Exhibit 3a
WHOLESALING AGREEMENT
AGREEMENT dated as of November _____, 1996 by and between ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY COMPANY, a Delaware insurance company (the
"Company"), ALLMERICA INVESTMENTS, INC., a Massachusetts corporation (the
"Underwriter"), Xxxxxx Distributors, Inc., a Delaware corporation ("KDI"), ZKI
Agency, Inc., a Delaware corporation ("ZKIA" and , together with KDI,
collectively, the "Wholesaler"), and the insurance agency affiliates of the
Wholesaler listed on Schedule 1 to this Agreement (hereinafter referred to as
the "Wholesaler Agency Affiliates").
WITNESSETH:
WHEREAS, the Company has registered or proposes to register with the Securities
and Exchange Commission interests in certain variable annuity contracts and
variable life insurance contracts under the Securities Act of 1933 and proposes
to issue and sell such contracts through the Underwriter acting as the principal
underwriter for such contracts; and
WHEREAS, the Company, the Underwriter and the Wholesaler desire to establish an
arrangement whereby the Wholesaler will act as the wholesaler for such variable
annuity contracts and variable life insurance contracts and, as such, will
recruit business firms to distribute such contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Underwriter and the Wholesaler hereby agree as follows:
1. DEFINITIONS
a. ACCOUNT -- Each and any separate account established by the Company and
listed on Schedule 2 to this Agreement, as amended from time to time. The
phrase "Account supporting the Contracts" or "Account supporting a class of
Contracts" shall mean the separate account identified in such Contracts as
the separate account to which the Purchase Payments made under such
Contracts are allocated and as to which income, gains and losses, whether
or not realized, from assets allocated to such separate account, are, in
accordance with such Contracts, credited to or charged against such
separate account without regard to other income, gains, or losses of the
Company or any other separate account established by the Company.
b. CONTRACTS -- The variable annuity contracts and variable life insurance
contracts described more specifically on Schedule 3 to this Agreement, as
amended from time to time. The term "Contracts" shall include various
Account sub-account investment options, investment options in the Company's
general account and Guarantee Period Accounts, if available, any riders to
such contracts and any other contracts offered in connection therewith or
any contracts for which such Contracts may be exchanged or converted. The
phrase "a class of Contracts" shall mean those variable annuity contracts
or variable life insurance contracts, as the case may be, issued on the
same policy form or forms and covered by the same Registration Statement,
as shown on Schedule 3 to this Agreement.
c. REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the SEC
under the 1933 Act, or currently effective post-effective amendment
thereto, relating to a class of Contracts, including financial statements
included in, and all exhibits to, such registration statement or
post-effective amendment. (For purposes of Sections 5.a. and 11 of this
Agreement, however, the term "Registration Statement" means any document
that is or at any time was a Registration Statement within the meaning of
this Section 1.c.).
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d. PROSPECTUS -- The prospectus and any statement of additional
information included within a Registration Statement, except that, if the
prospectus and statement of additional information most recently filed with
the SEC pursuant to Rule 497 under the 1933 Act after the date on which the
Registration Statement became effective differs from the prospectus and
statement of additional information included within the Registration
Statement at the time it became effective, the term "Prospectus" shall
refer to the most recently filed prospectus and statement of additional
information filed under Rule 497 under the 1933 Act from and after the date
on which they each shall have been filed. (For purposes of Sections 5.a.
and 11 of this Agreement, however, the term "any Prospectus" means any
document that is or at any time was a Prospectus within the meaning of this
Section x.x.).
e. FUND --Xxxxxx Investors Fund.
f. FUND REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the SEC
under the 1933 Act, or currently effective post-effective amendment
thereto, for shares of the Fund. (For purposes of Section 11 of this
Agreement, however, the term "Fund Registration Statement" means any
document that is or at any time was a Fund Registration Statement within
the meaning of this Section l.f.).
g. FUND PROSPECTUS -- At any time while this Agreement is in effect, the
prospectus and statement of additional information for the Fund most
recently filed with the SEC pursuant to Rule 497 under the 1933 Act. (For
purposes of Section 11 of this Agreement, however, the term "Fund
Prospectus" means any document that is or at any time was a Fund Prospectus
within the meaning of this Section l.g.).
h. 1933 ACT -- The Securities Act of 1933, as amended.
i. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
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j. 1940 ACT -- The Investment Company Act of 1940, as amended.
k. SEC -- The Securities and Exchange Commission.
l. NASD -- The National Association of Securities Dealers, Inc.
m. REGULATIONS -- The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or thereafter promulgated, and as they may
be amended from time to time.
n. TERRITORY -- The fifty states of the United States, the District of
Columbia, and all other territories of the United States.
o. STATE -- Any state or commonwealth of the United States, the District
of Columbia or any other territory of the United States. Provided,
however, that the term "State" shall not include the states of New York and
Hawaii.
p. BROKER-DEALER -- An entity registered as a broker-dealer and licensed
as a life insurance agent or affiliated with an entity so licensed, and
recruited by the Wholesaler and subsequently authorized by the Company and
the Underwriter to distribute the Contracts pursuant to a sales agreement
with the Company and the Underwriter entered into in accordance with
Section 3 of this Agreement.
q. ASSOCIATED PERSON -- This term as used in this Agreement shall have the
meaning assigned to it in the 1934 Act.
r. REPRESENTATIVE -- An Associated Person of the Wholesaler or a Broker-
Dealer registered with the NASD as a registered representative or principal
of the Wholesaler or Broker-Dealer, as the case may be.
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s. PURCHASE PAYMENT -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
t. PROCEDURES -- The administrative procedures prepared and distributed by
the Company, as such may be amended or supplemented from time to time,
relating to the solicitation, sale and delivery of the Contracts. Provided,
however, that Broker-Dealers shall only be responsible for compliance with
those Procedures which have been furnished to them in writing.
u. PARTICIPATION AGREEMENT -- The agreement dated as of November,
1996, among the Company, KDI, Zurich Xxxxxx Investments and the Fund
relating to the investment of assets of the separate accounts of the
Company in the Fund.
2. APPOINTMENT AND WHOLESALING RIGHTS
a. The Company hereby authorizes the Wholesaler to represent the Company
in the wholesaling activities contemplated by this Agreement. Where
required by relevant state insurance law, the Company hereby appoints the
Wholesaler as an agent under such state insurance laws to represent the
Company in the wholesaling activities contemplated by this Agreement. In
those states in which the Wholesaler is not licensed as an insurance agent
and the relevant state insurance law requires that the Wholesaler be
licensed as an insurance agent, the Company hereby appoints the appropriate
entity or individual ("Wholesaler Agency Affiliate") affiliated with the
Wholesaler (as set forth on Schedule 1 to this Agreement, as such Schedule
may be amended from time to time by the Wholesaler to reflect changes in
the licensing status, if any, as required by relevant state insurance law
of the Wholesaler or Wholesaler Agency Affiliates) as its agent under the
insurance laws to engage in such wholesaling activities. The Underwriter
hereby authorizes the Wholesaler under applicable securities laws to engage
in the activities contemplated in this Agreement relating to the
wholesaling of the Contracts for which the Underwriter acts or may act as
principal underwriter.
