DRAFT
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PARTICIPATION AGREEMENT
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Xxxxx Xxxxx Variable Trust and
Xxxxx Xxxxx Distributors, Inc.
and
Allmerica Financial Life Insurance and Annuity Company and
First Allmerica Financial Life Insurance Company
THIS AGREEMENT, made and entered into as of this ___ day of March, 2001 by and
among Allmerica Financial Life Insurance and Annuity Company and First Allmerica
Financial Life Insurance Company (hereinafter collectively referred to as, the
Company), a Delaware insurance company, on its own behalf and on behalf of each
segregated asset account of the Company (hereinafter referred to as the
Accounts), Xxxxx Xxxxx Variable Trust, a business trust organized under the laws
of Massachusetts (hereinafter referred to as the "Fund"),Xxxxx Xxxxx
Distributors, Inc., the underwriter of the Fund (hereinafter the "Distributor"),
a Massachusetts corporation.
WHEREAS, the Fund is engaged in business as an open-end management investment
company and wishes to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to as "Variable Insurance Contracts" and the owners of
such products being referred to as "Contract Owners") to be offered by insurance
companies which have entered into participation agreements with the Fund
("Participating Insurance Companies"); and
WHEREAS, the shares of the Fund (the "Fund shares") consist of separate classes
or series of shares, each designated a "Portfolio" and each series of shares
("Portfolio shares") representing an interest in a particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has filed a registration statement (referred to herein as the
"Fund Registration Statement" and the prospectus contained therein, referred to
herein as the "Fund Prospectus") with the Securities and Exchange Commission
(the "SEC") on Form N-lA to register itself as an open-end management investment
company (File No. 811-10067) under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund shares (File No. 33344010) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, each Account of the Company is a validly existing separate account duly
authorized and established by resolution of the Board of Directors of the
Company, and sets aside and invests assets attributable to the Contracts, and
the Company has registered or will have registered each Account, of which may be
divided into two or more SubAccounts ("SubAccounts"; reference herein to an
Account includes reference to each SubAccount thereof to the extent the context
requires). with the SEC as a unit investment trust under the 1940 Act before any
Contracts are issued by the Account unless such Accounts are exempt from
registration; and
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WHEREAS, the Company has filed or will file registration statements with the SEC
to register under the 1933 Act certain variable annuity contracts and variable
life contracts (the "Contracts") unless such Contracts are exempt from
registration, each such registration statement for a class or classes of
contracts being referred to as the "Contracts Registration Statement," and the
prospectus for each such class or classes being referred to herein as the
"Contracts Prospectus," and the owners of such contracts; and,
WHEREAS, the Fund will seek 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, 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, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"), and
WHEREAS, the Distributor and the Fund have entered into a Distribution Agreement
(the "Fund Distribution Agreement") dated August 14, 2000 pursuant to which the
Distributor will distribute Fund shares, and to the extent permitted by
applicable insurance laws and regulations, the Company intends to purchase
Portfolio shares on behalf of the Accounts to fund the Contracts and the
Distributor 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, the Fund
and the Distributor agree as follows:
ARTICLE I. TRANSACTIONS IN FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the Fund which the
Company orders on behalf of the Accounts, executing such orders on a daily basis
in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make the shares of its Portfolios available for purchase
by the Company on behalf of the Accounts at the then applicable net asset value
per share on Business Days as defined in Section 1.4 of this Agreement, and each
Portfolio shall use reasonable efforts to calculate its net asset value on each
such Business Day. Notwithstanding any other provision in this Agreement to the
contrary, the Board of Directors of the Fund (the "Board") may suspend or
terminate the offering of Fund shares of any Portfolio, if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or termination is
necessary and in the best interests of the shareholders of any Portfolio.
1.3. The Fund agrees to redeem, upon request, any full or fractional shares of
the Fund held by the Accounts or the Company, executing such requests at net
asset value on a daily basis in
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accordance with Section 1.4 of this Agreement and applicable provisions of the
1940 Act. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the extent permitted by the 1940 Act, or any rules, regulations or
orders thereunder.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall be the
agent of the Fund for the limited purpose of receiving redemption and purchase
requests from the Account (but not from the general accounts of the Company),
and receipt on any Business Day by the Company as such limited agent of the Fund
by the time prescribed in the current Contracts Prospectus (which as of the date
of execution of this Agreement is expected to be 4 p.m.) shall constitute
receipt by the Fund on that same Business Day, provided that the Fund receives
notice of such redemption or purchase request by 11:00 a.m. Eastern Time on the
next following Business Day. For purposes of this Agreement, "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading or
as otherwise provided in the Fund's then currently effective Fund Prospectus.
