PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 1st day of May 2002,
by and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
Trust), ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY, a Delaware
corporation (the "Company") on its own behalf and on behalf of each of the
segregated asset accounts of the Company set forth in Schedule A hereto, as may
be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
1940 Act), and its shares are registered or will be registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided
into several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, certain series of shares of the Trust are divided into
two separate share classes, an Initial Class and a Service Class, and the Trust
on behalf of the Service Class has adopted a Rule 12b-1 plan under the 1940 Act
pursuant to which the Service Class pays a distribution fee;
WHEREAS, the series of shares of the Trust (each, a "Portfolio,"
and, collectively, the "Portfolios") and the classes of shares of those
Portfolios (the "Shares") offered by the Trust to the Company and the Accounts
are set forth on Schedule A attached hereto;
WHEREAS, MFS is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing
segregated asset accounts, established by resolution of the Board of Directors
of the Company, to set aside and invest assets attributable to the aforesaid
variable annuity and/or variable life insurance contracts that are allocated to
the Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts
as unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is
registered as a broker-dealer with the Securities and Exchange Commission (the
SEC) under the Securities Exchange Act of 1934, as amended (hereinafter the 1934
Act), and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, Allmerica Investments, Inc. ("AII"), the underwriter
for the individual variable annuity and the variable life policies, is
registered as a broker-dealer with the SEC under the 1934 Act and is a member
in good standing of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase the Shares of the Portfolios as
specified in Schedule A attached hereto on behalf of the Accounts to fund the
Policies, and the Trust intends to sell such Shares to the Accounts at net asset
value;
NOW, THEREFORE, in consideration of their mutual promises, the
Trust, MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders prior to the close
of regular trading on the New York Stock Exchange, Inc. (the "NYSE") on
that Business Day, as defined below) and which are available for purchase
by such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the order
for the Shares. For purposes of this Section 1.1, the Company shall be the
designee of the Trust for receipt of such orders from Policy owners and
receipt by such designee shall constitute receipt by the Trust; PROVIDED
that the Trust receives notice of such orders by 9:30 a.m. New York time on
the next following Business Day. "Business Day" shall mean any day on which
the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset
value on each day which the NYSE is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Trust (the "Board") may refuse to
sell any Shares to the Company and the Accounts, or suspend or terminate
the offering of the Shares if such action is required by law or by
regulatory authorities having jurisdiction or is, in the sole discretion of
the Board acting in good faith and in light of its fiduciary duties under
federal and any applicable state laws, necessary in the best interest of
the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust
and MFS (the "Participating Insurance Companies") and their separate
accounts, qualified pension and retirement plans and MFS or its affiliates.
The Trust and MFS will not sell Trust shares to any insurance company or
separate account unless an agreement containing provisions substantially
the same as Articles III and VII of this Agreement is in effect to govern
such sales. The Company will not resell the Shares except to the Trust or
its agents.
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1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by
Policy owners prior to the close of regular trading on the NYSE on that
Business Day), executing such requests on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
request for redemption. For purposes of this Section 1.4, the Company shall
be the designee of the Trust for receipt of requests for redemption from
Policy owners and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust receives notice of such request for
redemption by 9:30 a.m. New York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted with
respect to any Portfolio. However, with respect to payment of the purchase
price by the Company and of redemption proceeds by the Trust, the Company
and the Trust shall net purchase and redemption orders with respect to each
Portfolio and shall transmit one net payment for all of the Portfolios in
accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares by
2:00 p.m. New York time on the next Business Day after an order to purchase
the Shares is made in accordance with the provisions of Section 1.1.