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In jurisdictions where neither the Wholesaler nor any Wholesaler Agency
Affiliate is licensed as contemplated by the first paragraph of this
Section 2.a., when requested in writing by the Wholesaler, the Company will
perform such wholesaling activities related to the Contracts contemplated
by this Agreement as are mutually agreed upon by the Company and the
Wholesaler. Any such wholesaling activities will be performed by the
Company as agent and for the benefit of the Wholesaler, until such time as
the Wholesaler notifies the Company and the Underwriter that the Wholesaler
or its Wholesaler Agency Affiliate is so licensed. The Company shall be
compensated by the Wholesaler for its performance of such wholesaling
activities on such basis as is mutually agreed upon by the Company and the
Wholesaler.
b. The Wholesaler (both on its own behalf and on behalf of Wholesaler
Agency Affiliates) undertakes to use its best efforts to recruit Broker-
Dealers in accordance with Section 3 of this Agreement, consistent with
market conditions and in compliance with its responsibilities under the
federal securities laws and NASD rules and regulations. The obligations of
the Wholesaler and Wholesaler Agency Affiliates hereunder are further
subject to the accuracy of the representations and warranties of the
Company and the Underwriter contained in this Agreement and to the
performance by the Company of its obligations hereunder.
c. The appointment and authorization of the Wholesaler and Wholesaler
Agency Affiliates to engage in wholesaling activities pursuant to this
Agreement is exclusive as to the Contracts listed on Schedule 3, as amended
from time to time in accordance with Section 2.e. of this Agreement.
Neither the Company nor the Underwriter shall authorize any other person
(as principal underwriter or otherwise) to engage in wholesaling or
distribution activities with respect to the Contracts or to recruit
business firms to engage in wholesaling or distribution activities with
respect to the Contracts (other than business firms recommended by the
Wholesaler pursuant to Section 3 of this Agreement) without the
Wholesaler's prior written consent, nor shall the Company or the
Underwriter, without the Wholesaler's prior written consent, separately
engage in wholesaling or distribution activities relating to the Contracts.
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The Company shall design the Contracts, and any amendments or riders
thereto, subject to approval by the Wholesaler. Throughout the term of
this Agreement, the Contracts shall be issued and offered for sale by the
Company and the variable portion thereof shall be supported by the
Accounts. The Company alone shall be responsible for filing the initial
Registration Statements and any amendments thereto with the SEC in
accordance with the 1933 Act, 1934 Act, 1940 Act and the Regulations to
register interests in each class of Contracts. The Company will not make
any amendment or rider to the Contracts or a class of Contracts, or file a
Registration Statement, or make an amendment to a Registration Statement or
supplement to a Prospectus, without the Wholesaler having been given the
opportunity to review any such filing, amendment, rider or supplement.
However, such opportunity to review shall not make the Wholesaler
responsible for the content of any such filing, amendment, rider or
supplement; the Company alone shall be responsible for such content.
The Company shall register its Accounts with the SEC. All amounts
available under the Contracts shall be invested only in the Fund (through
the Account(s) supporting the Contracts) and/or allocated to the Company's
general account, or to one or more of the Guarantee Period Accounts
referred to in the Prospectus, provided that such amounts may also be
invested in an investment company or investment vehicle other than the Fund
if: (1) such other investment company is advised by the Fund's investment
adviser; (2) the Fund and/or Wholesaler, in their sole discretion, consents
to the use of such other investment company or investment vehicle; (3)
there is a substitution of the Fund made in accordance with Section 10.1(e)
of the Participation Agreement; or (4) the Participation Agreement is
terminated pursuant to Article X of the Participation Agreement. The
Company will not take action to operate any Account or any subaccount(s) of
an Account, as a management investment company under the 1940 Act without
the Fund's and Wholesaler's prior written consent.
All assets in the Guarantee Period Accounts referred to in the Prospectus
shall be managed by Zurich Investment Managment, Inc. ("ZIM") pursuant to
the Investment Management Agreement being executed
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contemporaneously herewith by the Company and ZIM for so long as such
Investment Management Agreement is in effect.
d. The Company shall obtain appropriate authorizations, to the extent
necessary, whether by registration, qualification, approval or otherwise,
for the issuance and sale of the Contracts (including all investment
options) in each State in the Territory (provided, however, that it shall
be within the Company's discretion whether to obtain such authorization in
Guam). The Company shall also use its best efforts to obtain any
additional state regulatory approvals necessary for the sale and issuance
of the Contracts including, without limitation, approvals required under
California Insurance Bulletin 95-2. From time to time, the Company shall
notify the Wholesaler in writing of all States in the Territory in which
the Contracts can then lawfully be offered. To the extent that the Company
is not authorized to issue the Contracts in any State in the Territory, the
Company shall employ all reasonable efforts to obtain such authorization in
such State (provided, however, that it shall be within the Company's
discretion whether to obtain such authorization in Guam).
e. The Wholesaler may unilaterally amend Schedule 1 from time to time
pursuant to Section 2.a. of this Agreement. The parties to this Agreement
may amend Schedules 2 and 3 to this Agreement from time to time by mutual
agreement to reflect changes in or relating to the Contracts and the
Accounts and to add new classes of variable annuity contracts and variable
life insurance contracts to be issued by the Company or for which the
Wholesaler will act as wholesaler. Schedule 2 to this Agreement will be
automatically amended by the Company from time to time to reflect the
addition and deletion of subaccounts and Fund portfolios. The provisions
of this Agreement shall be equally applicable to each such class of
Contracts, unless the context otherwise requires. Schedule 4 to this
Agreement may be amended only by mutual agreement of the parties to this
Agreement pursuant to Section 9 of this Agreement.
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3. RECRUITMENT OF BROKER-DEALERS AND RELATED RESPONSIBILITIES
a. The Company and the Underwriter hereby authorize the Wholesaler and any
Wholesaler Agency Affiliates to contact and recommend business firms to act
as Broker-Dealers for the sale of the Contracts. The Company shall have the
right to reject any such recommendation, but shall not do so arbitrarily or
unreasonably, and any such rejection shall be in writing and state the
reasons therefor.
b. The Company and the Underwriter shall have the responsibility for: (i)
executing appropriate sales agreements with the business firms recommended
by the Wholesaler or Wholesaler Agency Affiliates and (ii) appointing such
business firms, and/or Associated Persons of such firms, as insurance
agents of the Company in those States where such business firms and/or
Associated Persons possess insurance agent licenses. None of the
Wholesaler, the Wholesaler Agency Affiliates, the Company or the
Underwriter shall have responsibility for, or bear the cost of, any
registration or licensing of Broker-Dealers or any of their Associated
Persons with the SEC, NASD or any state insurance, governmental or
regulatory agency. The costs of appointment shall be borne as provided in
Section 9.c. hereof. The Company shall maintain the appointment records of
all agents appointed by the Company to distribute the Contracts or, if
required by relevant state law, to engage in the wholesaling activities
contemplated by this Agreement. The Company shall provide KDI with a
complete listing of all agents appointed by the Company to distribute the
Contracts and shall provide KDI with an updated listing at least monthly.
c. Any sales agreement entered into by the Company and/or the Underwriter
with a Broker-Dealer shall provide that:
(i) The Broker-Dealer (or an affiliated person duly registered as a
broker-dealer with the SEC) shall train, supervise, and be solely
responsible for the conduct of all of its Associated Persons in the
proper method of solicitation, sale and delivery of the Contracts for
the purpose of complying on a continuous basis with
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the NASD Rules of Fair Practice and with federal and state securities
and insurance law requirements applicable in connection with the
offering and sale of the Contracts;
(ii) Purchase Payments for the Contracts shall be made payable to the
Company and shall be delivered together with all applications and
related information in accordance with the Procedures;
(iii) The Broker-Dealer and/or its duly licensed insurance agency
affiliates shall be solely responsible for all compensation paid to
its Representatives and all related tax reporting that may be required
under applicable law;
(iv) The Broker-Dealer and its Representatives shall not use, develop
or distribute any promotional, sales or advertising material that has
not been approved in writing by the Company, the Underwriter and the
Wholesaler and filed with the appropriate governmental or regulatory
agencies; and
(v) The Broker-Dealer shall not have authority, on behalf of the
Company, the Underwriter, the Wholesaler or the Wholesaler Agency
Affiliates, to make, alter or discharge any Contract or other
contract entered into pursuant to a Contract; to waive any Contract
forfeiture provision; to extend the time of paying any Purchase
Payment; to receive any monies or Purchase Payments (except for the
sole purpose of forwarding monies or Purchase Payments to the
Company); or to expend, or contract for the expenditure of, funds of
the Company, the Underwriter, the Wholesaler or the Wholesaler
Agency Affiliates.
d. The Wholesaler and Wholesaler Agency Affiliates shall provide such
assistance to the Company in the appointment procedure applicable to
Broker-Dealers and their Representatives as may be reasonably requested by
the Company.
