EXHIBIT (H)(IV)
PARTICIPATION AGREEMENT
Among
GABELLI CAPITAL SERIES FUNDS, INC.
GABELLI & COMPANY, INC.
and
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of this 10th day of December, 2001 by
and among First Allmerica Financial Life Insurance Company (hereinafter, the
"Company"), a Massachusetts insurance company, on its own behalf and on behalf
of each segregated asset account of the Company set forth on Schedule A hereto,
as may be amended from time to time (each account hereinafter referred to as the
"Accounts"), and the Gabelli Capital Series Funds, Inc. ("GCSF"), a corporation
organized under the laws of Maryland, for itself and on behalf of its series
fund, Gabelli Capital Asset Fund (hereinafter referred to as the "Fund"), and
Gabelli & Company, Inc., the underwriter of the Fund (hereinafter the
"Underwriter"), a New York corporation.
WHEREAS, GCSF engages in business as an open-end management investment company
and is or will be available to act as the investment vehicle for separate
accounts established for variable life insurance and variable annuity contracts
(the "Variable Insurance Products") to be offered by insurance companies which
have entered into participation agreements with GCSF and Underwriter
(hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in GCSF may be divided into several series of
shares, each designated a "Series" and representing the interest in a particular
managed portfolio of securities and other assets; and
WHEREAS, GCSF has obtained or has filed an application to obtain an order from
the Securities and Exchange Commission ("SEC") granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of Sections 9(a),13(a),15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the "1940 Act") and
Rules 6e(b)(15) and 6e(T)(b)(15) thereunder, if any to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
life insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, GCSF is registered as an open-end management investment company under
the 1940 Act and shares of the Fund are registered under the Securities Act of
1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Gabelli Funds, LLC (hereinafter referred to as the "Adviser") is duly
registered as an investment adviser under the Federal Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and
WHEREAS, the Accounts are duly established and maintained as a segregated asset
accounts, established by resolution of the Board of Directors of the Company, on
the dates shown for such Accounts on Schedule A hereto, to set aside and invest
assets attributable to the aforesaid Contracts; and
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WHEREAS, the Company has registered or will register the Accounts under the 1940
Act and has registered or will register certain variable life insurance and
variable annuity contracts supported wholly or partially by the Accounts (the
"Contracts") under the 1933 Act, and said Contracts are listed in Schedule A
hereto, as it may be amended from time to time by mutual written agreement; and
WHEREAS, the Underwriter is registered as a broker dealer with 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. (hereinafter "NASD"); and
WHEREAS, Allmerica Investments, Inc., the underwriter for the Contracts, is
registered as a broker-dealer 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 shares in the Fund on behalf of the Accounts to
fund the aforesaid Contracts, and the Underwriter is authorized to sell such
shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, GCSF and
the Underwriter agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.2 The Underwriter agrees to sell to the Company those shares of the Fund which
the Accounts order, executing such orders on such dates as the Fund makes its
shares available for purchase pursuant to Section 1.2 hereof at the net asset
value next computed after receipt by the Fund or its designee of the order for
the shares.
1.2 GCSF agrees to make shares of the Fund available for purchase at the
applicable net asset value per share by the Company and the Accounts on those
days on which the Fund calculates its net asset value pursuant to rules of the
SEC, and the Fund shall use reasonable commercial efforts to calculate such net
asset value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Directors of the GCSF (hereinafter
"Board") may refuse to sell shares of the Fund to any person, or suspend or
terminate the offering of shares of the Fund 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 their fiduciary duties under
federal and any applicable state laws, necessary in the best interests of the
shareholders of the Fund.
1.3 GCSF and the Underwriter agree that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts. No shares of the
Fund will be sold to the general public. GCSF and the Underwriter will not sell
Fund shares to any insurance company or separate account unless an agreement
containing provisions substantially the same as Articles I and VII of this
Agreement is in effect to govern such sales. The Company agrees that the
Participation Agreement, dated May 1, 1995, among The Guardian Insurance &
Annuity Company, Inc., Guardian Investor Services Company, Inc., GCSF, Gabelli
Funds, Inc. and the Underwriter satisfies the requirements of this Section 1.3.