hereof. In the event of net redemptions, the Trust shall pay the redemption
proceeds by 2:00 p.m. New York time on the next Business Day after an order
to redeem the shares is made in accordance with the provisions of Section
1.4. hereof. All such payments shall be in federal funds transmitted by
wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the
Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone followed
by written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares
in additional Shares of that Portfolio. The Trust shall notify the Company
of the number of Shares so issued as payment of such dividends and
distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available
by 6:30 p.m. New York time. In the event that the Trust is unable to meet
the 6:30 p.m. time stated herein, it shall provide additional time for the
Company to place orders for the purchase and redemption of Shares. Such
additional time shall be equal to the additional time which the Trust takes
to make the net asset value available to the Company. If the Trust provides
materially incorrect share net asset value information, the Trust shall
make an adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
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ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable
state and federal laws, including without limitation the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940
Act. The Company further represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that
it has legally and validly established the Account as a segregated asset
account under applicable law and has registered or, prior to any issuance
or sale of the Policies, will register the Accounts as unit investment
trusts in accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the Policies, and
that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the
1933 Act for the Policies and the registration statements under the 1940
Act for the Accounts from time to time as required in order to effect the
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for
sales in accordance with the securities laws of the various states only if
and to the extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are currently
and at the time of issuance will be treated as life insurance, endowment or
annuity contract under applicable provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), that it will maintain such treatment and
that it will notify the Trust or MFS immediately upon having a reasonable
basis for believing that the Policies have ceased to be so treated or that
they might not be so treated in the future.
2.3. The Company represents and warrants that AII, the underwriter for the
individual variable annuity and the variable life policies, is a member in
good standing of the NASD and is a registered broker-dealer with the SEC.
The Company represents and warrants that the Company and AII will sell and
distribute such policies in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant
to this Agreement shall be registered under the 1933 Act, duly authorized
for issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust
shall amend the registration statement for its Shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the
continuous offering of its Shares. The Trust shall register and qualify the
Shares for sale in accordance with the laws of the various states only if
and to the extent deemed necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 0000 Xxx.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it
does and will comply in all material respects with the 1940 Act and any
applicable regulations thereunder.
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2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material
respects with any applicable federal securities laws and with the
securities laws of The Commonwealth of Massachusetts. MFS represents and
warrants that it is not subject to state securities laws other than the
securities laws of The Commonwealth of Massachusetts and that it is exempt
from registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so
that it may carry out fully the obligations imposed upon it by the
conditions contained in the exemptive application pursuant to which the SEC
has granted exemptive relief to permit mixed and shared funding (the "Mixed
and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares
as the Company may reasonably request for distribution to existing Policy
owners whose Policies are funded by such Shares. The Trust or its designee
shall provide the Company, at the Company's expense, with as many copies of
the current prospectus for the Shares as the Company may reasonably request
for distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent
to the financial printer) and other assistance as is reasonably necessary
in order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the
prospectus for the Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to
the number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear the
cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the
Company to bear the expenses of printing the portion of such document
relating to the Accounts; PROVIDED, however, that the Company shall bear
all printing expenses of such combined documents where used for
distribution to prospective purchasers or to owners of existing Policies
not funded by the Shares. In the event that the Company requests that the
Trust or its designee provides the Trust's prospectus in a "camera ready"
or diskette format, the Trust shall be responsible for providing the
prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (E.G., typesetting expenses), and the Company shall bear the expense
of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and
provide such statement of additional information to the Company (or a
master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust or
its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser who
requests such statement or to an owner of a Policy not funded by the
Shares.
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3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders
in such quantity as the Company shall reasonably require for distribution
to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or
of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but
are not limited to, the printing of the Shares' prospectus or prospectuses
for distribution to prospective purchasers or to owners of existing
Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners; and
(c) vote the Shares for which no instructions have been received in
the same proportion as the Shares of such Portfolio for which
instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940
Act to require pass through voting privileges for variable contract owners.
The Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Policy owners. The Company reserves the right to vote shares held in any
segregated asset account in its own right, to the extent permitted by law.
Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts holding Shares calculates voting privileges
in the manner required by the Mixed and Shared Funding Exemptive Order. The
Trust and MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS are named, at least three (3) Business Days
prior to its use. No such material shall be used if the Trust, MFS, or
their respective designees reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of the Trust, MFS, any other investment adviser to
the Trust, or any affiliate of MFS or concerning the Trust or any other
such entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement
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of additional information for the Shares, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust, MFS or their respective designees, except with the permission of the
Trust, MFS or their respective designees. The Trust, MFS or their
respective designees each agrees to respond to any request for approval on
a prompt and timely basis. The Company shall adopt and implement procedures
reasonably designed to ensure that information concerning the Trust, MFS or
any of their affiliates which is intended for use only by brokers or agents
selling the Policies (I.E., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used, and
neither the Trust, MFS nor any of their affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker
only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature
or other promotional material in which the Company and/or the Accounts is
named, at least three (3) Business Days prior to its use. No such material
shall be used if the Company or its designee reasonably objects to such use
within three (3) Business Days after receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter shall
not give, any information or make any representations on behalf of the
Company or concerning the Company, the Accounts, or the Policies in
connection with the sale of the Policies other than the information or
representations contained in a registration statement, prospectus, or
statement of additional information for the Policies, as such registration
statement, prospectus and statement of additional information may be
amended or supplemented from time to time, or in reports for the Accounts,
or in sales literature or other promotional material approved by the
Company or its designee, except with the permission of the Company. The
Company or its designee agrees to respond to any request for approval on a
prompt and timely basis. The Trust and MFS may not alter any material so
provided by the Company or its designee (including, without limitation,
presenting or delivering such material in a different medium, e.g.,
electronic or internet) without the prior written consent of the Company.
The parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor of
the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to
the Policies, or to the Trust or its Shares, prior to or contemporaneously
with the filing of such document with the SEC or other regulatory
authorities. The Company and the Trust shall also each promptly inform the
other of the results of any examination by the SEC (or other regulatory
authorities) that relates to the Policies, the Trust or its Shares, and the
party that was the subject of the examination shall provide the other party
with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. No party shall use any other party's names, logos, trademarks or
service marks, whether registered or unregistered, without the prior
written consent of such other party, or after written consent therefor has
been revoked, provided that separate consent is not required under this
Section 4.6 to the extent that consent to use a party's name, logo,
trademark or service xxxx in connection with a particular piece of
advertising or sales literature has previously been given by a party under
Sections 4.2 and 4.4 of this Agreement. The Company shall not use in
advertising, publicly or otherwise the name of the Trust, MFS or any of
their affiliates nor any trade name, trademark,
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trade device, servicemark, symbol or any abbreviation, contraction or
simulation thereof of the Trust, MFS, or their affiliates without the prior
written consent of the Trust or MFS in each instance. The Trust and MFS
shall not use in advertising, publicly or otherwise the name of the Company
or any of its affiliates nor any trade name, trademark, trade device,
servicemark, symbol or any abbreviation, contraction or simulation thereof
of the Company or its affiliates without the prior written consent of the
Company in each instance.
4.7. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies
from Policy owners or to make changes to its prospectus, statement of
additional information or registration statement, in an orderly manner. The
Trust and MFS will make reasonable efforts to attempt to have changes
affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.8. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), and sales literature (such as brochures, circulars,
reprints or excerpts or any other advertisement, sales literature, or
published articles), distributed or made generally available to customers
or the public, educational or training materials or communications
distributed or made generally available to some or all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that, to the extent the Trust or any Portfolio has
adopted and implemented a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution and for Shareholder servicing expenses, then the Trust
may make payments to the Company or to the underwriter for the Policies in
accordance with such plan. Each party, however, shall, in accordance with
the allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust and/or
to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal
and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration fees;
preparation and filing of the Trust's proxy materials and reports to
Shareholders; setting in type and printing its prospectus and statement of
additional information (to the extent provided by and as determined in
accordance with Article III above); setting in type and printing the proxy
materials and reports to Shareholders (to the extent provided by and as
determined in accordance with Article III above); the preparation of all
statements and notices required of the Trust by any federal or state law
with respect to its Shares; all taxes on the issuance or transfer of the
Shares; and the costs of distributing the Trust's prospectuses and proxy
materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses
of marketing the Policies.