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e. The Wholesaler shall train, supervise, and be solely responsible for
the conduct of all of its Associated Persons (including Wholesaler Agency
Affiliates, but not Broker-Dealers or their Representatives unaffiliated
with the Wholesaler or the Wholesaler Agency Affiliates), for the purpose
of complying on a continuous basis with the NASD Rules of Fair Practice and
with federal and state securities and insurance laws applicable to the
wholesaling activities contemplated in this Agreement. The Wholesaler and
the Wholesaler Agency Affiliates shall be responsible for the maintenance
of licenses, certifications or permits that they determine to be necessary
for themselves and/or their Associated Persons pursuant to any federal or
state securities law or state insurance law.
f. None of the Wholesaler, the Wholesaler Agency Affiliates, the Company
or the Underwriter will have any supervisory responsibility (as such
supervision is contemplated by the 1934 Act or the NASD's Rules of Fair
Practice) with respect to Broker-Dealers or their Representatives. Under
no circumstances will the Wholesaler or the Wholesaler Agency Affiliates be
responsible for Broker-Dealers' or their Representatives' failure to comply
with applicable law or the Procedures.
g. The Wholesaler shall not have authority on behalf of the Company to
make, alter or discharge any Contract or other contract entered into
pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Purchase Payment; or to receive any monies or
Purchase Payments. The Wholesaler shall not expend, nor contract for the
expenditure of, funds of the Company; nor shall the Wholesaler possess or
exercise any authority on behalf of the Company other than that expressly
conferred on the Wholesaler by this Agreement.
h. The Wholesaler and the Wholesaler Agency Affiliates shall act as
independent contractors in the performance of their duties and obligations
under this Agreement and nothing contained in this Agreement shall
constitute the Wholesaler or any Wholesaler Agency Affiliate or their
respective Associated Persons as employees of the Company or the
Underwriter in connection with the wholesaling activities contemplated by
this Agreement or otherwise.
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i. It is the intention of the parties hereto that the wholesaling
activities contemplated by this Agreement shall not involve the
solicitation of any insurance business from the public, or any act or
activity which would require registration as a life insurance or variable
annuity agent dealing with the public, including without limitation,
activities or conduct involving the solicitation, negotiation, procurement,
collection or transmittal of any premium or other consideration on any
insurance policy or annuity contract, or any other act involving the
consummation or delivery of any insurance policy or annuity contract to a
policy holder or the general public.
4. MARKETING AND SALES
a. Except as otherwise agreed to by the Company and the Wholesaler, the
Wholesaler shall be responsible for the design and cost of all promotional,
sales and advertising material relating to the Contracts, which include the
marketing brochure, application, broker-dealer guide book, asset allocator
worksheet and Prospectus covers.
Prior to use with any member of the public, the Wholesaler shall provide to
the Company copies of all promotional, sales and advertising material
developed by the Wholesaler for the Company's review and written approval.
Upon receipt of such material from the Wholesaler, the Company shall be
given a reasonable amount of time to complete its review. The Company will
respond on a prompt and timely basis in approving any such material.
Failure to respond shall not relieve the Wholesaler of the obligation to
obtain the prior written approval of the Company.
In the event that the Company shall design any promotional, sales or
advertising material relating to the Contracts, the Company shall provide
to the Wholesaler copies of such material for the Wholesaler's review and
written approval. Upon receipt of such material from the Company, the
Wholesaler shall be given a reasonable amount of time to complete its
review. The Wholesaler will respond on a prompt and timely
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basis in approving any such material. Failure to respond shall not relieve
the Company of the obligation to obtain the prior written approval of the
Wholesaler.
The Underwriter shall be responsible for filing, as required, all
promotional, sales or advertising material, whether developed by the
Company, the Underwriter or the Wholesaler, with the NASD and any federal
and state securities, governmental or regulatory agencies. The Company
shall be responsible for filing, as required, such material, whether
developed by the Company, the Underwriter or the Wholesaler, with any state
insurance, governmental or regulatory agencies. Neither the Wholesaler nor
the Wholesaler Agency Affiliates shall have any responsibility for any of
the filings referred to in this paragraph.
If any such promotional, sales or advertising material names the Fund or
the Fund's investment adviser, the Company shall furnish such material to
the Fund or the Fund's distributor (if other than the Wholesaler) prior to
its use. Such material shall not be used unless written approval has been
obtained from the Fund or the Fund's distributor. Failure of the Fund or
the Fund's distributor to respond shall not relieve the Company or the
Underwriter of the obligation to obtain the prior written approval of the
Fund or the Fund's distributor.
b. The Wholesaler acknowledges that the Company shall have the right to
reject, in whole or in part, any application for a Contract, provided (i)
that there must be a reasonable basis (as determined by the Company) for
any such rejection, which basis shall be specified in writing by the
Company upon request by the Wholesaler and (ii) that the projected
profitability or lack of profitability of a Contract shall not be a basis
for rejection. In the event an application is rejected, any Purchase
Payment submitted will be returned by or on behalf of the Company to the
applicant. The Company will notify the Wholesaler and the Broker-Dealer
who submitted the Purchase Payment of such action. In the event that a
purchaser exercises his/her free look right under his/her Contract, any
amount to be refunded as provided in such Contract will be so refunded to
the purchaser by or on behalf of the Company. The Company will notify the
Wholesaler and the Broker-Dealer who solicited the sale of the Contract of
such action.
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c. The Company and the Wholesaler shall equally share the costs (other
than those borne by the Fund pursuant to the Participation Agreement) for
printing any preliminary and all definitive Prospectuses for the Contracts
and Fund Prospectuses and any supplements thereto.
d. The Wholesaler will pay the following expenses related to its
wholesaling activities contemplated by this Agreement:
(i) the compensation, if any, of its Associated Persons;
(ii) expenses associated with the initial licensing, if any, and
training of its Associated Persons involved in the wholesaling
activities;
(iii) the development, printing and mailing of any promotional, sales
or advertising material for use in connection with the distribution of
the Contracts;
(iv) the printing, mailing, and all other activities associated with
proxy solicitations;
(v) expenses associated with telecommunications with the Company at
the sites of the Wholesaler or its Associated Persons, including site
installations and purchases, leases or rentals of modems, terminals
and other hardware, and lease line telephone charges; and
(vi) any other expenses incurred by the Wholesaler or its Associated
Persons for the purpose of carrying out the obligations of the
Wholesaler hereunder.