1.4 GCSF agrees to redeem, on the Company's request, any full or fractional
shares of the Fund held by the Company, executing such requests on a daily basis
at the net asset value next computed after receipt by GCSF or its designee of
the request for redemption, except that the Fund reserves the right to suspend
the right of redemption or postpone the date of payment or satisfaction upon
redemption consistent with Section 22(e) of the 1940 Act and any rules
thereunder, and in accordance with the procedures and policies of the Fund as
described in its then current prospectus.
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the designee of
the Fund for receipt of purchase and redemption orders from the Accounts, and
receipt by such designee shall constitute receipt by the Fund; provided that the
Company receives the order by 4:00 PM. New York time and the Fund or its
designee receives notice of such order by 9:30 AM New York time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
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1.6 The Company agrees to purchase and redeem the shares of the Fund in
accordance with the provisions of its then current prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day after receipt
of an order to purchase Fund shares. Payment shall be in federal funds
transmitted by wire by 3:00 PM New York time. If payment in Federal Funds for
any purchase is not received or is received by the Fund after 3:00 PM New York
time on such Business Day, the Company shall promptly, upon the Fund's request,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowing or
overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon such purchase
request. For purposes of Section 2.8 and 2.9 hereof, upon receipt by the Fund of
the federal funds so wired, such funds shall cease to be the responsibility of
the Company and shall become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry only. Stock
certificates will not be issued to the Company or any Account. Shares ordered
from the Fund will be recorded in an appropriate title for each Account or the
appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone, followed by
written confirmation) to the Company of any income, dividends or capital gain
distributions payable on the Fund's shares. The Company hereby elects to receive
all such income, dividends, and capital gain distributions as are payable on
Fund shares in additional shares of the Fund. The Company reserves the right to
revoke this election and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions. The Fund shall use
commercially reasonable efforts to furnish advance notice of the day such
dividends and distributions are expected to be paid.
1.10 GSCF shall make the net asset value per share for the Fund available to the
Company on each Business Day as soon as reasonably practical after the net asset
value per share is calculated (normally by 6:30 PM New York time) and shall use
commercially reasonable efforts to make such net asset value per share available
by 7 PM New York time.
1.11 The Parties hereto acknowledge that the arrangement contemplated by this
Agreement is not exclusive; the Fund's shares may be sold to other insurance
companies (subject to Section 1.3 and Article VI hereof) and the cash value of
the Contracts may be invested in other investment companies, provided, however,
that (a) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of the Fund; or (b) the Company gives the Fund and the
Underwriter 45 days written notice of its intention to make such other
investment company available as a funding vehicle for the Contracts; or (c) such
other investment company was available as a funding vehicle for the Contracts
prior to the date of this Agreement and the Company so informs the Fund and
Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company, such consent
not to be unreasonably withheld.
ARTICLE II. REPRESENTATION AND WARRANTIES
2.1 The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act; that the Contracts will be issued and sold in
compliance in all material respects with all applicable federal and state laws
and that the sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. 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
Accounts prior to any issuance or sale thereof as a segregated asset account
under the Delaware insurance laws and has registered or, prior to any issuance
or sale of the Contracts, will register the Accounts in accordance with the
provisions of the 1940 Act.
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2.2 GCSF represents and warrants that Fund 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 State of Maryland and all applicable
federal and state securities laws and that GCSF is and shall remain registered
under the 1940 Act. GCSF shall amend the Registration Statement for the Fund's
shares under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of the Fund's shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have a
Board, a majority of whom are not interested persons of the Fund, formulate and
approve any plan pursuant to Rule 12b-1 under the 1940 Act to finance
distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its operation,
including but not limited to, investments policies, fees and expenses, complies
with the insurance and other applicable laws of the various states.
2.5 GCSF represents that it is lawfully organized and validly existing under the
laws of the State of Maryland and that it does and will comply in all material
respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member of good standing
of the NASD and is registered as a broker-dealer with the SEC. The Underwriter
further represents that it will sell and distribute the Fund shares in
accordance with the laws of the State of Maryland and any applicable state and
federal securities laws.
