivered together with all applications and related
information in accordance with the Procedures;
(iii) The Broker-Dealer shall be solely responsible for all
compensation paid to its Representatives and all related tax
reporting that may be required under applicable law;
(iv) The Broker-Dealer and its Representatives shall not use, develop
or distribute any promotional, sales or advertising material that
has not been approved in writing by the Company, Underwriter and
Distributor and filed with the appropriate governmental or
regulatory agencies; and
(v) The Broker-Dealer shall not have authority, on behalf of the
Company, Underwriter, Distributor or Distributor Agency
Affiliates: to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; to waive any
Contract forfeiture provision; to extend the time of paying any
Purchase Payment; to receive any monies or Purchase Payments
(except for the sole purpose of forwarding monies or Purchase
Payments to the Company); or to expend, or contract for the
expenditure of, funds of the Company, Underwriter, Distributor or
Distributor Agency Affiliates.
D. The Distributor and Distributor Agency Affiliates shall provide
assistance to the Company in the appointment process applicable to Broker-
Dealers and their Representatives as may be reasonably acceptable to the
Company.
E. The Distributor shall train, supervise, and be solely responsible for
the conduct of all of its Associated Persons (including Distributor Agency
Affiliates, but not Broker-Dealers or their Representatives unaffiliated
with the Distributor or Distributor Agency Affiliates), for the purpose of
complying on a continuous basis with the NASD Rules of Fair Practice and
with federal and state securities and insurance laws applicable to the
wholesaling activities contemplated in this Agreement. The Distributor and
Distributor Agency Affiliates shall be responsible for the maintenance of
licenses, certifications or permits that they determine to be necessary for
themselves and/or their Associated Persons pursuant to any federal or state
securities law or state insurance law.
F. None of the Distributor, Distributor Agency Affiliates, the Company or
Underwriter will have any supervisory responsibility (as such supervision
is contemplated by the 1934 Act or the NASD's Rules of Fair Practice) with
respect to Broker-Dealers or their Representatives. Under no circumstances
will the Distributor or Distributor Agency Affiliates be responsible for
Broker-Dealers' or their Representatives' failure to comply with applicable
law or the Procedures.
G. The Distributor shall not have authority on behalf of the Company: to
make, alter or discharge any Contract or other contract entered into
pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Purchase Payment; or to receive any monies or
Purchase Payments. The Distributor shall not expend, nor contract for the
expenditure of, funds of the Company; nor shall the Distributor possess or
exercise any authority on behalf of the Company other than that expressly
conferred on the Distributor by this Agreement.
H. The Distributor and Distributor Agency Affiliates shall act as
independent contractors in the performance of their duties and obligations
under this Agreement and nothing contained in this Agreement shall
constitute the Distributor or any Distributor Agency Affiliate or their
respective Associated Persons
5
as employees of the Company or Underwriter in connection with the
wholesaling activities contemplated by this Agreement or otherwise.
4. MARKETING AND SALES
A. Prior to use with any member of the public, the Company shall provide
to the Distributor copies of any promotional, sales and advertising
material developed by the Company for the Distributor's review and written
approval. Upon receipt of such material from the Company, the Distributor
shall be given a reasonable amount of time to complete its review. The
Distributor will respond on a prompt and timely basis in approving any such
material. Failure to respond shall not relieve the Company of the
obligation to obtain the prior written approval of the Distributor.
In the event that the Distributor shall design any promotional, sales or
advertising material relating to the Contracts, the Distributor shall
provide to the Company copies of such material for the Company's review and
written approval. Upon receipt of such material from the Distributor, the
Company shall be given a reasonable amount of time to complete its review.
The Company 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 Company.
The Underwriter shall be responsible for filing, as required, all
promotional, sales or advertising material, whether developed by the
Company, Underwriter or Distributor, with the NASD and any federal and
state securities governmental or regulatory agencies. The Company shall be
responsible for filing, as required, such material, whether developed by
the Company, Underwriter or Distributor, with any state insurance
governmental or regulatory agencies. Neither the Distributor nor
Distributor Agency Affiliates shall have any responsibility for any of the
filings referred to in this paragraph.
If any such promotional, sales or advertising material names the Fund or
the Fund's investment adviser, the Company shall furnish such material to
the Fund or the Fund's distributor (if other than the Distributor) prior
to its use. Such material shall not be used unless written approval has
been obtained from the Fund or the Fund's distributor. Failure of the Fund
or the Fund's distributor to respond shall not relieve the Company or
Underwriter of the obligation to obtain the prior written approval of the
Fund or the Fund's distributor.
B. The Distributor acknowledges that the Company shall have the
unconditional right to reject, in whole or in part, any application for
a Contract. In the event an application is rejected, any Purchase
Payment submitted will be returned by or on behalf of the Company to
the applicant. The Company will notify the Distributor and the
Broker-Dealer who submitted the Purchase Payment of such action. In
the event that a purchaser exercises his/her free look right under
his/her Contract, any amount to be refunded as provided in such
Contract will be so refunded to the purchaser by or on behalf of the
Company. The Company will notify the Distributor and the Broker-Dealer
who solicited the sale of the Contract of such action.
C. The Distributor will pay the following expenses related to its
wholesaling activities contemplated by this Agreement:
(i) the compensation, if any, of its Associated Persons;
6
(ii) expenses associated with the initial licensing, if any, and
training of its Associated Persons involved in the
wholesaling activities;
(iii) expenses for design and development of (1) marketing kits
and prospectus covers in a design which are agreed upon
by the Company and the Distributor, which meet regulatory
requirements as determined by the Company, and which are
provided to the Company in camera-ready format, and (2) of
promotional and advertising materials;
(iv) printing of promotional and advertising materials (not
including marketing kits and prospectuses);
(v) mailing of any promotional and advertisng material and
marketing kits in connection with the distribution of the
contracts
(vi) fulfillment of marketing materials and forms to broker-
dealers
(vii) the printing, mailing (such mailing to be conducted by the
Distributor), and all other activities associated with
proxy solicitations;
(viii) mailing of Fund prospectuses, supplements and periodic
reports relating to the Fund to contract owners;
(ix) any additions, inserts, or packaging enhancements to the
Company's basic "Welcome Package";
(x) expenses associated with telecommunications with the Company
at the sites of the Distributor or its Associated Persons,
including site installations and purchases, leases or
rentals of modems, terminals and other hardware, and lease
line telephone charges; and
(xi) any other expenses incurred by the Distributor or its
Associated Persons for the purpose of carrying out the
obligations of the Distributor hereunder.