Except for such expenses and the expenses described in Section 4.c. of
this Agreement, the Wholesaler shall not be responsible for any
expenses relating to the Contracts or distribution of the Contracts or
the processing of Contracts or applications, including without
limitation
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any expenses incurred in connection with the return of Purchase
Payments solicited by Broker-Dealers for applications rejected or not
timely received by the Company.
e. The Company will pay all expenses in connection with:
(i) the preparation and filing with appropriate governmental or
regulatory agencies of the Registration Statements and each
preliminary Prospectus and definitive Prospectus;
(ii) the preparation and issuance of the Contracts;
(iii) any authorization, registration, qualification or approval of
the Contracts required under the securities, blue-sky laws or
insurance laws of the States in the Territory;
(iv) registration fees for the Contracts payable to the SEC, the NASD
or any other governmental or regulatory agency;
(v) the mailing of Prospectuses for the Contracts and Fund
Prospectuses, any supplements thereto, as required by federal
securities laws, and periodic reports relating to the Fund or the
Accounts to Contract owners;
(vi) the preparation of administrative forms utilized in connection
with the distribution of the Contracts;
(vii) the preparation of Contract owner lists for the purposes of
proxy solicitations; and
(viii) compensation as provided in Section 9 hereof.
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f. The Company alone shall be responsible for and bear the cost of
administration of the Contracts following their issuance, including all
Contract owner service and communication activities, but the Wholesaler
shall be responsible for answering inquiries from Broker-Dealers or
Representatives regarding the investment performance of the Contracts, as
permitted by applicable law. The Company agrees that its service standards
for the Contracts shall be always equal to or better than its current
service standards for the other variable annuity and variable life
insurance contracts that it is actively marketing on the effective date of
this Agreement.
g. The Company, as agent for the Underwriter, will confirm to each
applicant for and owner of a Contract in accordance with Rule lOb-10 under
the 1934 Act its acceptance of Purchase Payments and such other
transactions as are required by Rule l0b-10 or administrative
interpretations thereunder and in accordance with Release 8389 under the
1934 Act.
h. At the end of 15 months from the later of the date (a) on which the
Company notifies the Underwriter and the Wholesaler that it has received
approval of (i) the Contract covering "Xxxxxx Gateway Elite" and (ii) the
Contract covering "Xxxxxx Gateway Custom" (collectively, the "Contracts")
from at least thirty (30) states as provided in Section 2.d. or (b) on
which both Contracts may be legally distributed under the Federal
Securities Laws, reimbursement (if any) from the Wholesaler to the Company
for development and administrative costs of the Contracts shall be computed
based on the following schedule:
Aggregate Sales Reimbursement
--------------- -------------
$150,000,000 and over $ 0
$140,000,001 - $150,000,000 $ 70,000
$130,000,001 - $140,000,000 $140,000
$120,000,001 - $130,000,000 $210,000
$110,000,001 - $120,000,000 $280,000
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$100,000,001 - $110,000,000 $350,000
$ 90,000,001 - $100,000,000 $420,000
$ 80,000,001 - $ 90,000,000 $490,000
$ 70,000,001 - $ 80,000,000 $560,000
$ 60,000,001 - $ 70,000,000 $630,000
$ 0 - $ 60,000,000 $700,000
Aggregate Sales shall be determined in accordance with Section 21.a. Any
amount payable pursuant to this Section 4.h. shall be paid within thirty
(30) days after confirmation by the Wholesaler and the Company of the
amount owed.
For purposes of calculating the above reimbursement, Aggregate Sales shall
include all sales of the Contracts from the inception of public
distribution to the end of the applicable fifteen-month computation period.
5. REPRESENTATIONS AND WARRANTIES
a. The Company and the Underwriter each represent and warrant to the
Wholesaler and each Wholesaler Agency Affiliate, on the effective date of
each Registration Statement for the Contracts (or class of Contracts) and
at each time that a Contract is sold and, with respect to Clauses (vi),
(vii), (x), and (xi) below, also on the date of this Agreement, as follows:
(i) The Registration Statement has been declared effective by the SEC
or has become effective in accordance with the Regulations.
(ii) The Registration Statements and the Prospectuses each comply in
all material respects with the provisions of the 1933 Act and the 1940
Act and the Regulations, and neither the Registration
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Statements nor the Prospectuses contain an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made; provided, however,
that none of the representations and warranties in this Clause (ii)
shall apply to statements in or omissions from the Registration
Statements or Prospectuses made in reliance upon and in conformity
with information furnished to the Company in writing by the Wholesaler
expressly for use in the Registration Statements.
(iii) Neither the Company nor the Underwriter has received any notice
from the SEC with respect to the Registration Statement or the Account
supporting the Contracts described in the Registration Statements
pursuant to Section 8(e) of the 1940 Act and no stop order under the
1933 Act has been issued and no proceeding therefor has been
instituted or threatened by the SEC.
(iv) The accountants who certified the financial statements included
in the Registration Statements and Prospectuses are independent public
accountants as required by the 1933 Act and the Regulations and such
independent public accountants shall have certified that the financial
statements included in the Registration Statements present fairly the
respective financial positions of the Company and the Account
supporting the Contracts described in the Registration Statements as
of the dates indicated; and such financial statements have been
prepared in conformity with generally accepted accounting principles
in the United States applied on a consistent basis.
(v) Subsequent to the respective dates as of which information is
given in the Registration Statement or the Prospectus, there has not
been any material adverse change in the condition, financial or
otherwise, of the Company, the Underwriter or the Account supporting
the Contracts described in the Registration Statements that would
cause such information to be materially misleading.
(vi) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware
with full power and authority to own, lease and operate its
18
properties and conduct its business in the manner described in the
Prospectus; is duly qualified to transact the business of a life
insurance company; and is in good standing, in each State in the
Territory in which the Contracts are or will be offered.
(vii) The Underwriter has been duly organized and is validly existing
as a corporation in good standing under the laws of the Commonwealth
of Massachusetts with full power and authority to own, lease and
operate its properties and conduct its business in the manner
described in the Prospectuses; is duly registered as a broker-dealer
with the SEC and with the securities commission of every State in the
Territory with which such registration is required; and is a member in
good standing with the NASD.
(viii) Each Account supporting the Contracts described in the
Registration Statements has been duly authorized and established and
is validly existing as a separate account under the insurance code of
the State of Delaware, and is duly registered with the SEC as a unit
investment trust under the 1940 Act.
(ix) The form of the Contracts has been approved to the extent
required by the Insurance Commissioner of the State of Delaware and by
the governmental agency responsible for regulating insurance companies
in each other State in the Territory in which the contracts are to be
offered.
(x) The execution and delivery of this Agreement and the consummation
of the transactions contemplated in this Agreement have been duly
authorized by all necessary corporate action by the Company and the
Underwriter and when so executed and delivered this Agreement will be
the valid and binding obligation of the Company and the Underwriter,
enforceable in accordance with its terms.
(xi) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this Agreement, will
not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the charter or bylaws of the Company or the
Underwriter, or any indenture, agreement, mortgage, deed of trust, or
other instrument
19
to which the Company or the Underwriter is a party or by which either
is bound, or violate any law, or, to the best of the Company's or the
Underwriter's knowledge, any order, rule or regulation applicable to
the Company or the Underwriter of any court or of any federal or state
regulatory body, administrative agency or any other governmental
instrumentality having jurisdiction over the Company or the
Underwriter or any of their respective properties.
(xii) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or sale
of the Contracts or for the consummation of the transactions
contemplated by this Agreement, that has not been obtained.
(xiii) The Company has filed with the SEC all statements and other
documents required for registration under the provisions of the 1940
Act and the Regulations thereunder of the Account supporting the
Contracts described in the Registration Statement, and such
registration has been effected; there are no agreements or documents
required by the 1933 Act, the 1940 Act, or the Regulations to be filed
with the SEC as exhibits to the Registration Statement, that have not
been so filed; and the Company has obtained all exemptive or other
orders of the SEC necessary to make the public offering and consummate
the sale of the Contracts pursuant to this Agreement and to permit the
operation of the Accounts supporting the Contracts described in the
Registration Statements, as contemplated in the Prospectuses.