2.7 The Advisor represents and warrants that the Advisor is and shall remain
duly registered under all applicable federal and state securities laws and that
the Adviser shall perform its obligations for the Fund in compliance in all
material respects with any applicable state and federal securities laws.
2.8 GCSF and the Underwriter represent and warrant that all of their directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and /or securities of the Fund are and shall continue to
be at all times covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund in an amount not less than the minimum coverage as required
currently by Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding company.
2.9 The Company represents and warrants that all of its directors, officers,
employees, investment advisers, and other individuals/entities employed or
controlled by the Company dealing with the money and/or securities of the Fund
are covered by a blanket fidelity bond or similar coverage, in an amount not
less that $5 million. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company. The Company agrees to
make all reasonable efforts to see that this bond or another bond containing
these provisions is always in effect, and agrees to notify the Fund and the
Underwriter in the event that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, STATEMENTS OF ADDITIONAL INFORMATION, AND PROXY
STATEMENTS: VOTING
3.1 At least annually, the Fund or its designee shall provide the Company, free
of charge, with as many copies of the current prospectus of the Fund as the
Company may reasonably request for distribution to existing Contract owners
whose Contracts are funded by shares of the Fund. The Fund or its designees
shall provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Fund Shares as the Company may reasonably request for
distribution to prospective purchasers of Contracts. If requested by the Company
in lieu thereof, the Fund or its designees 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 a 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 Fund
is supplemented or amended) to have the prospectus for the Contracts and the
prospectus for the shares printed together in one document; the Fund or its
designee to bear the cost of printing the Fund's prospectus portion of such
document for distribution to owners of existing Contracts funded by shares of
the Fund and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; provided, however, the Company shall bear all
printing expenses if such combined document is used for distribution to
prospective purchasers or to owners of existing Contracts not funded by shares
of the Fund.
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3.2 The Fund's prospectus shall state that the current Statement of Additional
Information ("SAI") for the Fund is available from the Company (or, in the
Fund's discretion, from the Fund), and the Underwriter (or the Fund) at its
expense, shall print, or otherwise reproduce, and provide a copy of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its proxy
material, reports to shareholders, and other communications to shareholders in
such quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions received
from Contract owners; and
(iii) vote Fund shares for which no instructions have been received
in the same proportion as Fund shares for which instructions
have been received, 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 or to the
extent otherwise required by law.
The Company reserves the right to vote Fund shares held in any segregated asset
account in its own right, to the extent permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges as required by the Shared Funding Exemptive Order and consistent with
any reasonable standards that the Fund may adopt.
3.6 GCSF will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular GCSF will either provide for annual meetings or
comply with Section 16 of the 1940 Act. Further, GCSF will act in accordance
with the SEC's interpretation of the requirements of Section 16(a) with respect
to periodic elections of directors or trustees and with whatever rules the SEC
may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material that
the Company develops or uses and in which the Fund or the Adviser or the
Underwriter is named, at least fifteen calendar days prior to its use. No such
material shall be used if the Fund or its designee reasonably object to such use
within fifteen calendar days after receipt of such material. The Fund or its
designee reserves the right to reasonably object to the continued use of such
material, and no such material shall be used if the Fund or its designee so
object.
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4.2 The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund in connection with the
sale of the Contracts other than the information or representations contained in
the registration statement or prospectus or SAI for the Fund shares, as such
registration statement and prospectus or SAI maybe amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee or
by the Underwriter, except with the permission of the Fund or the Underwriter or
the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall cause to be
furnished, to the Company, each piece of sales literature or other promotional
material in which the Company, and/or any Account, is named at least fifteen
calendar days prior to its use. No such material shall be used if the Company
reasonably objects to such use within fifteen calendar days after receipt of
such material. The Company reserves the right to reasonably object to the
continued use of such material and no such material shall be used if the Company
so objects.
4.4 The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, the
Accounts, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus or SAI may be amended or supplemented
from time to time, or in published reports for the Accounts which are the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, SAIs, 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 Fund or its shares, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, request for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Accounts, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 For purposes of this Article IV, the phrase "sales literature and other
promotional materials" includes, but is not limited to, any of the following
that refer to the Fund or any affiliate of the Fund: 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), sales literature
(I.E., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, reports, market
letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Fund.