Except for such expenses and the expenses described in this Section
4.C and in Section 4.G of this Agreement, the Distributor shall not be
responsible for any expenses relating to the Contracts or distribution
of the Contracts or the processing of Contracts or applications,
including without limitation any expenses incurred in connection with
the return of Purchase Payments solicited by Broker-Dealers for
applications rejected or not timely received by the Company, or
relating to any of the matters or acts contemplated by this Agreement.
D. The Company 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 Contracts, including the
Company's basic "Welcome Package" (any additions, inserts,
or packaging enhancements to the Company's basic "Welcome
Package" shall be at the expense of the Distributor, as set
forth in Section 4.C.(x), above).
(iii) any authorization, registration, qualification or approval
of the Contracts required under the securities, blue-sky
laws or insurance laws of the States in the Territory;
7
(iv) registration fees for the Contracts payable to the SEC, the
NASD or any other governmental or regulatory agency;
(v) printing of marketing kits materials, including prospectus
(other than those born by the Fund pursuant to the
Participation Agreement) used in connection with the
distribution of the Contracts based on the schedule for each
product as set forth in Schedule 6.
(vi) the mailing of Contract Prospectuses and any supplements
thereto, as required by federal securities laws, and
periodic reports relating to the Accounts to Contract
owners;
(vii) the preparation and printing of administrative forms
utilized in connection with the distribution of the
Contracts, including but not limited to the form of
application;
(viii) the preparation of Contract Owner lists for the purposes of
proxy solicitations;
(ix) compensation as provided in Section 9 hereof; and
(x) any other expenses related to the distribution of the
Contracts except those set forth in Section 4.C of this
Agreement and except as provided in Section 4.E of this
Agreement.
E. The Company alone shall be responsible for and bear the cost of
administration of the Contracts following their issuance including all
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 Contracts as
permitted by applicable law.
F. The Company, as agent for the Underwriter, will confirm to each
applicant for and owner of a Contract in accordance with Rule lOb-10 under
the 1934 Act its acceptance of Purchase Payments and such other
transactions as are required by Rule l0b-10 or administrative
interpretations thereunder and in accordance with Release 8389 under the
1934 Act.
G. The Distriubtor agrees to reimburse the Company for development and
implementation costs for each new product based upon the schedule set forth
in Schedule 5.
5. REPRESENTATIONS AND WARRANTIES
A. The Company and Underwriter each represent and warrant to the
Distributor and each Distributor Agency Affiliate, on the effective date of
each Registration Statement for the Contracts (or class of Contracts) and
at each time that a Contract is sold and, with respect to Clauses (vii),
(viii), (xi) and (xii) below, also on the date of this Agreement, as
follows:
(i) The Registration Statement has been declared effective by
the SEC or has become effective in accordance with the
Regulations.
(ii) The Registration Statements and the Prospectuses each comply
in all material respects with the provisions of the 1933 Act
and the 1940 Act and the Regulations, and neither the
Registration Statements nor the Prospectuses contain an
untrue statement of a material fact or omits 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; provided, however,
that none of the representations and warranties in this
Section 5.A.(ii) shall apply to statements in or omissions
from the Registration Statements or Prospectuses made in
reliance upon and in conformity with information furnished
to the Company in writing by the Distributor expressly for
use in the Registration Statements.
8
(iii) Neither the Company nor Underwriter has received any notice
from the SEC with respect to the Registration Statement or
the Account supporting the Contracts described in the
Registration Statements pursuant to Section 8(e) of the 1940
Act and no stop order under the 1933 Act has been issued and
no proceeding therefor has been instituted or threatened by
the SEC.
(iv) The accountants who certified the financial statements
included in the Registration Statements and Prospectuses are
independent public accountants as required by the 1933 Act
and the Regulations.
(v) The financial statements included in the Registration
Statements present fairly the respective financial positions
of the Company and the Account supporting the Contracts
described in the Registration Statements as of the dates
indicated; and such financial statements have been prepared
in conformity with generally accepted accounting principles
in the United States applied on a consistent basis.
(vi) Subsequent to the respective dates as of which information
is given in the Registration Statement or the Prospectus,
there has not been any material adverse change in the
condition, financial or otherwise, of the Company,
Underwriter or the Account supporting the Contracts
described in the Registration Statements that would cause
such information to be materially misleading.
(vii) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of its
state of domicile with full power and authority to own,
lease and operate its properties and conduct its business in
the manner described in the Prospectus; is duly qualified to
transact the business of a life insurance company; and is in
good standing, in each State in the Territory in which the
Contracts are or will be offered.
(viii) The Underwriter has been duly organized and is validly
existing as a corporation in good standing under the laws of
the Commonwealth of Massachusetts with full power and
authority to own, lease and operate its properties and
conduct its business in the manner described in the
Prospectuses; is duly registered as a broker-dealer with the
SEC and with the securities commission of every state in the
Territory with which such registration is required; and is a
member in good standing with the NASD.
(ix) Each Account supporting the Contracts described in the
Registration Statements has been duly authorized and
established and is validly existing as a separate account
under the insurance code of the respective Company's state
of domicile, and is duly registered with the SEC as a unit
investment trust under the 0000 Xxx.
(x) The form of the Contracts has been approved to the extent
required by the Insurance Commissioner of each Company's
respective state of domicile and by the governmental agency
responsible for regulating insurance companies in each other
State in the Territory in which the contracts are offered.