(xiv) The Contracts have been duly authorized by the Company and
conform to the descriptions thereof in the Registration Statements and
the Prospectuses and, when issued as contemplated by the Registration
Statements, will constitute legal, validly issued and binding
obligations of the Company in accordance with their terms.
20
b. KDI and ZKIA represent and warrant to the Company on the date hereof
as follows:
(i) KDI and ZKIA have taken all action including, without limitation,
those necessary under their respective certificates of incorporation,
by-laws and applicable state corporate law, necessary to authorize the
execution, delivery and performance of this Agreement, and have taken
or will take all requisite action to enable them to perform all
transactions contemplated hereunder in accordance with the terms
hereof; and
(ii) KDI is and during the term of this Agreement shall remain duly
registered as a broker-dealer under the 1934 Act, a member in good
standing with the NASD, and duly registered as a broker-dealer under
applicable state securities laws.
6. ADDITIONAL RESPONSIBILITIES OF THE COMPANY
a. The Company shall use its best efforts:
(i) to maintain the registration of the Contracts with the SEC and any
state securities commissions of any State in the Territory where the
securities or blue-sky laws of such State require registration of the
Contracts, including without limitation using its best efforts to
prevent a stop order from being issued or if a stop order has been
issued to cause such stop order to be withdrawn;
(ii) to gain approval or other authorization of the Contract forms
where required under the insurance laws and regulations of each State
in the Territory (provided, however, that it shall be within the
Company's discretion whether to obtain such approval or authorization
in Guam); and
(iii) to keep such registration, approval and authorization in effect
thereafter so long as the Contracts are outstanding.
21
b. During the term of this Agreement the Company shall take all action
required to cause each class of Contracts to comply, and to continue to
comply, as annuity contracts or life insurance contracts, as the case may
be, and to cause the Registration Statements and the Prospectus for each
class of Contracts to comply, and to continue to comply, with all
applicable federal laws and regulations and all applicable laws and
regulations of each State in the Territory.
c. The Company, during the term of this Agreement, shall notify the
Wholesaler immediately:
(i) when each Registration Statement has become effective or any
post-effective amendment with respect to the Registration Statement
thereafter becomes effective;
(ii) of any request by the SEC for any amendment to a Registration
Statement or supplement to a Prospectus or for additional information;
(iii) of any event that makes any material statement made in a
Registration Statement or a Prospectus untrue in any material respect
or results in a material omission in a Registration Statement or a
Prospectus;
(iv) of the issuance by the SEC of any stop order with respect to a
Registration Statement or any amendment thereto, or the initiation of
any proceedings for that purpose, or for any other purpose relating to
the registration and/or offering of the Contracts (or a class of
Contracts);
(v) in which States in the Territory registration of the Contracts
(or a class of Contracts) is required under the securities or blue-sky
laws, and when such registrations have become effective.
22
d. The Company shall furnish to the Wholesaler without charge promptly
after filing five (5) copies of each Registration Statement as originally
filed and any pre-effective or post-effective amendment thereto, including
financial statements and all exhibits, including exhibits incorporated
therein by reference.
e. The Company shall timely file all reports, statements and amendments
required to be filed by or for each Account or class of Contracts under the
1933 Act and/or the 1940 Act or the Regulations.
f. The Company shall deliver to the Wholesaler, as soon as practicable
after it becomes available, the Annual Statements for the Company and for
each Account in the form filed with their respective state of domicile, and
any quarterly reports upon the Wholesaler's request.
g. The Company and the Underwriter will provide the Wholesaler access to
such records, officers and employees of the Company, the Underwriter and
each Account at reasonable times as is necessary to enable the Wholesaler
to fulfill its obligations under the federal securities laws and NASD
rules. The Wholesaler will provide the Company and the Underwriter access
to such of its records, officers and employees at reasonable times as is
necessary to enable the Company and the Underwriter to fulfill their
obligations under the federal securities laws and NASD rules.
h. The Company shall provide the Wholesaler at least monthly with a sales
report or reports and an assets under management report in such form as
shall be acceptable to both the Company and the Wholesaler. Any such sales
report shall include, among other items, a break-down of sales by
Representative, Broker-Dealer, product type and Contract state of issue.
7. CONFIDENTIALITY
a. The Company and the Underwriter acknowledge that the names and
addresses of all customers and prospective customers (for purposes of this
Section 7.a., the terms "customers" and "prospective
23
customers" shall not mean Broker-Dealers) of the Wholesaler, of its parent
company and of any affiliated person of the Wholesaler, the Wholesaler
Agency Affiliates and the names and addresses of all customers and
prospective customers of any Broker-Dealer that may come to the attention
of the Company, the Underwriter or any person affiliated with the Company
or the Underwriter solely as a result of their relationship with the
Wholesaler, its parent company or any affiliated person of the Wholesaler,
the Wholesaler Agency Affiliates or any Broker-Dealer and not from any
independent source, are confidential and shall not be used by the Company,
the Underwriter or any person affiliated with the Company or the
Underwriter for any purpose whatsoever except as may be necessary in
connection with the administration of the Contracts sold by the Broker-
Dealers, including responses to specific requests made to the Company for
service by Contract owners, efforts to prevent the replacement of such
Contracts or communications with customers concerning option rights
available under the terms of the Contracts. The restrictions set forth in
the previous sentence do not apply if and to the extent a Broker-Dealer
knowingly discloses the names and addresses of its customers or prospective
customers to the Company or the Underwriter outside the operation of this
Agreement. In no event shall the names and addresses of such customers and
prospective customers, whether disclosed to the Company or the Underwriter
by the Wholesaler or by any Broker-Dealer, be furnished by the Company, the
Underwriter or any of their affiliated persons to any other person. The
intent of this paragraph is that neither the Company nor the Underwriter,
nor persons affiliated with the Company or the Underwriter, shall utilize,
or permit to be utilized, for any purpose other than for the sale and
administration of the Contracts or for the sale and administration of other
financial products distributed or managed by the Wholesaler and/or its
affiliates, their knowledge of the Wholesaler, of its parent company or of
any affiliated person of the Wholesaler, the Wholesaler Agency Affiliates
or the identity of all customers and prospective customers, derived solely
as a result of the relationship created through the funding and sale of the
Contracts. This paragraph shall remain operative and in full force and
effect regardless of the termination of this Agreement, and shall survive
any such termination.
In addition to the foregoing, the Company and the Underwriter agree that
neither during the term of this Agreement nor after its termination shall
the names and addresses of Broker-Dealers and their
24
Representatives recruited by the Wholesaler to solicit the Contracts be
furnished by the Company, the Underwriter or any of their affiliated
persons to any other person, or be utilized by the Company, the Underwriter
or their affiliated persons for any purpose except as the Company deems
necessary or appropriate for the sale and administration of the Contracts
subject to this Agreement.
8. RECORDS
The Company, the Underwriter, the Wholesaler and the Wholesaler Agency
Affiliates shall each maintain such accounts, books and other documents as
are required to be maintained by each of them by applicable laws and
regulations and shall preserve such accounts, books and other documents for
the periods prescribed by such laws and regulations. The accounts, books
and records of the Company, the Underwriter, the Account, the Wholesaler
and the Wholesaler Agency Affiliates as to all transactions hereunder shall
be maintained so as to clearly and accurately disclose the nature and
details of the transactions, including such accounting information as is
necessary to support the reasonableness of the amounts paid by the Company
hereunder. Each party shall have the right to inspect and audit such
accounts, books and records of the other party during normal business hours
upon reasonable written notice to the other party. Each party shall keep
confidential all information obtained pursuant to such an inspection or
audit, and shall disclose such information to third parties only upon
receipt of written authorization from the other party, except as required
by law.