(b) The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next business day after the Fund receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Fund or its designated
custodian. If Federal funds are not received on time, such funds will be
invested, and Portfolio shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for Portfolio shares redeemed by the Accounts or the
Company will be made in Federal funds transmitted to the Company by wire on the
day the Fund is notified of the redemption order of Fund shares (unless
redemption proceeds are applied to the purchase of shares of other Portfolios).
1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
the Account or the appropriate SubAccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on Fund
shares. The Company hereby elects to receive all such dividends and
distributions as are payable on any Portfolio shares in the form of additional
shares of that Portfolio. The Company reserves the right to revoke this election
and to receive all such dividends in cash. The Fund shall notify the Company of
the number of Portfolio shares so issued as payment of such dividends and
distributions.
1.7. The Fund shall make the net asset value per share for each Portfolio
available to the Company by 6 p.m. Eastern Time each Business Day, and in any
event, as soon as reasonably practicable after the net asset value per share for
such series is calculated, and shall calculate such net asset value in
accordance with the then currently effective Fund Prospectus.
1.8. The Fund and the Distributor agree that Fund shares will be sold only to
Participating Insurance Companies, their separate accounts, and to certain
qualified pension plans, as may be permitted by Section 817 of the Internal
Revenue Code of 1986, as amended. The Fund and the Distributor will not sell
Fund shares to any insurance company, separate account, or qualified pension
plan unless an agreement containing provisions substantially the same as Article
VII of this Agreement, as it may be amended from time to time, is in effect to
govern such sales. No Fund
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shares of any Portfolio will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants:
(a) that the Contracts are registered under the 1933 Act, will be so
registered before the issuance thereof, or are exempt from registration;
(b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws;
(c) that the Company will require of every person distributing the
Contracts (i) that the Contracts be offered and sold in compliance in all
material respects with all applicable Federal and state laws and (ii) that at
the time it is issued each Contract is a suitable purchase for the applicant
therefor under applicable state insurance laws;
(d) that it is an insurance company duly organized and in good standing
under applicable law and that it has legally and validly authorized each of its
Accounts as a separate account under the insurance law of its state of domicile,
and has registered or, prior to the issuance of any Contracts, will register the
Accounts as unit investment trusts in accordance with the provisions of the 1940
Act to serve as separate accounts for the Contracts, and that such registration
will be maintained for as long as any Contracts are outstanding, unless such
Accounts are exempt from registration;
(e) that the Contracts are currently and at the time of issuance will
be treated as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code. The Company shall make
every effort to maintain such treatment and shall notify the Fund and the
Distributor immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated in
the future; and
(f) that until such time as the Fund agrees otherwise, the Contracts
investing in the Portfolios shall only consist of variable annuity contracts.
2.2. The Fund represents and warrants:
(a) that Fund shares sold pursuant to this Agreement shall be
registered under the 1933 Act and duly authorized for issuance in accordance
with applicable law and that the Fund is a business trust duly organized and in
good standing under the laws of Massachusetts;
(b) that each series currently qualifies and will make every effort to
continue to qualify as a Regulated Investment Company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code") and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that the Fund 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;
(c) that each series currently complies with and will make every effort
to continue to comply with Section 817(h) (or any successor or similar
provision) of the Code, and all regulations issued
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thereunder, and that the Fund 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; and
(d) that the Fund's investment policies, fees and expenses and
operations are and shall at all times remain in material compliance with the
laws of Massachusetts, to the extent required to perform this Agreement. The
Fund, however, makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) otherwise complies with the insurance laws or regulations of any
states.
2.3. The Distributor represents and warrants that the Distributor is duly
registered as a broker-dealer under the 1934 Act, is a member in good standing
with the NASD, and is duly registered as a broker-dealer under applicable state
securities laws; its operations are in compliance with applicable law, and it
will distribute the Fund shares according to applicable law.