(xi) The execution and delivery of this Agreement and the
consummation of the transactions contemplated in this
Agreement have been duly authorized by all necessary
corporate action by the Company and Underwriter and when so
executed and delivered this Agreement will be the valid and
binding obligation of the Company and Underwriter
enforceable in accordance with its terms.
(xii) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this
Agreement, will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the
charter or bylaws of the Company or Underwriter, or any
indenture,
9
agreement, mortgage, deed of trust, or other instrument
to which the Company or Underwriter is a party or by
which either is bound, or violate any law, or, to the
best of the Company's or Underwriter's knowledge, any
order, rule or regulation applicable to the Company or
Underwriter of any court or of any federal or state
regulatory body, administrative agency or any other
governmental instrumentality having jurisdiction over
the Company or Underwriter or any of their respective
properties.
(xiii) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the
issuance or sale of the Contracts or for the consummation of
the transactions contemplated by this Agreement, that has
not been obtained.
(xiv) The Company has filed with the SEC all statements and other
documents required for registration under the provisions of
the 1940 Act and the Regulations thereunder of the Account
supporting the Contracts described in the Registration
Statement, and such registration has been effected; there
are no agreements or documents required by the 1933 Act, the
1940 Act, or the Regulations to be filed with the SEC as
exhibits to the Registration Statement, that have not been
so filed; and the Company has obtained all exemptive or
other orders of the SEC necessary to make the public
offering and consummate the sale of the Contracts pursuant
to this Agreement and to permit the operation of the
Accounts supporting the Contracts described in the
Registration Statements, as contemplated in the
Prospectuses.
(xv) The Contracts have been duly authorized by the Company and
conform to the descriptions thereof in the Registration
Statements and the Prospectuses and, when issued as
contemplated by the Registration Statements, will constitute
legal, validly issued and binding obligations of the Company
in accordance with their terms.
B. The Distributor represents and warrants to the Company on the date
hereof as follows:
(i) the Distributor has taken all action including, without
limitation, those necessary under its articles of
incorporation, by-laws and applicable state corporate law,
necessary to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
(ii) the Distributor is and during the term of this Agreement
shall remain duly registered as a broker-dealer under the
1934 Act, a member in good standing with the NASD, and duly
registered as a broker-dealer under applicable state
securities laws.
6. ADDITIONAL RESPONSIBILITIES OF THE COMPANY
A. The Company shall use its best efforts:
(i) to maintain the registration of the Contracts with the SEC
and any state securities commissions of any State in the
Territory where the securities or blue-sky laws of such
State require registration of the Contracts, including
without limitation using its best efforts to prevent a stop
order from being issued or if a stop order has been issued
to cause such stop order to be withdrawn;
(ii) to gain approval or other authorization of the Contract
forms where required under the insurance laws and
regulations of each State in the Territory (provided,
however, that it shall be within the Company's discretion
whether to obtain such approval or authorization in Guam);
and
(iii) to keep such registration, approval and authorization in
effect thereafter so long as the Contracts are outstanding.
10
B. During the term of this Agreement the Company shall take all reasonable
action required to cause each class of Contracts to comply, and to continue
to comply, as annuity contracts or life insurance contracts, as the case
may be, and to cause the Registration Statements and the Prospectus for
each class of Contracts to comply, and to continue to comply, with: all
applicable federal laws and regulations and all applicable laws and
regulations of each State in the Territory.
C. The Company, during the term of this Agreement, shall notify the
Distributor immediately:
(i) when each Registration Statement has become effective or any
post-effective amendment with respect to the Registration
Statement thereafter becomes effective;
(ii) of any request by the SEC for any amendment to a
Registration Statement or supplement to a Prospectus or for
additional information;
(iii) of any event that makes any material statement made in a
Registration Statement or a Prospectus untrue in any
material respect or results in a material omission in a
Registration Statement or a Prospectus;
(iv) of the issuance by the SEC of any stop order with respect to
a Registration Statement or any amendment thereto, or the
initiation of any proceedings for that purpose, or for any
other purpose relating to the registration and/or offering
of the Contracts (or class of Contracts);
(v) in which States in the Territory registration of the
Contracts (or class of Contracts) is required under the
securities or blue-sky laws, and when such registrations
have become effective.
D. The Company shall furnish to the Distributor without charge promptly
after filing five (5) copies of each Registration Statement as originally
filed and any pre-effective or post-effective amendment thereto, including
financial statements and all exhibits, including exhibits incorporated
therein by reference.
E. The Company shall timely file all reports, statements and amendments
required to be filed by or for each Account or class of Contracts under the
1933 Act and/or the 1940 Act or the Regulations.
F. The Company shall deliver to the Distributor, as soon as practicable
after it becomes available, the Annual Statements for the Company and for
each Account in the form filed with their respective state of domicile, and
any quarterly reports upon the Distributor's request.
G. The Company and Underwriter will provide the Distributor access to such
records, officers and employees of the Company, Underwriter and each
Account at reasonable times as is necessary to enable the Distributor to
fulfill its obligations under the federal securities laws and NASD rules.
The Distributor will provide the Company and Underwriter access to such of
its records, officers and employees at reasonable times as is necessary to
enable the Company and Underwriter to fulfill their obligations under the
federal securities laws and NASD rules.
7. CONFIDENTIALITY
A. The Company and Underwriter acknowledge that the names and addresses of
all customers and prospective customers (for purposes of this Section 7.A,
the terms "customers" and "prospective customers" shall not mean Broker-
Dealers) of the Distributor, of its parent company and of any affiliated
person of the Distributor, Distributor Agency Affiliates or of any Broker-
Dealer that may come to the attention of the Company, Underwriter or any
person affiliated with the Company or Underwriter as a result of their
relationship with the Distributor, its parent company or any affiliated
person of the Distributor, Distributor Agency Affiliates or any Broker-
Dealer and not from any independent source, are confidential
11
and shall not be used by the Company or Underwriter or any person
affiliated with the Company or Underwriter for any purpose whatsoever
except as may be necessary in connection with the administration of the
Contracts sold by the Broker-Dealers, including responses to specific
requests made to the Company for service by Contract owners or efforts
to prevent the replacement of such Contracts or to encourage the
exercise of options under the terms of the Contracts. The restrictions
set forth in the previous sentence do not apply if and to the extent a
Broker-Dealer knowingly discloses the names and addresses of its
customers or prospective customers to the Company or Underwriter
outside the operation of this Agreement. In no event shall the names
and addresses of such customers and prospective customers be furnished
by the Company, Underwriter or any of their affiliated persons to any
other person. The intent of this paragraph is that neither the Company
nor Underwriter, nor persons affiliated with the Company or
Underwriter, shall utilize, or permit to be utilized, their knowledge
of the Distributor, of its parent company or of any affiliated person
of the Distributor, Distributor Agency Affiliates or any Broker-Dealer,
derived as a result of the relationship created through the funding and
sale of the Contracts or the solicitation of sales of any product or
service. This paragraph shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall
survive any such termination.