9. BROKER-DEALER COMPENSATION AND WHOLESALER PROMOTIONAL ALLOWANCES
a. The Company shall compensate Broker-Dealers and/or their duly licensed
insurance affiliates for sales of the Contracts by their Representatives
pursuant to Schedule 4 to this Agreement, as such Schedule may be amended
from time to time upon mutual agreement of the parties to this Agreement.
As of the effective date of this Agreement, Schedule 4 governs only
compensation and Promotional Allowances related to sales of Xxxxxx Gateway
Elite and Custom annuity Contracts. When additional Contracts are
developed
25
and offered for sale, Schedule 4 will be appropriately amended to reflect
the compensation and Promotional Allowances payable as a result of sales of
such additional Contracts. Such compensation shall be based in part on
Purchase Payments received and accepted by the Company for all Contracts
issued on applications obtained by the Broker-Dealers or any of their
respective Representatives. Additional "trail" compensation shall be paid,
as described in Schedule 4. The Company will pay compensation due Broker-
Dealers and/or their insurance affiliates in accordance with the procedures
set forth in Schedule 4. The compensation provided for in this Section 9
shall be payable to the Broker-Dealer and/or its duly licensed insurance
affiliate in accordance with the sales agreement between the Underwriter
and the Broker-Dealer for so long as the Contracts are outstanding,
regardless of whether this Agreement is still in effect. If trail
commissions are no longer payable to a Broker-Dealer because the sales
agreement between the Company and the Broker-Dealer is no longer in effect,
one-half of the trail commissions that would have been payable to the
Broker-Dealer had the sales agreement remained in effect shall be paid
instead to ZKIA for so long as the Contracts on which the trail commissions
are payable remain in effect, regardless of whether this Agreement is still
in effect. In addition to the compensation payable to the Broker-Dealers
and their insurance affiliates, the Company shall pay the Wholesaler a
Promotional Allowance as a reimbursement for its expenses incurred relating
to its wholesaling activities contemplated by this Agreement. Promotional
Allowances shall be payable to the Wholesaler in such amount and in
accordance with the procedures as set forth in Schedule 4, as such Schedule
may be amended from time to time upon mutual agreement of the parties to
this Agreement. Promotional Allowances shall be payable to the Wholesaler
for so long as the Contracts are outstanding, regardless of whether this
Agreement and the Participation Agreement are still in effect. Nothing
herein or in any sales agreement shall be construed to create any
obligation on the part of the Wholesaler to compensate any Broker-Dealer
for sales of the Contracts.
If any State in the Territory by insurance rule, regulation or statute,
prohibits payment of Promotional Allowances to the Wholesaler, the
Wholesaler shall designate in writing a business entity or natural person,
including Wholesaler Agency Affiliates, meeting the requirements of such
State to receive any amounts that
26
may otherwise be payable to the Wholesaler hereunder. The Wholesaler may
change such designation from time to time upon written notice to the
Company. Any payments made by the Company to any person or entity so
designated by the Wholesaler shall discharge the Company's liability to the
Wholesaler hereunder.
If a purchaser rescinds a Contract or exercises a right to surrender a
contract for return of all Purchase Payments, the Wholesaler will pay to
the Company on demand the amount of any Promotional Allowances it received
on the Purchase Payments returned. Promotional Allowance chargebacks will
be calculated by the Company on the same basis, as described in Schedule 4
hereto, as was utilized in calculating the Contract Promotional Allowances
received.
b. INDEBTEDNESS. Nothing in this Agreement shall be construed as giving
the Wholesaler the right to incur any indebtedness on behalf of the
Company.
c. APPOINTMENT FEES. The Company will pay the initial and renewal fees
for agent appointments by the Company of duly licensed Wholesaler Agency
Affiliates and Broker-Dealers and their respective Associated Persons;
provided, however, (a) that if total Aggregate Annual Sales of the
Contracts, as described in Section 21.a., do not exceed $60 million during
any calendar year beginning after December 31, 1997, the Wholesaler will
reimburse the Company for the total amount of initial or renewal fees paid
by the Company during such calendar year(s), and (b) that the Company
reserves the right to refuse to pay renewal fees for Representatives not
meeting such minimal sales as may be agreed upon from time to time. For
purposes of (b) above, the minimal sales target for Representatives shall
be $25,000 per calendar year, unless the parties hereto mutually agree on a
different sales target for a calendar year.
Notwithstanding Clause (a) above, in calculating the amount of agent fee
reimbursements, if an agent solicited products of the Company in addition
to the Contracts described in this Agreement, the reimbursement otherwise
required under Clause (a) will be pro-rated, as described below:
27
The otherwise reimbursable amount shall be multiplied by a
fraction, the numerator of which is the number of Xxxxxx
products covered by this Agreement on the date of
determination (two as of the effective date of this
Agreement) and the denominator of which is the aggregate
number of products of the Company and its insurance
affiliates being solicited by the agent on the date of
determination.
d. REPORTING. The Wholesaler shall be responsible for all tax reporting
information, if any, that the Wholesaler is required to provide under
applicable tax law to its Associated Persons with respect to the Contracts.
Nothing contained in this Agreement or any sales agreement with a Broker-
Dealer is to be construed to require the Wholesaler to provide any tax
reporting information directly or indirectly to any Broker-Dealer or its
Representatives.
e. SURVIVAL. Except for Section 9.c.(a), this Section 9 shall remain
operative and in full force and effect regardless of the termination of
this Agreement, and shall survive any such termination.
10. INVESTIGATION AND PROCEEDINGS
a. The Company, the Underwriter and the Wholesaler will cooperate fully in
any securities, insurance, governmental or regulatory investigation or
proceeding or judicial proceeding arising out of or in connection with the
offering, sale or distribution of the Contracts for which the Wholesaler
acts as wholesaler pursuant to this Agreement. Without limiting the
foregoing, the Company, the Underwriter and the Wholesaler agree to notify
one another promptly of any customer complaint or notice of any
governmental, judicial or regulatory investigation or proceeding described
in this Section 10.
b. In the case of a substantive customer complaint, the Company, the
Underwriter, the Wholesaler and the Wholesaler Agency Affiliates will
cooperate in investigating such complaint and any response by the Company
or Underwriter, as one party, or the Wholesaler or Wholesaler Agency
Affiliates, as another party,
28
to such complaint will be sent to the other party for approval not less
than five business days prior to its being sent to the customer or to any
governmental or regulatory agency, except that if a more prompt response is
required, the proposed response shall be communicated by telephone,
telegraph or facsimile. Neither such party will release any such response
without the other party's prior written approval, unless otherwise required
by applicable law. Failure of any party to object to a proposed response
within four business days shall be deemed to constitute approval of a
proposed response by the non-objecting party.