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5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and
of distributing the Trust's Shareholder reports to Policy owners. The
Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing and
distributing the Policy prospectus and statement of additional information;
and the cost of preparing, printing and distributing annual individual
account statements for Policy owners as required by state insurance laws.
5.4. MFS will monthly reimburse the Company certain of the administrative
costs and expenses incurred by the Company as a result of operations
necessitated by the beneficial ownership by Policy owners of shares of the
Portfolios of the Trust, equal to 0.25% per annum of the aggregate net
assets of the Trust attributable to variable life or variable annuity
contracts offered by the Company or its affiliates. In no event shall such
fee be paid by the Trust, its shareholders or by the Policy holders.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1) of
the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts,
as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal
Revenue Service interpreting these sections), as if those requirements
applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of
the variable annuity contract owners and the variable life insurance policy
owners of the Company and/or affiliated companies ("contract owners")
investing in the Trust. The Board shall have the sole authority to
determine if a material irreconcilable conflict exists, and such
determination shall be binding on the Company only if approved in the form
of a resolution by a majority of the Board, or a majority of the
disinterested trustees of the Board. The Board will give prompt notice of
any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the Board
in carrying out its responsibilities under the conditions set forth in the
Trust's exemptive application pursuant to which the SEC has granted the
Mixed and Shared Funding Exemptive Order by providing the Board, as it may
reasonably request, with all information necessary for the Board to
consider any issues raised and agrees that it will be responsible for
promptly reporting any potential or existing conflicts of which it is aware
to the Board including, but not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are
disregarded. The
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Company also agrees that, if a material irreconcilable conflict arises, it
will at its own cost remedy such conflict up to and including (a)
withdrawing the assets allocable to some or all of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Trust, or submitting to a vote of all affected contract owners whether to
withdraw assets from the Trust or any Portfolio and reinvesting such assets
in a different investment medium and, as appropriate, segregating the
assets attributable to any appropriate group of contract owners that votes
in favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their contracts
or policies, and (b) establishing a new registered management investment
company and segregating the assets underlying the Policies, unless a
majority of Policy owners materially adversely affected by the conflict
have voted to decline the offer to establish a new registered management
investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of
the Accounts designated by the disinterested trustees and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination; PROVIDED, HOWEVER, that such
withdrawal and termination shall be limited to the extent required to
remedy any such material irreconcilable conflict as determined by a
majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Mixed and Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then (a) the Trust and/or the
Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rule 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable; and (b) Sections
3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees,
officers and each person, if any, who controls the Trust or MFS within the
meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of the Company) or expenses (including reasonable counsel
fees) to which any Indemnified Party 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 sale or acquisition of the Shares or the
Policies and:
10
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or
sales literature or other promotional material for the Policies
(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 PROVIDED that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or
sales literature or other promotional material (or any amendment
or supplement) or otherwise for use in connection with the sale
of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust not supplied by the Company or its designee, or persons
under its control and on which the Company has reasonably relied)
or wrongful conduct of the Company or persons under its control,
with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Trust, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Trust by or on behalf
of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company and each
of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, and any agents or
employees of the foregoing (each an "Indemnified Party," or collectively,
the "Indemnified Parties" for purposes of this Section 8.2) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Trust) or expenses (including
reasonable counsel fees) to which any Indemnified Party may
11
become subject under any statute, 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 sale or acquisition of
the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material of
the Trust (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 statement therein not
misleading, PROVIDED that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the
Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust
or in sales literature or other promotional material for the
Trust (or any amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, statement of additional
information or sales literature or other promotional material for
the Policies not supplied by the Trust, MFS, the Underwriter or
any of their respective designees or persons under their
respective control and on which any such entity has reasonably
relied) or wrongful conduct of the Trust or persons under its
control, with respect to the sale or distribution of the Policies
or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in the registration statement,
prospectus, statement of additional information, or sales
literature or other promotional literature of the Accounts or
relating to the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information
furnished to the Company by or on behalf of the Trust, MFS or the
Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement) or arise
out of or result from any other material breach of this Agreement
by the Trust; or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share
or dividend or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
12
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating Insurance
Company or any Policy holder, with respect to any losses, claims, damages,
liabilities or expenses that arise out of or result from (i) a breach of
any representation, warranty, and/or covenant made by the Company hereunder
or by any Participating Insurance Company under an agreement containing
substantially similar representations, warranties and covenants; (ii) the
failure by the Company or any Participating Insurance Company to maintain
its segregated asset account (which invests in any Portfolio) as a legally
and validly established segregated asset account under applicable state law
and as a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company or
any Participating Insurance Company to maintain its variable annuity and/or
variable life insurance contracts (with respect to which any Portfolio
serves as an underlying funding vehicle) as life insurance, endowment or
annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified
Party would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, willful misconduct, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5.