ARTICLE V. FEES AND EXPENSES
5.1 The Fund and the Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund adopts and implements a
plan pursuant to Rule 12b-1 to finance distribution expenses, then, subject to
obtaining any required exemptive orders or regulatory approvals, the Fund may
make payments to the Company or to the underwriter of the Contracts if and in
amounts agreed to by the Fund in writing. In addition, nothing herein shall
prevent the parties from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Fund and/or the
Accounts.
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5.2 All expenses incident to performance by the Fund under this Agreement shall
be paid by the Fund, except as otherwise provided herein. The Fund shall see to
it that all its shares are registered and authorized for issuance in accordance
with applicable federal law and, if and to the extent deemed advisable by the
Fund, in accordance with applicable state laws, prior to their sale. The Fund
shall bear the expenses for the cost of registration and qualification of the
Fund's shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of printing (in accordance with Section
3.1) and distributing the Fund_s prospectus to prospective owner of the
Contracts and of distributing the Fund_s shareholder reports and proxy material
to Contract owners. The Company shall bear all expenses associated with the
registration, qualification, and filing of the Contracts under applicable
federal securities and state insurance laws; the cost of preparing, printing,
and distributing the Contract prospectus and statement of additional information
(if applicable); and the cost of preparing, printing and distributing annual
account statements for Contract owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND QUALIFICATION
6.1 The Fund will invest its assets in such a manner as to ensure that the
Contracts will be treated as annuity or life insurance contracts, whichever is
appropriate, under the Internal Revenue Code of 1986, as amended (the "Code")
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Code and Treasury Section 1.817-5, and any Treasury interpretations thereof,
relating to the diversification requirements for variable annuity, endowment, or
life insurance contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a breach off this
Article VI by the Fund, it will take all reasonable steps (a) to notify the
Company of such breach and (b) to adequately diversify the Fund so as to achieve
compliance within the grace period afforded by Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will use
commercially reasonable efforts to maintain such qualification (under Subchapter
M or any successor or similar provisions) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased to
so qualify or that it might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the time of
issuance shall be, treated as life insurance or annuity insurance contracts,
under applicable provisions of the Code, and that it will use commercially
reasonable efforts to maintain such treatment, and that it will notify the Fund
and the Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
ARTICLE VII. POTENTIAL CONFLICTS.
The following provisions apply effective upon (a) the issuance of the Shared
Funding Exemptive Order, and (b) investment in the Fund by a separate account of
a Participating Insurance Company supporting variable life insurance contracts.
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7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2 The Company will report any potential or existing conflicts of which it is
aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order, by providing the
Board with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund and reinvesting such assets in a different investment medium, including
(but not limited to) another Series of GCSF or submitting the question whether
such segregation should be implemented to a vote of all affected contract owners
and, as appropriate, segregating the assets of any appropriate group (I.E.
annuity contract owners, life insurance contract owners, or variable contract
owners of one or more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected contract owners the option of
making such a change; and (2), establishing a new registered management
investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision by the
Company to disregard contract owner voting instructions and that decision
represents a minority position or would prelude a majority vote, the Company may
be required, at the Fund_s election, to withdraw the affected Account_s
investment in the Fund and terminate this Agreement with respect to such Account
provided, however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as determined
by a majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular state
insurance regulator_s decision applicable to the Company conflicts with the
majority of other state regulators, then the Company will withdraw the affected
Account_s investment in the Fund and terminate this Agreement with respect to
such Account within six months after the Board informs the Company in writing
that it has determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Until the
end of the foregoing six month period, the Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a majority of the
disinterested members of the Board shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
GCSG be required to establish a new funding medium for the Contracts. The
Company shall not be required by Section 7.3 to establish a new funding medium
for the Contract if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Accounts' investment in the Fund 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 by any such material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
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7.7 If and to the extent the Shared Funding Order contains terms and conditions
different from Sections, 3.4, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement,
then the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with the Shared Funding
Exemptive Order, and Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and 7.5 of the
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in the Shared Funding
Exemptive Order or any amendment thereto. 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 Shared Funding
Exemptive Order) on terms and conditions materially different from those
contained in the Shared Funding Exemptive Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable; and (b) Sections 3.4, 3.5,