8. RECORDS
The Company, Underwriter, Distributor and Distributor Agency Affiliates
shall each maintain such accounts, books and other documents as are
required to be maintained by each of them by applicable laws and
regulations and shall preserve such accounts, books and other documents for
the periods prescribed by such laws and regulations. The accounts, books
and records of the Company, Underwriter, the Account, the Distributor and
Distributor Agency Affiliates as to all transactions hereunder 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 paid by the Company hereunder.
Each party shall have the right to inspect and audit such accounts, books
and records of the other party during normal business hours upon reasonable
written notice to the other party. Each party shall keep confidential all
information obtained pursuant to such an inspection or audit, and shall
disclose such information to third parties only upon receipt of written
authorization from the other party, except as required by law.
9. BROKER-DEALER COMPENSATION AND DISTRIBUTOR PROMOTIONAL ALLOWANCES
A. The Company shall compensate Broker-Dealers for sales of the Contracts
by the Broker-Dealers pursuant to Schedule 4 to this Agreement, as such
Schedule may be amended from time to time upon mutual agreement of the
parties to this Agreement. Such compensation shall be based on Purchase
Payments received and accepted by the Company for all Contracts issued on
applications obtained by the Broker-Dealers or any of their respective
Representatives. The Company will pay compensation due Broker-Dealers in
accordance with the procedures set forth on Schedule 4. The compensation
provided for in this Section 9 shall be payable to the Broker-Dealer in
accordance with the Sales Agreement between the Underwriter and the Broker-
Dealer for so long as the Contracts are outstanding regardless of whether
this Agreement is still in effect. In addition to the Compensation payable
to Broker-Dealers, the Company shall pay Distributor a Promotional
Allowance as a reimbursement for its expenses incurred relating to its
wholesaling activities contemplated by this Agreement. Promotional
Allowances shall be payable to Distributor in such amount and in accordance
with the procedures as set forth on Schedule 4, as such Schedule may be
amended from time to time upon mutual agreement of the parties to this
Agreement. Promotional Allowances shall be payable to Distributor for so
long as the Contracts are outstanding and this Agreement remains in effect.
If any State in the Territory by insurance rule, regulation or statute,
prohibits payment of Promotional Allowances to the Distributor, the
Distributor shall designate in writing a business entity or natural person,
including Distributor Agency Affiliates, meeting the requirements of such
State to receive any amounts that
12
may otherwise be payable to the Distributor hereunder. The Distributor
may change such designation from time to time upon written notice to
the Company. Any payments made by the Company to any person or entity
so designated by the Distributor shall discharge the Company's
liability to the Distributor hereunder.
If a purchaser rescinds a Contract or exercises a right to surrender a
contract for return of all Purchase Payments, the Distributor will pay on
demand the amount of any Promotional Allowances it received on the Purchase
Payments returned.
B. INDEBTEDNESS. Nothing in this Agreement shall be construed as giving
the Distributor the right to incur any indebtedness on behalf of the
Company.
C. APPOINTMENT FEES. The Company will pay the initial and renewal fees
for agent appointment by the Company of duly licensed Distributor Agency
Affiliates and Broker-Dealers and their respective Associated Persons, as
follows:
(i) that if total annual sales of the Contracts exceed
$60,000,000 during any calendar year beginning January 1,
1997, the Company will pay up to $600,000 of appointment
fees; provided, however, if sales do not meet this goal, the
Distributor will reimburse the Company for all appointment
fees paid during the calendar year.
(ii) if total sales of contracts exceed $100,000,000 during any
calendar year, the Company will pay up to $1,300,000 of
appointment fees. If sales do not meet this goal but do
exceed $60,000,000, the Distributor will reimburse the
Company for all appointment fees paid during the calendar
year over $600,000.
(iii) The Distributor will reimburse the Company for all
appointment fees over $1,3000,000 during any calendar year,
unless prior agreement is made with the Company.
The Company reserves the right to refuse to pay renewal fees for
individuals not meeting such minimal sales as may be agreed upon from time
to time.
D. REPORTING. The Distributor shall be responsible for all tax
reporting information, if any, that the Distributor is required to
provide under applicable tax law to its Associated Persons with respect
to the Contracts. Nothing contained in this Agreement or any sales
agreement with a Broker-Dealer is to be construed to require the
Distributor to provide any tax reporting information directly or
indirectly to any Broker-Dealer or its Representatives.
E. SURVIVAL. This Section 9 shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall survive
any such termination.
10. INVESTIGATION AND PROCEEDINGS
A. The Company, Underwriter and Distributor will cooperate fully in any
securities or insurance governmental or regulatory investigation or
proceeding or judicial proceeding arising in connection with the offering,
sale or distribution of the Contracts for which the Distributor acts as
wholesaler pursuant to this Agreement. Without limiting the foregoing, the
Company, Underwriter and Distributor agree to notify one another promptly
of any customer complaint or notice of any governmental or regulatory
investigation or proceeding or judicial proceeding received by any of them
with respect to the Company, Underwriter, Distributor or any of their
respective Associated Persons or that may affect the issuance of any
Contract for which the Distributor acts as wholesaler pursuant to this
Agreement.