11. INDEMNIFICATION
a. The Company and the Underwriter, jointly and severally, shall indemnify
and hold harmless the Wholesaler and the Wholesaler Agency Affiliates and
each person who controls or is associated with the Wholesaler or the
Wholesaler Agency Affiliates within the meaning of such terms under the
federal securities laws, and any officer, director, employee or agent of
the foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to which the
Wholesaler, the Wholesaler Agency Affiliates and/or such person may become
subject, under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement, Prospectus, blue sky application or other document executed
by the Company specifically for the purpose of qualifying any or all
of the Contracts for sale under the securities laws of any State,
promotional, sales or advertising material for the Contracts prepared
by the Company, or the Contracts themselves (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they
were made; provided
29
that this obligation to indemnify shall not apply if such untrue
statement or omission or such alleged untrue statement or alleged
omission was made in reliance upon and in conformity with information
furnished in writing to the Company or the Underwriter by the
Wholesaler specifically for use in the preparation of any such
Registration Statement, Prospectus or blue-sky application or other
document, material or Contract (or any such amendment or supplement
thereto); or
(ii) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Fund Registration
Statement, Fund Prospectus, blue sky application or other document
executed by the Fund specifically for the purpose of qualifying any or
all of the shares of the Fund for sale under the securities laws of
any State, or in any promotional, sales or advertising material or
written information relating to the shares of the Fund authorized by
the Fund (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances in which they were made, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with information furnished in writing to the
Wholesaler or the Fund by the Company specifically for use in the
preparation of any such Fund Registration Statement, Fund Prospectus,
blue-sky application or other document (or any such amendment or
supplement thereto); or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission of a material fact by
or on behalf of the Company or the Underwriter (other than statements
or representations contained in the Fund Registration Statement, Fund
Prospectus or promotional, sales or advertising material of the Fund
that were not supplied by the Company, the Underwriter or persons
under their control) or wrongful conduct of the Company or the
Underwriter or persons under their control with respect to the sale or
distribution of the Contracts; or
30
(iv) result because of the terms of any Contract or because of any
material breach by the Company or the Underwriter of any terms of this
Agreement or of any Contract or that proximately result from any
activities of the Company's or Underwriter's officers, directors,
employees or agents or their failure to take action in connection with
the sale of a Contract, to the extent of the Company's or the
Underwriter's obligations under this Agreement or otherwise, or the
processing or administration of the Contracts.
This indemnification obligation will be in addition to any liability
that the Company or Underwriter may otherwise have; provided, however,
that no person shall be entitled to indemnification pursuant to this
Section 11.a. if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless disregard
of duty by the person seeking indemnification.
b. The Wholesaler shall indemnify and hold harmless the Company and the
Underwriter and each person who controls or is associated with the Company
or the Underwriter within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities,
joint or several (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amounts paid in settlement
of, any action, suit or proceeding or any claim asserted), to which the
Company, the Underwriter and/or any such person may become subject under
any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or blue-sky
application or other document executed by the Company specifically
for the purpose of qualifying any or all of the Contracts for sale
under the securities laws of any State (or any amendment or supplement
to the foregoing), or omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, in light of the
circumstances in which they were made, in each
31
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with information furnished in
writing to the Company or the Underwriter by the Wholesaler
specifically for use in the preparation of any such Registration
Statement, Prospectus, such blue-sky application or other document (or
any such amendment or supplement thereto), the parties hereby
confirming that the only such information is the information which
appears in the Prospectus under the sub-caption "Xxxxxx Investors
Fund" and in the Statement of Additional Information filed with the
Prospectus under the caption "Performance Information;" or
(ii) any use of promotional, sales or advertising material for the
Contracts not approved in writing by the Company or any verbal or
written misrepresentations or any unlawful sales practices concerning
the Contracts by the Wholesaler or the Wholesaler Agency Affiliates
under federal securities laws or NASD regulations (but not including
state insurance laws, compliance with which is a responsibility of the
Company or the Underwriter under this Agreement or otherwise); or
(iii) claims by agents, representatives or employees of the Wholesaler
for compensation or other remuneration of any type other than claims
by any Broker-Dealer relating to compensation described or referred to
in Schedule 4 hereto; or
(iv) any material breach by the Wholesaler or the Wholesaler Agency
Affiliates of any provision of this Agreement.
This indemnification obligation will be in addition to any liability
that the Wholesaler may otherwise have; provided, however, that no
person shall be entitled to indemnification pursuant to this Section
11.b. if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty
by the person seeking indemnification.
32
c. If the indemnification provided for in this Section is unavailable to
an indemnified party under paragraphs (a) or (b) hereof in respect to any
losses, claims, damages or liabilities referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company
and the Underwriter, on the one hand, and the Wholesaler, on the other, as
well as any other relevant equitable considerations. The relative fault of
the Company and the Underwriter, on the one hand, and the Wholesaler, on
the other, with respect to untrue or alleged untrue statements of material
fact or omissions or alleged omissions of material facts shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Company or by the
Underwriter, on the one hand, and by the Wholesaler, on the other, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Underwriter and the Wholesaler agree that it would not be
just and equitable if contribution pursuant to this Section were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the
immediately preceding paragraph.
If the Company and the Underwriter, as one party, and the Wholesaler, as
the other party, cannot agree on the appropriate amount of any contribution
payable pursuant to this Section, the matter shall be settled by
arbitration pursuant to Section 16 hereof. The costs of any such
arbitration shall be divided equally between the Company and the
Underwriter, as one party, and the Wholesaler, as the other party.
33
d. After receipt by a party entitled to indemnification ("indemnified
party") under this Section 11 of notice of the commencement of any action,
if a claim in respect thereof is to be made by the indemnified party
against any person obligated to provide indemnification under this Section
11 ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as
practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this
Section 11, except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying party is
damaged as a result of the failure to give such notice. The indemnifying
party, upon the request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnified party shall indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
e. The indemnification provisions contained in this Section 11 shall
remain operative in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company or by or on behalf of any
controlling person thereof, (ii) delivery of any Contracts and Purchase
Payments therefor, or (iii) any termination of this Agreement. A successor
by law of the Wholesaler or the Company, as the case may be, shall be
entitled to the benefits of the indemnification provisions contained in
this Section 11.
34
12. TERMINATION
a. This Agreement may be terminated at the option of any party upon twelve
months advance written notice to the other parties, such termination to be
effective no earlier than six years following the date on which the first
Contract is issued to the public. Notwithstanding the foregoing, this
Agreement shall terminate automatically on the termination date of the
Participation Agreement among the Fund, Zurich Xxxxxx Investments Inc., KDI
and the Company entered into contemporaneously herewith.
b. This Agreement may not be assigned without the express written consent
of the other parties hereto. This Agreement may be terminated at the option
of the Company and the Underwriter, as one party, or the Wholesaler and the
Wholesaler Agency Affiliates, as one party, upon the other party's material
breach of any provision of this Agreement, if any such breach is not cured
within ninety days after notice thereof to the breaching party and all
other parties..
c. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (i) the obligation to continue to pay
compensation to Broker-Dealers and compensation and Promotional Allowances
to the Wholesaler, as set forth in Section 9.a. and Schedule 4; (ii) the
provisions contained in Sections 7, 9 and 11 of this Agreement; and (iii)
the indemnification provisions set forth in Section 11 of this Agreement,
or as otherwise specifically noted in this Agreement.
13. RIGHTS, REMEDIES, ETC, ARE CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties to this Agreement are
entitled to under state and federal laws. Failure of the Wholesaler or the
Wholesaler Agency Affiliates, as one party, or the Company or the
Underwriter, as another party, to insist upon strict compliance by the
other party with any of the conditions of this Agreement shall not be
construed as a
35
waiver of any of the conditions, but the same shall remain in full force
and effect. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or
not similar, nor shall any waiver constitute a continuing waiver.
14. NOTICES
All notices hereunder are to be made in writing and shall be given:
if to the Company to:
Xxxx X. Xxxxx, Vice President
Allmerica Financial Life Insurance and Annuity Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Underwriter to:
Xxxxxxx Xxxxxx, President
Allmerica Investments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Wholesaler or Wholesaler Agency Affiliates, to any such
party at:
[Name of Party]
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: President
or such other address as such party may hereafter specify in writing. Each
such notice to a party shall be either hand delivered or transmitted by
registered or certified United States mail with return receipt requested, and
shall be effective upon delivery.