of notice of commencement of any action, such Indemnified Party will, if a
claim in respect thereof is to be made against the indemnifying party under
this section, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any Indemnified Party otherwise
than under this section. In case any such action is brought against any
Indemnified Party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the defense
thereof, with counsel satisfactory to such Indemnified Party. After notice
from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional
counsel obtained by it, and the indemnifying party shall not be liable to
such Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control
persons in connection with the Agreement, the issuance or sale of the
Policies, the operation of the Accounts, or the sale or acquisition of
Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
13
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
SEC may grant and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one,
some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance written
notice to the other parties; or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonably available to meet the requirements
of the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without
limiting the generality of the foregoing, the Shares of a
Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other
requirements referred to in Article VI hereof; or if the Company
would be permitted to disregard Policy owner voting instructions
pursuant to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt
notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Policies, the operation of the Accounts, or the purchase of
the Shares; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or
related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of
any necessary regulatory approvals and/or the vote of the Policy
owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected
to serve as the underlying investment media. The Company will
give thirty (30) days' prior written notice to the Trust of the
Date of any proposed vote or other action taken to replace the
Shares; or
14
(f) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its
business, operations, financial condition, or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(g) termination by the Company by written notice to the Trust and
MFS, if the Company shall determine, in its sole judgment
exercised in good faith, that the Trust or MFS has suffered a
material adverse change in this business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written
consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised for
cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated transactions,
or as required by state insurance laws or regulations, the Company shall
not redeem the Shares attributable to the Policies (as opposed to the
Shares attributable to the Company's assets held in the Accounts), and the
Company shall not prevent Policy owners from allocating payments to a
Portfolio that was otherwise available under the Policies, until thirty
(30) days after the Company shall have notified the Trust of its intention
to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this
Agreement, for all Policies in effect on the effective date of termination
of this Agreement (the "Existing Policies"), except as otherwise provided
under Article VII of this Agreement. Specifically, without limitation, the
owners of the Existing Policies shall be permitted to transfer or
reallocate investment under the Policies, redeem investments in any
Portfolio and/or invest in the Trust upon the making of additional purchase
payments under the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
15
If to the Trust:
MFS VARIABLE INSURANCE TRUST
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Secretary
If to the Company:
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. St. Hilaire
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of
the owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted
by this Agreement or as otherwise required by applicable law or regulation,
shall not disclose, disseminate or utilize such names and addresses and
other confidential information without the express written consent of the
affected party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection
with inquiries by appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) relating to
this Agreement or the transactions contemplated hereby.
16
13.7. 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 hereto are entitled to
under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are
not binding upon any of the Trust's trustees, officers, employees, agents
or shareholders individually, but are binding solely upon the assets and
property of the Trust in accordance with its proportionate interest
hereunder. The Company further acknowledges that the assets and liabilities
of each Portfolio are separate and distinct and that the obligations of or
arising out of this instrument are binding solely upon the assets or
property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its
proportionate interest hereunder, and the Company agrees not to proceed
against any Portfolio for the obligations of another Portfolio.