B. In the case of a substantive customer complaint, the Company,
Underwriter, Distributor and Distributor
13
Agency Affiliates will cooperate in investigating such complaint and
any response by the Company or Underwriter, as one party, or the
Distributor or Distributor Agency Affiliates, as another party, to such
complaint will be sent to the other party for approval not less than
five business days prior to its being sent to the customer or any
governmental or regulatory agency, except that if a more prompt
response is required, the proposed response shall be communicated by
telephone, telegraph or facsimile. Neither such party will release any
such response without the other party's prior written approval, unless
otherwise required by applicable law.
11. INDEMNIFICATION
A. The Company and Underwriter, jointly and severally, shall indemnify and
hold harmless the Distributor and Distributor Agency Affiliates and each
person who controls or is associated with the Distributor or Distributor
Agency Affiliates within the meaning of such terms under the federal
securities laws, and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to which the
Distributor, Distributor Agency Affiliates and/or such person may become
subject, under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus, blue sky application or
other document executed by the Company specifically for the
purpose of qualifying any or all of the Contracts for sale
under the securities laws of any State, promotional, sales
or advertising material for the Contracts, or the Contracts
themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein 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; provided that this
obligation to indemnify shall not apply if such untrue
statement or omission or such alleged untrue statement or
alleged omission was made in reliance upon and in conformity
with information furnished in writing to the Company or
Underwriters by the Distributor specifically for use in the
preparation of any such Registration Statement, Prospectus
or blue-sky application or other document, material or
Contract (or any such amendment or supplement thereto); or
(ii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Fund Registration Statement, Fund Prospectus, blue sky
application or other document executed by the Fund
specifically for the purpose of qualifying any or all of the
shares of the Fund for sale under the securities law of any
State, or in any promotional, sales or advertising material
or written information relating to the shares of the Fund
authorized by the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein 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, in each case to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with information
furnished in writing to the Distributor or the Fund by the
Company specifically for use in the preparation of any such
Fund Registration Statement, Fund Prospectus, blue-sky
application or other document (or any such amendment or
supplement thereto); or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement or omission or alleged omission of
a material fact by or on behalf of the Company or
Underwriter (other than statements or representations
contained in the Fund Registration Statement, Fund
Prospectus or promotional, sales or advertising material of
the Fund that were not supplied by the Company,
14
Underwriter or persons under their control) or wrongful
conduct of the Company or Underwriter or persons under
their control with respect to the sale or distribution
of the Contracts; or
(iv) result because of the terms of any Contract or because of
any material breach by the Company or Underwriter of any
terms of this Agreement or of any Contract or that
proximately result from any activities of the Company' or
Underwriter' officers, directors, employees or agents or
their failure to take action in connection with the sale of
a Contract, to the extent of the Company's or Underwriter's
obligations under this Agreement or otherwise, or the
processing or administration of the Contracts.
This indemnification obligation will be in addition to any liability
that the Company or Underwriter may otherwise have; provided, however,
that no person shall be entitled to indemnification pursuant to this
Section ll.a if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless disregard
of duty by the person seeking indemnification.
B. The Distributor shall indemnify and hold harmless the Company and
Underwriter and each person who controls or is associated with the Company
or Underwriter within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to which the
Company and/or any such person may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement,
Prospectus or blue-sky application or other document
executed by the Company specifically for the purposes of
qualifying any or all of the Contracts for sale under the
securities law of any State (or any amendment or supplement
to the foregoing), or omission or alleged omission to state
therein a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading, in light of the circumstances in which they were
made, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and
in conformity with information furnished in writing to the
Company or Underwriter by the Distributor specifically for
use in the preparation of any such Registration Statement,
Prospectus, such blue-sky application or other document (or
any such amendment or supplement thereto); or
(ii) any use of promotional, sales or advertising material for
the Contracts not authorized by the Company or any verbal or
written misrepresentations or any unlawful sales practices
concerning the Contracts by the Distributor or Distributor
Agency Affiliates under federal securities laws or NASD
regulations (but not including state insurance laws
compliance with which is a responsibility of the Company or
Underwriter under this Agreement or otherwise); or
(iii) claims by agents, representatives or employees of the
Distributor for compensation or other remuneration of any
type; or
(iv) any material breach by the Distributor or Distributor Agency
Affiliates of any provision of this Agreement.
This indemnification obligation will be in addition to any liability
that the Distributor may otherwise have; provided, however, that no
person shall be entitled to indemnification pursuant to this Section
ll.b if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty
by the person seeking indemnification.
15
C. After receipt by a party entitled to indemnification ("indemnified
party") under this Section 11 of notice of the commencement of any action,
if a claim in respect thereof is to be made by the indemnified party
against any person obligated to provide indemnification under this Section
11 ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this
Section 11, except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying party is
damaged solely as a result of the failure to give such notice. The
indemnifying party, upon the request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnified party shall indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
D. The indemnification provisions contained in this Section 11 shall
remain operative in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or by or on behalf of any
controlling person thereof, (ii) delivery of any Contracts and Purchase
Payments therefor, or (iii) any termination of this Agreement. A successor
by law of the Distributor or the Company, as the case may be, shall be
entitled to the benefits of the indemnification provisions contained in
this Section 11.
12. TERMINATION
A. This Agreement may be terminated at the option of any party upon six
months advance written notice to the other parties, such termination to be
effective no earlier than one year following the date on which the first
Contract is issued to the public.
B. This Agreement shall terminate automatically if it is assigned. This
Agreement may be terminated at the option of the Company and Underwriter,
as one party, or the Distributor and Distributor Agency Affiliates, as one
party, upon the other party's material breach of any provision of this
Agreement.
C. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except:
(i) the obligation to settle accounts hereunder, as set forth in
Schedule 4;
(ii) the provisions contained in Sections 7, 9 and 11 of this
Agreement; and
(iii) the indemnification provisions set forth in Section 11 of
this Agreement, or as otherwise specifically noted in this
Agreement.