36
15. INTERPRETATION, JURISDICTION, ETC.
This Agreement constitutes the whole agreement between the parties to this
Agreement relating to the wholesaling activities contemplated in this
Agreement, and supersedes all prior oral or written negotiations between
the parties to this Agreement with respect to the subject matter of this
Agreement. The parties acknowledge that the Company, the Wholesaler and
the Fund have entered into the Participation Agreement in contemplation of
entering into this Agreement. This Agreement shall be construed and the
provisions of this Agreement interpreted under and in accordance with the
internal laws of the Commonwealth of Massachusetts without giving effect to
principles of conflict of laws.
16. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or
the breach of this Agreement, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
17. HEADINGS
The headings in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
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19. SEVERABILITY
This is a severable agreement and in the event that any part or parts of
this Agreement shall be held to be unenforceable to its or their full
extent, then it is the intention of the parties to this Agreement that such
part or parts shall be enforced to the extent permitted under the law, and,
in any event, that all other parts of this Agreement shall remain valid and
duly enforceable as if the unenforceable part or parts had never been a
part of this Agreement.
20. REGULATION
This Agreement shall be subject to the provisions of the 1933 Act, 1934 Act
and 1940 Act and the Regulations and the rules and regulations of the NASD,
from time to time in effect, including such exemptions from the 1940 Act as
the SEC may grant, and the terms of this Agreement shall be interpreted and
construed in accordance therewith.
21. MISCELLANEOUS
a. For the purposes of Section 4.h., "Aggregate Sales" shall refer to the
aggregate sales of the Contracts pursuant both to this Agreement and to the
Wholesaling Agreement with First Allmerica Financial Life Insurance Company
("FAFLIC") related to contracts offered for sale in the States of New York
and Hawaii being executed contemporaneously herewith (the "FAFLIC
Agreement"). Based on such Aggregate Sales, Wholesaler shall be
responsible for only a single reimbursement amount, and such reimbursement
shall be divided between the Company and FAFLIC as they may mutually agree.
For the purposes of Section 9.c.(a), "Aggregate Annual Sales" shall refer
to the total annual sales through the Wholesaler pursuant both to this
Agreement and to the FAFLIC Agreement, and "total amount of initial or
renewal fees" shall refer to the aggregate amount of such fees incurred by
the Company and FAFLIC.
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b. The Company and the Underwriter acknowledge that the names "Gateway
Elite," "Gateway Custom," "Xxxxxx Gateway Elite" and "Xxxxxx Gateway
Custom," and any and all variations thereof, are the exclusive property of
the Wholesaler and their respective affiliates, and that any use of any
such names or any variation thereof during or after the term of this
Agreement are and will be subject to the express prior written consent of
KDI and/or ZKIA thereto. Notwithstanding the foregoing, KDI and ZKIA
hereby specifically permit the Company to use the above names as the
Company deems necessary or appropriate in its administration of the
Contracts subject to this Agreement. The Company and the Wholesaler agree
that in the event of any breach of this Section 21.b, as a remedy therefor
and in addition to all other remedies, the Wholesaler shall be entitled to
specific performance and injunctive or other equitable relief without proof
of actual damages, and that the Company and the Underwriter will not oppose
or impede the granting of such relief.
39
IN WITNESS WHEREOF, each party hereto represents that the officer signing this
Agreement on the party's behalf is duly authorized to execute this Agreement;
and each party has caused this Agreement to be duly executed by such authorized
officer on the date specified below.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Date: 11/6/96 By: /s/ Xxxxxxx X. Xxxxxx
Name: _______________________
Title: President and Chief Executive Officer
ALLMERICA INVESTMENTS, INC.
Date: 11/6/96 By: /s/ Xxxxxxx X. Xxxxxx
Name: _______________________
Title: Director
XXXXXX DISTRIBUTORS, INC.
(on its own behalf and on behalf of
the Wholesaler Agency Affiliates)
Date: 11/5/96 By: /s/ Xxxxx X. Xxxxxxxxxx
Name: _______________________
Title: President
ZKI AGENCY, INC.
Date: 11/5/96 By: /s/ Xxxxx X. Xxxxxxxxxx
Name: _______________________
Title: President
40
SCHEDULE 1
Wholesaler Agency Affiliates
Effective _____________, 1996
Name of State(s) In
Wholesaler Agency Affiliate Which Licensed
--------------------------- --------------
None
Schedule 2
Separate Accounts
Available under the Contracts
Effective ___________, 1996
Separate Account Subaccounts are
invested in the following Xxxxxx
Name of Separate Account Investors Fund Portfolios
------------------------ --------------------------------
Separate Accounts KG (Xxxxxx XX
Gateway Elite) and KGC (Xxxxxx Gov Sec
Gateway Custom) of Allmerica Inv Grade
Financial Life Insurance and Annuity High Yield
Company Horizon 5
Horizon 10+
Horizon 20+
Total Return
Growth
Value
Value and Growth
Small Cap Value
Small Cap Growth
International
SCHEDULE 3
Contracts Subject to Wholesaling Agreement
Effective _____________, 1996
SEC
Marketing Policy Registration
Name Form No. No.
--------- -------- ------------
Xxxxxx Gateway Elite A3025-96 333-9965
Xxxxxx Gateway Custom A3026-96 333-10283
SCHEDULE 4
Broker-Dealer Compensation and
Wholesaler Promotional Allowance Schedule
The Broker-Dealer Compensation payable by the Company with respect to the sale
and distribution of the Contracts, based on initial and subsequent Purchase
Payments received and accepted by the Company, shall be computed under one of
the options shown below:
For non-401(k) contracts:
Option A: 6.00% and no trail
Option B: 5.00% and .25% lifetime trail
Option C: 4.00% and .50% lifetime trail
Option D: 2.00% and 1.00% lifetime trail
For 401(k) contracts:
Option A: 5% and no trail
Option B: 4.00% and .25% lifetime trail
Option C: 3.00% and .50% lifetime trail
Option D: 1.00% and 1.00% lifetime trail
These amounts shall be payable to Broker-Dealers as sales commissions. Such
amounts will be paid according to the then current practice of the Company, but
no less frequently than twice each calendar month. One quarter of the trail
rate is paid on the NON-LOANED contract value at the end of each calendar
quarter after the first contract year. Alternative sales commission options
involving a combination of both up-front amounts and asset based trails may be
made available by mutual agreement.
Promotional Allowances shall be payable to the Wholesaler as reimbursement for
its expenses incurred with respect to the distribution of the Contracts
("Support Services"); provided, however, that the Company shall pay such amounts
from Promotional Allowances to Broker-Dealers who provide Support Services, as
the Wholesaler may from time to time direct.
Promotional Allowances shall be determined as follows:
- .15% on an annual basis of the average daily assets in the Elite
separate accounts (excluding the GPA accounts); plus
- .15% on an annual basis of the average monthly account balance in the
GPA and fixed accounts for both the Elite and Custom Contracts; plus
- .25% of initial and subsequent Purchase Payments received and accepted
by the Company on any Contract for which commission Option B was
chosen; plus
- 1.00% of initial and subsequent Purchase Payments received and
accepted by the Company for 401(k) Contracts.
Promotional allowances will be reduced by the following amounts:
- .50% of initial and subsequent Purchase Payments for Contracts issued
in Maine and South Dakota and any other states which levy an upfront
premium tax; plus
- $35 each contract anniversary and on surrender for Contracts issued to
fund 401(k) plans with Contract values of $50,000 or less; plus
- $5 each contract anniversary and on surrender for non-401(k) contracts
with contact values of $50,000 or less issued in North Dakota or any
other state that caps the contract charge at $30.
The net Promotional Allowance will be paid to the Wholesaler according to the
then current practice of the Company, but no less frequently than monthly.