3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 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(a). The Company agrees to indemnify and hold harmless GCSF and the
Underwriter and each of their officers and directors and each person, if any,
who controls GCSF or the Underwriters within the meaning of Section 15 of the
1933 Act(collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all loses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or
litigation(including legal and other expenses), to which the Indemnified Parties
may become subject under any statue or 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
Fund_s shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement, prospectus, or statement of
additional information for the Contracts or contained in the
Contracts or sales literature for the Contracts (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 reliance upon and in
conformity with information furnished to the Company by or on
behalf of GCSF for use in the Registration Statement,
prospectus or statement of additional information for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the
Fund not supplied by the Company or persons under its
control), or wrongful conduct of the Company or persons under
its authorization or control, with respect to the sale or
distribution of the Contracts or Fund Shares; or
-8-
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus, or sales literature of the Fund 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 statements therein not
misleading if such statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement (including a failure, whether unintentional
or in good faith or otherwise, to comply with the
qualification requirements specified in Article IV of the
Agreement); or
(v) arise out of or result from any material breach off 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,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Company of any such claim shall not
relieve the Company from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against an
Indemnified Party, the Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action and to settle the claim at its own expense provided, however, that no
such settlement shall, without the Indemnified Parties' written consent, include
any factual stipulation referring to the Indemnified Parties or their conduct.
After notice from the Company to such party of the Company_s election to assume
the defense thereof, the Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the Company will not be liable to
such party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2 INDEMNIFICATION BY THE UNDERWRITER
8.2(a). The Underwriter 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 (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against any and all
loses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Underwriter) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under any statute
or 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 Fund_s shares or the Contracts; and
-9-
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Registration Statement or prospectus or SAI or sales
literature of 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, 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 reliance upon and in conformity with
information furnished to the Underwriter or Fund by or on
behalf of the Company for use in the Registration Statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or wrongful conduct of GCSF or Underwriter or persons
under their control with respect to the sale or distribution
of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement,
prospectus or sales literature covering the Contracts, 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 Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter,
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation to which
an Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
or such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.2(c). The Underwriter shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action and to settle the claim at its own expense; provided,
however, that no such settlement shall, without the Indemnified Parties' written
consent, include any factual stipulation referring to the Indemnified Parties or
their conduct. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
-10-
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Accounts.
8.3 INDEMNIFICATION BY GCSF
8.3(a). GCSF 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 (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in settlement with the
written consent of GCSF) or litigation (including legal and other expenses) to
which the Indemnified Parties may be required to pay or may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, expenses, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article VI
of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by GCSF in this Agreement
or arise out of or result from any other material breach of
this Agreement by GCSF;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). GCSF shall not be liable under this indemnification provision with
respect to any losses, claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such Indemnified
Party's willful misfeasance, bad faith, 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.
8.3(c). GCSF shall not be liable under this indemnification provision with
respect to any claim made against an Indemnified Party unless such Indemnified
Party shall have notified GCSF in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify GCSF of any such claim shall not relieve GCSF from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, GCSF will be
entitled to participate, at its own expense, in the defense thereof. GCSF also
shall be entitled to assume the expense thereof, with counsel satisfactory to
the party named in the action and to settle the claim at its own expense;
provided, however, that no such settlement shall, without the Indemnified
Parties' written consent, include any factual stipulation referring to the
Indemnified Parties or their conduct. After notice from GCSF to such party of
the GCSF's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and GCSF
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
-11-
8.3(d). The Company and the Underwriter agree promptly to notify GCSF of the
commencement of any litigation or proceeding against it or any of its respective
officers or directors in connection with the Agreement, the issuance or sale of
the Contracts, the operation of the Accounts, or the sale or acquisition of
shares of the Fund.
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.