13. RIGHTS, REMEDIES, ETC, ARE CUMULATIVE.
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties to this Agreement are
entitled to under state and federal laws. Failure of the Distributor or
Distributor Agency Affiliates, as one party, or the Company or Underwriter,
as another party, to insist upon strict compliance
16
by the other party with any of the conditions of this Agreement shall
not be construed as a waiver of any of the conditions, but the same
shall remain in full force and effect. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver.
14. NOTICES
All notices hereunder are to be made in writing and shall be given:
if to the Company to:
Xxxxxxx X. Xxxxxx
President
Allmerica Financial Life Insurance and Annuity Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Underwriter:
Xxxxxxx X. Xxxxxx
President and CEO
Allmerica Investments Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Distributor or Distributor Agency Affiliates, to:
Western Capital Financial Group, Inc.
At.: President
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
or such other address as such party may hereafter specify in writing. Each such
notice to a party shall be either hand delivered or transmitted by registered or
certified United States mail with return receipt requested, and shall be
effective upon delivery.
15. INTERPRETATION, JURISDICTION ETC.
This Agreement constitutes the whole agreement between the parties to this
Agreement relating to the wholesaling activities contemplated in this
Agreement, and supersedes all prior oral or written negotiations between
the parties to this Agreement with respect to the subject matter of this
Agreement. The parties acknowledge that the Company, the Distributor and
the Fund have entered into the Participation Agreement in contemplation of
entering into this Agreement. This Agreement shall be construed and the
provisions of this Agreement interpreted under and in accordance with the
internal laws of the Commonwealth of Massachusetts without giving effect to
principles of conflict of laws.
16. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or
the breach of this Agreement, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
17
17. HEADINGS
The headings in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
19. SEVERABILITY
This is a severable agreement and in the event that any part or parts of
this Agreement shall be held to be unenforceable to its or their full
extent, then it is the intention of the parties to this Agreement that such
part or parts shall be enforced to the extent permitted under the law, and,
in any event, that all other parts of this Agreement shall remain valid and
duly enforceable as if the unenforceable part or parts had never been a
part of this Agreement.
20. REGULATION
This Agreement shall be subject to the provisions of the 1933 Act, 1934 Act
and 1940 Act and the Regulations and the rules and regulations of the NASD,
from time to time in effect, including such exemptions from the 1940 Act as
the SEC may grant, and the terms of this Agreement shall be interpreted and
construed in accordance therewith. Without limiting the generality of the
foregoing, the term "assigned" shall not include any transaction exempted
from Section 15(b)(2) of the 1940 Act.
21. MISCELLANEOUS
For the purposes of Section 4(G), "Aggregate Sales" shall refer to the
aggregate sales through Distributor pursuant both to this Agreement and to
the Wholesaling Agreement ("First Allmerica Agreement") with First
Allmerica Financial Life Insurance Company ("First Allmerica"). Based on
such Aggregate Sales, Distributor shall be responsible for only a single
Reimbursement amount, and such Reimbursement shall be divided between the
Company and First Allmerica as they may mutually agree. For the purposes
of Section 9(C), "total annual sales" shall refer to the total annual
sales through Distributor pursuant both to this Agreement and to the First
Allmerica Agreement, and "total amount of initial or renewal fees" shall
refer to the aggregate amount of such fees incurred by the Company and
First Allmerica. For the purposes of Schedule 6, "total quantity" shall
refer to the total number of marketing kits and prospectuses provided
pursuant both to this Agreement and to the First Allmerica Agreement.
IN WITNESS WHEREOF, each party hereto represents that the officer signing this
Agreement on the party's behalf is duly authorized to execute this Agreement;
and each party has caused this Agreement to be duly executed by such authorized
officer on the date specified below.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Date: By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
18
ALLMERICA INVESTMENTS, INC.
Date: By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
WESTERN CAPITAL FINANCIAL GROUP, INC.
(on its own behalf and on behalf of
the Distributor Agency Affiliates)
Date: By: /s/ H. Xxxxxxx Xxxxxxxx
---------------------------------------
Name: H. Xxxxxxx Xxxxxxxx
Title: President
19
SCHEDULE I
DISTRIBUTOR AGENCY AFFILIATES
Effective______ , 1996
State(s) In
Distributor Agency Affiliate Which Licensed
---------------------------- --------------
Palladian Marketing Group, Inc. Connecticut, New York
20
SCHEDULE 2
FUND PORTFOLIOS
AVAILABLE UNDER THE CONTRACTS
Effective _________, 1996
Name of Separate Account Underlying Funds
------------------------ ----------------
Fulcrum Fund Separate Value Portfolio of The
Account of Allmerica Palladian Trust
Financial Life
Insurance and Annuity Growth Portfolio of The
Company Palladian Trust
International Growth
Portfolio of
The Palladian Trust
Global Strategic Income
Portfolio of
The Palladian Trust
Global Interactive/Telecomm
Portfolio of The Palladian
Trust
Money Market Fund of
Allmerica Investment Trust
Name of Separate Account Underlying Funds
------------------------ ----------------
Fulcrum Fund Variable Life Value Portfolio of The
Separate Account of Palladian Trust
Allmerica Financial Life
Insurance Growth Portfolio of The
and Annuity Company Palladian Trust
International Growth
Portfolio of
The Palladian Trust
Global Strategic Income
Portfolio of
The Palladian Trust
Global Interactive/Telecomm
Portfolio of The Palladian
Trust
Money Market Fund of
Allmerica Investment Trust
21
SCHEDULE 3
CONTRACTS SUBJECT TO PROMOTIONAL AGENT AGREEMENT
Effective , 1996
SEC
Marketing Policy Registration Name of
Name Form No. No, Separate Account
--------- ------- ------------ -----------------
Fulcrum Fund A3025-96 Fulcrum Separate
Variable Annuity 333-11377 Account of Allmerica
811-7799 Financial Life
Insurance and
Annuity Company
Fulcrum Fund 1030-96 Fulcrum Variable Life
Single Premium Separate Account of
Variable Life Allmerica Financial
Policy Life Insurance and
Annuity Company
22
SCHEDULE 4
BROKER-DEALER COMPENSATION AND
DISTRIBUTOR PROMOTIONAL ALLOWANCE SCHEDULE
VARIABLE ANNUITY CONTRACTS
(A). The maximum Broker-Dealer Commission and Distributor Service Fees
Compensation payable by the Company with respect to the sale and distribution
of the Contracts shall be 7.1% of initial and subsequent Purchase Payments
received and accepted by the Company.
