EXHIBIT 99.3(d)
APPENDIX B
Shared Services Agreement
AGREEMENT made this 5th day of August, 2010 between Commonwealth Annuity and
Life Insurance Company, a Massachusetts corporation ("Commonwealth Annuity") and
Epoch Securities, Inc., a Delaware corporation ("Epoch").
WHEREAS, Epoch and Commonwealth Annuity have entered into a Consolidated
Underwriting and Administrative Services Agreement dated April 30, 2010, and
Epoch, Commonwealth Annuity, and Commonwealth Annuity's subsidiary, First
Allmerica Financial Life Insurance Company ("First Allmerica") entered into a
substantially identical Consolidated Underwriting and Administrative Services
Agreement with Epoch and Commonwealth dated April 30, 2010 (collectively, the
"Consolidated Underwriting and Administrative Services Agreements"), as may be
amended from time-to-time, pursuant to which Epoch serves as principal
underwriter for certain variable annuity contracts or variable insurance
policies (the "Variable Contracts"), which are issued by Commonwealth Annuity,
First Allmerica, and their respective separate accounts;
WHEREAS, Epoch, an affiliate of Commonwealth Annuity, is registered as a
broker-dealer with the Securities and Exchange Commission ("SEC") under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member of the
Financial Industry Regulatory Authority, Inc. ("FINRA");
WHEREAS, pursuant to the terms of the Consolidated Underwriting and
Administrative Services Agreements, Epoch has assumed full responsibility for
the securities activities of all "persons associated" (as that term is defined
in Section 3(a)(18) of the 0000 Xxx) with Epoch and engaged directly or
indirectly in the Variable Contract operations (the "associated persons"), and
is responsible for the continued compliance by itself and its associated persons
with FINRA rules and Federal and state securities laws, to the extent applicable
in connection with the distribution of the Variable Contracts and the Variable
Contract operations;
WHEREAS, pursuant to the terms of the Consolidated Underwriting and
Administrative Services Agreements, Commonwealth Annuity has agreed to perform
certain administrative services on behalf of Epoch, and may from time-to-time
provide Epoch facilities and the services of personnel sufficient to conduct the
functions and services contemplated under the Consolidated Underwriting and
Administrative Services Agreements;
WHEREAS, Epoch and Commonwealth Annuity may each from time-to-time perform
services on behalf of the other that may be unrelated to the services provided
under the Consolidated Underwriting and Administrative Services Agreements (the
"Additional Services");
WHEREAS, Commonwealth Annuity intends to assume all costs of Epoch associated
with the provision of services and facilities related to the Consolidated
Underwriting and Administrative Services Agreements, and desires to do so in a
manner consistent with regulatory guidance, including NASD Notice to Members
03-63;
NOW, THEREFORE, in consideration of the covenants and mutual promises of the
parties made to each other, it is hereby covenanted and agreed as follows:
1. Commonwealth Annuity will bear the cost of all services and expenses,
including legal services and expenses, filing fees, and other fees incurred in
connection with distribution and administration of the Variable Contracts
pursuant to the terms of the Consolidated Underwriting and Administrative
Services Agreements (the "Covered Expenses"), including but not limited to:
(a) registering the separate accounts and Variable Contracts and qualifying the
Variable Contracts for sale in the various states;
(b) preparing, printing, and distributing all registration statements and
prospectuses (including amendments), Variable Contracts, notices, periodic
reports, and proxy solicitation material;
(c) preparing, printing and distributing advertising and sales literature used
by Epoch or furnished by Epoch to broker-dealers in connection with
offering the Variable Contracts;
(d) all costs associated with the Variable Contract compliance function
including, but not limited to, FINRA advertising costs, fees and expenses
associated with qualifying and licensing associated persons with Federal
and state regulatory authorities and with FINRA and the performance of
compliance-related administrative services;
(e) sales commissions and other compensation, if any, due to broker-dealers for
the sale of Variable Contracts or to other persons for activities relating
to the sale of the Variable Contracts;
(f) the services of personnel sufficient for Epoch to conduct the functions and
services under the Consolidated Underwriting and Administrative Services
Agreements, as set forth in Schedule 1; and
(g) such office and administrative facilities, including, without limitation,
office space, telephones, copy services, and computers and other
facilities, as set forth in Schedule 1 (collectively, "the Facilities")
necessary for Epoch to conduct the functions and provide the services
anticipated under the Consolidated Underwriting and Administrative Services
Agreements.
Additionally, Commonwealth Annuity shall, as agent for Epoch, and at
Commonwealth Annuity's expense:
(a) maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the
1934 Act all books and records required to be maintained by Epoch in
connection with the offer and sale of the Variable Contracts, which books
and records shall remain the property of Epoch, and shall at all times be
subject to inspection by the SEC in accordance with Section 17(a) of the
1934 Act and by all other regulatory bodies having jurisdiction over the
Variable Contracts; and
(b) send a written confirmation for each Variable Contract transaction
reflecting the facts of the transaction and showing that it is being sent
by the Company on behalf of Epoch (acting in the capacity of principal
underwriter for the Variable Contracts), in conformance with the
requirements of Rule 10b-10 of the 1934 Act.