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 the statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith
ARTICLE X. TERMINATION
10.1 This Agreement shall continue in full force and effect until the first to
occur of:
(a) termination by any party, for any reason with respect to the Fund, by
six (6) months' advance written notice delivered to the other parties;
or
(b) termination by the Company by written notice to the Fund and the based
upon the Company's determination that shares of the Fund are not
reasonably available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter in the event the Fund's shares are not registered, issued
or sold in accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying investment media
of the Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that formal
administrative proceedings are instituted against the Company by the
NASD, the Sec, the Insurance Commissioner or like official of any state
or any other regulatory body regarding the Company_s duties under this
Agreement or related to the sale of the Contracts, the operation of any
Account, or the purchase of the Fund shares, provided, however, that
the Fund or Underwriter determines in its sole judgement exercised in
good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(e) termination by the Company in the event that formal administrative
proceedings are instituted against the Fund or Underwriter by the NASD,
the SEC, or any state securities or insurance department or any other
regulatory body, provided, however, that the Company determines in its
sole judgement exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Fund or Underwriter to perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the Fund and the
Underwriter in the event that the Fund ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified in Article VI
hereof, or if the Company reasonably believes that the Fund may fail to
so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to the Company
in the event that the Contracts fail to meet the qualifications
specified in Article hereof; or
(h) termination by either the Fund or the Underwriter by written notice to
the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgement 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
-12-
(i) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgement
exercised in good faith, that the Fund or the Underwriter 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
(j) termination by the Fund or the Underwriter by written notice to the
Company, if the Company gives the Fund and the Underwriter the written
notice specified in Section 1.11 hereof and at the time such notice was
given there was no notice of termination outstanding under any other
provision of this Agreement; provided, however, any termination under
this Section 10.1(j) shall be effective forty-five days after the
notice specified in Section 1.11 was given.
10.2 EFFECT OF TERMINATION. Notwithstanding any termination of this Agreement,
the Fund and the Underwriter shall, at the option of the Company, continue to
make available additional shares of the Fund pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, the owners of the Existing Contracts may be permitted
to reallocate investments in the Fund, redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts for a reasonable period of time not to exceed one year after
the date of notice of termination, in order to permit the Company to obtain all
regulatory and/or Contract owner approvals deemed appropriate to transfer
Contract owner monies from the Fund to other allocation options available under
the Existing Contracts. The parties agree that this Section 10.2 shall not apply
to any termination under Article VII and the effect of such Article VII
termination shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any termination under
Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company_s assets held in the
Accounts) except (i) as necessary to implement Contract Owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to the Fund that was
otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party_s obligation
under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified mail
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.
If to the Fund:
Gabelli Capital Series Funds, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Vice President
-13-
If to the Company:
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Hug, Vice President
If to Underwriter:
Gabelli & Company, Inc.
Xxx Xxxxxxxxx Xxxxxx
Xxx XX 00000
Attention: Xxxxx X. Xxxxxx
ARTICLE XII. MISCELLANEOUS
12.1 All persons dealing with the GCSF must look solely to the property of the
Fund, as though the Fund had separately contracted with the Company and the
Underwriter for the enforcement of any claims against GCSF. The parties agree
that neither the Board, officers, agents nor shareholders assume any personal
liability or responsibility for obligations entered into by or on behalf of GCSF
or the Fund.
12.2 Subject to the requirements of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Contracts and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement,
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 such information may come into the public domain.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
12.5 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.
12.6 Each party hereto shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Delaware Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with
variable annuity laws and regulations and any other applicable law or
regulations.
12.7 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.
12.8 This Agreement or any of the rights and obligations hereunder may not be
assigned by any party without the prior written consent of all parties hereto.
-14-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
COMPANY: First Allmerica Financial Life Insurance Company
By /S/ XXX X. XXXXX
------------------
Title: VICE PRESIDENT
-----------------
Date: 12-12-01
------------
FUND: Gabelli Capital Series Funds, Inc.
By: /S/ XXXXX XXXXXX
------------------
Title: VICE PRESIDENT
-----------------
Date: 12/10/01
------------
UNDERWRITER: Gabelli & Company, Inc.
By: /S/ XXXXX XXXXXX
------------------
Title: VICE PRESIDENT
-----------------
Date: 12/10/01
------------
-15-
= SCHEDULE A
Name of Separate Account and Contracts Funded by
Date established by Board of Directors Separate Account
Fulcrum Separate Account - June 13, 1996 Fulcrum Variable Annuity
(811-7799) (333-11377)
-16-