(B). Of the amount specified in item (A), above, 6.00% shall be payable by the
Company as Broker-Dealer sales commissions, or in lieu thereof the Broker-Dealer
may select an alternative trail commission option, if available. In the event
that an annuitant is over 85.5 years old, the only commission option available
to the Broker-Dealer will be a 1% trail option. Commission to the Broker-Dealer
will be reduced by 0.50% for contracts sold is states that require the Company
to pay premium tax at time of issue.
(C). Of the amount specified in item (A), above, 1.10% shall be payable to the
Distributor for administrative and support services ("Variable Annuity
Promotional Allowance") with respect to the distribution of the contracts.
(D). Actual compensation paid to the Distributor will be net of an offset of $30
for each policy anniversary and surrender of any contract issued to a 401(k)
plan with Accumulated Value of less than $100,000. This offset will apply only
to the extent that the Company waives its policy fee in connection with
contracts issued in connection with such 401(k) plans.
(E). Variable Annuity Promotional Allowances will be paid to the Distributor no
less frequently than twice a month.
(F). To the extent that the commissions paid to the Broker-Dealer as outlined
in item (B), above, increases or decreases, than the Variable Annuity
Promotional Allowance, outlined in item (C), above, shall decrease or increase
accordingly, such that the total compensation paid by the Company shall be equal
to a maximum of 7.10%.
(G). Notwithstanding item (F), above, the Company reserves the right to reduce
the commission payable to a Broker-Dealer on any contract sold in connection
with a 401(k) plan, WITHOUT increasing the compensation payable to the
Distributor under item (C), above.
SINGLE PREMIUM VARIABLE LIFE CONTRACTS
(A). Maximum Initial Compensation payable by the Company with respect to the
sale and distribution of Variable Life Contracts shall be 8.0% of initial and
subsequent payments. The Maximum Initial Compensation is reduced for issue ages
65 and older, and is payable as follows:
Issue Maximum Initial
Age Compensation
------------ ---------------
65 and Under 8.00%
66 - 75 7.70%
76 - 85 6.75%
86 + 4.95%
Of the Maximum Initial Compensation above, between 6.50% and 7.00% shall be
payable by the Company as Broker-Dealer sales commissions. The remainder shall
be payable to the Distributor for administrative and support services with
respect to the distribution of the Contracts ("Variable Life Promotional
Allowance").
23
(B). In addition to the amount specified in (A) above as Maximum Initial
Compensation, 0.50% shall be payable to the Distributor as fees with respect to
product development/consultation ("Product Development Fees").
(C). In addition to the Commissions payable in (A), Broker-Dealers shall be paid
deferred compensation beginning in contract year 11 as follows:
Deferred Compensation- COI based: 50% of standard (even if the Contract charges
substandard rates) COI charges in year 1-10,
paid quarterly beginning in contract year 11
Trail: 0.25% of account value (unloaned assets) each
quarter, beginning in contract year 11
(D). If the Distributor should determine that the level of Commissions
payable to the Broker-Dealer as set forth in (A) shall increase or decrease,
than the Variable Life Promotional Allowance shall decrease or increase
accordingly, such that the total compensation payable by the Company shall be
equal to the Maximum Initial Compensation set forth in (A).
24
SCHEDULE 5
DEVELOPMENT AND ADMINISTRATIVE COST REIMBURSEMENT
(A) FULCRUM FUND VARIABLE ANNUITY
(1) With respect to the Fulcrum Fund Variable Annuity product, the Distributor
agrees to reimburse the Company for development and implementation costs at
the end of a period (the "initial Variable Annuity measurement period") of
15 months from the later of the following dates:
(a) the date on which the Company has obtained approval of the product in
35 states (which will include California, Florida, Arizona, Michigan,
Massachusetts, Texas, and Pennsylvania, unless (1) the Company
determines, in good faith and upon notice to the Distributor, that
approval of the product in any such state is not reasonably possible
without material modifications to the contract, or (2) in California,
if approval is not obtained because of any failure of the funds of The
Palladian Trust to satisfy the requirements of California insurance
statutes and regulations, or interpretive positions of the California
Insurance Department).
(b) the date on which the registration statement for the product under
the 1933 Act is effective; or
(c) the date on which the product is available for sale to the public, as
determined by the Company.
based on the following schedule unless the combined product sales require
Variable Annuity reimbursement of a lower amount (as described in Section
(A)(2) and Section (B)(2)) :
AGGREGATE SALES REIMBURSEMENT
-------------------- ---------------
$0 up to $75,000,000 $600,000
$75,000,001 to $95,000,000 $480,000
$95,000,001 to $115,000,000 $360,000
$115,000,001 to $135,000,000 $240,000
$135,000,001 to $155,000,000 $120,000
$155,000,001 to $175,000,000 $ 50,000
$175,000,001 and over $ 0
(2) For sales over $175 million during the initial Variable Annuity measurement
period, the Distributor will receive a credit of $100,000 for each $20
million (pro rata for a portion thereof), of annuity sales to offset any
SPVUL reimbursement which may be required for the Fulcrum Fund SPVUL, as
set forth in Section (B), below. Under no circumstances will the Company
make any payments to the Distributor for the credit.
(3) If Variable Annuity reimbursement is required, it will be payable in equal
monthly installments over a 24 month period from the date the Company
provides notice to the Distributor that Variable Annuity reimbursement is
due the Company.