2. The parties anticipate that the personnel described in Section 1(f), above,
shall be from the departments of Commonwealth Annuity identified on Schedule 1
hereto, and anticipate that the personnel made available to Epoch will dedicate
to Epoch the percentage of their professional time indicated on Schedule 1. The
parties agree that a reasonable allocation of the cost of providing the
Facilities to Epoch should be based upon an average of the estimated time the
Commonwealth personnel will devote to activities related to the business of
Epoch, as set forth in Schedule 1, as the parties believe that this will most
closely approximate the actual use of the Facilities by Epoch.
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3. The Covered Expenses and other expenses incurred by Commonwealth Annuity
under this Agreement, including all costs attributable to or allocated to Epoch
under Schedule 1, shall be the sole obligation of and shall be paid by
Commonwealth Annuity. Commonwealth Annuity agrees that Epoch has no obligation,
directly or indirectly, to compensate or reimburse Commonwealth Annuity for any
costs and expenses incurred by Commonwealth Annuity or reimbursed by
Commonwealth Annuity in connection with this Agreement. Commonwealth Annuity
represents and warrants to Epoch that it has adequate resources independent of
Epoch to assume the obligations of Commonwealth Annuity as contemplated herein.
Commonwealth Annuity agrees to make available to Epoch upon request financial
information to demonstrate the adequacy of its resources.
Notwithstanding the foregoing, in the event that Commonwealth Annuity fails
to pay a Covered Expense, Epoch will include that expense in its net capital
computation by adjustments which reduce net capital and increase aggregate
indebtedness by the amount of such unpaid expense.
4. As set forth above, Commonwealth Annuity shall reimburse Epoch fully and
completely for all expenses incurred by Epoch for distribution services,
administration services, and other services in connection with the Variable
Contracts pursuant to the terms of the Consolidated Underwriting and
Administrative Services Agreements; provided, however, if Epoch receives
compensation from any third party in connection with such services, and such
services have been or will be directly or indirectly provided by Commonwealth
Annuity, Epoch shall pay such compensation to Commonwealth Annuity.
5. To the extent that Commonwealth Annuity or Epoch provide Additional
Services to the other party that are not in connection with the distribution or
administration of the Variable Contracts, the actual costs and expenses for such
Additional Services shall be allocated between the parties as may be mutually
agreed upon by the parties. Any costs and expenses allocated to Epoch will be
captured by the categories and reflected as expenses of Epoch on its financial
statements and reports that are submitted to the Securities and Exchange
Commission, FINRA, and the states.
6. Each party hereto shall each comply with all applicable provisions of the
Investment Company Act of 1940, Securities Act of 1933 and of all Federal and
state securities and insurance laws, rules and regulations governing the
issuance, sale, and administration of the Variable Contracts. Each party hereto
agrees to furnish any other state insurance commissioner or regulatory authority
with jurisdiction over the Variable Contracts with any information or reports in
connection with services provided under this Agreement which may be requested in
order to ascertain whether operations of Commonwealth Annuity or Epoch are being
conducted in a manner consistent with applicable statutes, rules and
regulations.
7. The parties acknowledge that their respective rights and obligations
constitute full consideration for this Agreement and agree that, except as
expressly provided herein, no fees or other charges are payable to the other for
the provision of services under this agreement.
8. This Agreement shall upon execution become effective as of the date first
written above, and
(a) unless otherwise terminated, this Agreement shall continue in effect
from year-to-year;
(b) this Agreement may be terminated by either party at any time upon
giving 60 days' written notice to the other party; and
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(c) this Agreement may be terminated at any time by mutual consent of
Commonwealth Annuity and Epoch.
9. Epoch will notify its local FINRA district office upon entering into a new
expense sharing agreement, or materially amending this agreement.
10. This Agreement shall be governed by and construed in accordance with the
laws of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx Xxxxxxx
--------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
EPOCH SECURITIES, INC.
By: /s/ XXXXXX X. XXXXXX
--------------------------
Name: XXXXXX X. XXXXXX
Title: Chief Compliance Officer
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SCHEDULE 1
1. PERSONNEL
DEPARTMENT NUMBER OF PERSONS ALLOCATED PERCENTAGE OF TIME
--------------------- ----------------- ----------------------------
COMPLIANCE DEPARTMENT 3 10%
MARKETING 2 10%
CORPORATE/EXECUTIVE 1 5%
OPERATIONS 1 5%
2. FACILITIES (ALLOCATED AVERAGE PERCENTAGE = 10%)
Office Space
Furniture/Equipment
Postage/printing/mailings/sundry office supplies
Photocopiers, other office equipment, telephone equipment
Information Systems and Technology (IT--computer systems, data processing)
Telecommunications-voice
Travel/Entertainment
Advertising/Promotional/Corporate Marketing
Meetings/Conferences
Memberships
Education/Training
Goods and Services
Donations
Miscellaneous business development
Miscellaneous Purchases
Taxes/licenses/fees
Miscellaneous Corporate Services
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