17
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By its authorized officer,
By: /s/ Xxxx X. Hug
Xxxx X. Hug
Title: President
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not
individually,
By: /s/ Xxxxx X. Xxxxxxxxx Xx.
Xxxxx X. Xxxxxxxxx, Xx.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive
Officer
18
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as
of the 1st day of August, 1998, by and among MFS Variable Insurance Trust,
Allmerica Financial Life Insurance Company and Annuity Company and Massachusetts
Financial Services Company, the parties do hereby agree that the following
provisions amended to reflect the following:
1. Schedule A is deleted in its entirety and replaced with the
Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative. The Amendment shall take effect on
May 1, 2002.
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
By its authorized officer and not individually,
By:_________________________________
Xxxx X. Hug
President
MFS VARIABLE INSURANCE TRUST,
on behalf of the Portfolios
By its authorized officer and not individually,
By:_________________________________
Xxxxx X. Xxxxxxxxx, Xx.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By:_________________________________
Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
19
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
May 1, 2002
POLICIES FUNDED BY
SEPARATE ACCOUNT SEPARATE ACCOUNT PORTFOLIOS APPLICABLE TO POLICIES
---------------- ---------------- ---------------------------------
FR1 Separate Account of Variable Life MFS(R) Utilities Series
Allmerica Financial Life Insurance and Annuity Company
Exempt From Registration
FQ1 Separate Account of Variable Life MFS(R) Growth with Income Series
Allmerica Financial Life Insurance and Annuity Company MFS(R) Utilities Series
Exempt From Registration
Separate Account FUVUL of Variable Life MFS(R) Investors Trust Series
Allmerica Financial Life Insurance and Annuity Company MFS(R) Utilities Series
1933 Act #: 333-93031
0000 Xxx #: 811-09731
Separate Account IMO of Variable Life MFS(R) Mid Cap Growth Series (Service Class)
Allmerica Financial Life Insurance and Annuity Company MFS(R) New Discovery Series (Service Class)
1933 Act #: 333-84879, 333-90995 MFS(R) Total Return Series (Service Class)
1940 Act #: 811-09529 MFS(R) Utilities Series (Service Class)
Separate Account SPVL of Variable Life MFS(R) Mid Cap Growth Series (Service Class)
Allmerica Financial Life Insurance and Annuity Company MFS(R) New Discovery Series (Service Class)
1933 Act #: (to be determined) MFS(R) Total Return Series (Service Class)
1940 Act #: 811-8859 MFS(R) Utilities Series (Service Class)
UR1 Separate Account of Variable Annuity MFS(R) Utilities Series
Allmerica Financial Life Insurance and Annuity Company
Exempt From Registration
UQ1 Separate Account of Variable Annuity MFS(R) Growth with Income Series
Allmerica Financial Life Insurance and Annuity Company MFS(R) Utilities Series
Exempt From Registration
Separate Account VA-K of Variable Annuity MFS(R) Mid Cap Growth Series (Service Class)
Allmerica Financial Life Insurance and Annuity Company MFS(R) New Discovery Series (Service Class)
1933 Act #'s: 33-39702, 333-81861, 333-38274 MFS(R) Total Return Series (Service Class)
1940 Act #: 811-6293 MFS(R) Utilities Series (Service Class)
Allmerica Select Separate Account of Variable Annuity MFS(R) Mid Cap Growth Series (Service Class)
Allmerica Financial Life Insurance and Annuity Company MFS(R) New Discovery Series (Service Class)
1933 Act #'s: 33-47216, 333-63093, 333-78245, 333-92115 MFS(R) Total Return Series (Service Class)
1940 Act #: 811-6632 MFS(R) Utilities Series (Service Class)