(4) If Variable Annuity reimbursement is required and during the next 15 month
period from date of expiration of the initial Variable Annuity measurement
period (the "subsequent Variable Annuity measurement period") cumulative
sales for any consecutive 15 month period reach $175 million, then the
Distributor will no longer be required to make Variable Annuity
reimbursement payments and the Company will refund all Variable Annuity
reimbursement payments made to date. If during the subsequent Variable
Annuity measurement period, cumulative sales for any three month period
(which may include the last 3 months of the initial Variable Annuity
measurement period), exceeds $44 million, then the Distributor may suspend
Variable Annuity reimbursement payments until the end of the subsequent
Variable Annuity
25
measurement period, at which time the Company will make a determination
as to whether Variable Annuity reimbursement payments are due. If
cumulative sales reach $175 million for any period of 15 consecutive
months by the end of the subsequent Variable Annuity measurement
period, then the Distributor will no longer be required to make
Variable Annuity reimbursement payments and the Company will refund all
Variable Annuity reimbursement payments which have been made.
(5) If during the initial Variable Annuity measurement period or the
subsequent Variable Annuity measurement period there should be material
changes to federal tax laws ("Material Tax Law Change"), which have a
significant negative impact on the sales of variable annuities, then each
Variable Annuity reimbursement amount set forth above in Section (A)(1)
will be reduced by 50%. For the purposes of this section, "significant
negative impact" shall mean a reduction of 35 % or more in the average
monthly industry sales of individual variable annuity contracts from the
average monthly industry sales of individual variable annuity contracts for
the consecutive three month period prior to the Material Tax Law Change, as
reported by VARDS, and the Company agrees that the reduction is reasonably
attributable to the Material Tax Law Change.
(B) FULCRUM FUND SPVUL
(1) With respect to the Fulcrum Fund SPVUL product, the Distributor agrees to
reimburse the Company for development and implementation costs at the end
of a period (the "initial SPVUL measurement period") of 18 months from the
later of the following dates:
a) the date on which the Company has obtained approval of the
product in 35 states (which will include California, Florida,
Arizona, Michigan, Massachusetts, Texas, and Pennsylvania, unless
(1) the Company determines, in good faith and upon notice to the
Distributor, that approval of the product in any such state is
not reasonably possible without material modifications to the
contract, or (2) in California, if approval is not obtained
because of any failure of the funds of The Palladian Trust to
satisfy the requirements of California insurance statutes and
regulations, or interpretive positions of the California
Insurance Department).
b) the date on which the registration statement for the Fulcrum Fund
SPVUL under the 1933 Act is effective; or
c) the date on which the product is available for sale to the public, as
determined by the Company,
based on the following schedule unless the combined product sales require
SPVUL reimbursement of a lower amount (as described in Section (A)(2) and
Section (B)(2)) :
AGGREGATE SALES REIMBURSEMENT
--------------- -------------
$0 up to $80,000,000 $700,000
$80,000,001 to $100,000,000 $580,000
$100,000,001 to $120,000,000 $460,000
$120,000,001 to $140,000,000 $340,000
$140,000,001 to $160,000,000 $220,000
$160,000,001 to $175,000,000 $100,000
$175,000,001 and over $ 0
2) For sales over $175 million during the initial SPVUL measurement period,
the Distributor will receive a credit of $100,000 for each $20 million (pro
rata for a portion thereof) of SPVUL sales to offset any reimbursement
which may be required for the Fulcrum Fund Variable Annuity. Under no
circumstances will the Company make any payments to the Distributor for
the credit.
26
(3) If SPVUL reimbursement is required it will be payable in equal monthly
installments over the 24 month period from the date the Company provides
notice to the Distributor that SPVUL reimbursement is due the Company.
(4) If SPVUL reimbursement is required, and during the next 24 month period
from date of expiration of the initial SPVUL measurement period ( "the
subsequent SPVUL measurement period") cumulative sales for any consecutive
15 month period reach $175 million, then the Distributor will no longer be
required to pay SPVUL reimbursement expenses and the Company will refund
all SPVUL reimbursement payments made to date. If during the subsequent
SPVUL measurement period, cumulative sales for any three month period
(which may include up to 3 months of the initial SPVUL measurement period),
exceeds $43.75 million, then the Distributor can suspend SPVUL
reimbursement payments until the end of the subsequent SPVUL measurement
period, at which time the Company will make a determination as to whether
SPVUL reimbursement is due. If cumulative SPVUL sales reach $175 million
for any period of 15 consecutive months by the end of the subsequent SPVUL
measurement period, then the Distributor will no longer be required to pay
SPVUL reimbursement to the Company and the Company will refund all SPVUL
reimbursement payments which have been made.
(5) If during the initial or the subsequent SPVUL measurement period there
should be material changes to federal tax laws ("Material Tax Law Change"),
which have a significant negative impact on the sales of single premium
variable life contracts, then each SPVUL reimbursement amount set forth
above in Section (B)(1) will be reduced by 50%. For the purposes of this
section, "significant negative impact" shall mean a reduction of 35% or
more in the average monthly industry sales of single premium variable life
insurance from the average monthly industry sales of single premium
variable life insurance over the three month period prior to the Material
Tax Law Change, as reported by VARDS, and the Company agrees that the
reduction is reasonably attributable to the Material Tax Law Change.
27
SCHEDULE 6
MARKETING KIT AND PROSPECTUS SALES MATERIALS
FULCRUM FUND VARIABLE ANNUITIES
The Company will print an initial total quantity of 25,000 marketing kits and
prospectuses to be available at the time of the product launch or on a schedule
agreed upon between the Company and the Distributor. Additional quantities may
be provided at the discretion of the Company.
The Company will provide a minimum total quantity of 65,000 marketing kits and
prospectuses each year up to a rate of 25,000 kits per $100,000,000 of sales.
Additional quantities may be provided at the discretion of the Company.
FULCRUM FUND SPVUL
The Company will print an initial total quantity of 10,000 marketing kits and
prospectuses to be available at the time of the product launch or on a schedule
agreed upon between the Company and the Distributor. Additional quantities may
be provided at the discretion of the Company.
The Company will provide a minimum total quantity of 20,000 marketing kits and
prospectuses per year up to a total quantity of 20,000 marketing kits and
prospectus per $100,000,000 of sales. Additional quantities may be provided at
the discretion of the Company.
28