ARTICLE III. PROSPECTUSES, PROXY STATEMENTS AND SALES MATERIAL
3.1 At least annually, the Fund or its designee shall provide the Company, free
of charge, with "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 Fund printed together in one document. The Company shall bear
the costs of printing and mailing such document for distribution to Contract
owners of existing Contracts and for distribution to prospective purchasers. At
the request of the Company, the prospectus for the Fund shall include only
information about the Portfolios of the Fund that are offered under the
Contracts; provided, however, that the prospectus of the Fund may includes
information about Portfolios that are not offered under the Contracts if the
Fund or its designee pays the prospectus printing and mailing costs attributable
to such Portfolios.
3.2 The Fund's prospectus shall state that the current Statement of Additional
Information ("SAI") for the Fund is available from the Distributor (or, in the
Fund's discretion, from the Fund), and the Distributor (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 Contract owner 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. The Fund or its designee shall bear the cost of printing,
duplicating, and mailing of these documents to current Contract owners, and the
Company shall bear the cost for such documents used for purposes other than
distribution to current Contract owners.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager or the
Distributor is named to the Fund and the Distributor prior to its use. No such
material shall be used, except with the prior written permission of the Fund and
the Distributor. The Fund and the Distributor agree to respond to any request
for approval on a prompt and timely basis. Failure to respond shall not relieve
the Company of the obligation to obtain the prior written permission of the Fund
or the Distributor.
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3.5. The Company shall not give any information or make any representations or
statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be 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 by
the Distributor, except with the prior written permission of the Fund or the
Distributor. The Fund and the Distributor agree to respond to any request for
permission on a prompt and timely basis. Failure to respond shall not relieve
the Company of the obligation to obtain the prior written permission of the Fund
or the Distributor.
3.6. The Fund and the Distributor 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 the
Contracts Registration Statement or Contracts Prospectus, as such Registration
Statement and Prospectus may be amended or supplemented from time to time, or in
published reports of the Account which are in the public domain or approved in
writing by the Company for distribution to Contract Owners, or in sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the Company. The Company agrees to
respond to any request for permission on a prompt and timely basis. Failure to
respond shall not relieve the Fund or the Distributor of the obligation to
obtain the prior written permission of the Company.
3.7. Each party will provide to the other party copies of draft versions of any
registration statements, prospectuses, statements of additional information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.8. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use, in a newspaper, magazine or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures or other public media), sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, or 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, registration statements,
prospectuses, Statements of Additional Information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
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ARTICLE IV. VOTING
4.1. Subject to applicable law, the Company shall:
(a) solicit voting instructions from Contract Owners;
(b) vote Fund shares of each Portfolio attributable to Contract Owners
in accordance with instructions or proxies timely received from
such Contract Owners;
(c) vote Fund shares of each Portfolio attributable to Contract Owners
for which no instructions have been received in the same
proportion as Fund shares of such Portfolio for which instructions
have been timely received; and
(d) vote Fund shares of each Portfolio held by the Company on its own
behalf or on behalf of the Account that are not attributable to
Contract Owners in the same proportion as Fund shares of such
Portfolio for which instructions have been timely received.
The Company shall be responsible for assuring that voting privileges for the
Account are calculated in a manner consistent with the provisions set forth
above. 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.
4.2. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by any Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt.
4.3. The Fund will comply with all provisions of the 1940 Act requiring voting
by shareholders, and in particular the Fund will either provide for annual
meetings or comply with Section 16(c) of the 1940 Act (although the Fund is not
one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund 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 V. FEES AND EXPENSES
5.1. The Fund and Distributor shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio adopts
and implements a service plan to compensate insurance companies for the services
described in Section 5.2 below, then the Distributor may make payments to the
Company in amounts agreed to by the Company and the Distributor in writing. The
Fund currently does not intend to make any payments to finance distribution
expenses pursuant to Rule 12b-l under the 1940 Act or in contravention of such
rule, although it may make payments pursuant to Rule 12b-l in the future.
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.
5.2. Unless otherwise agreed to in writing by the Company and the Distributor,
the services to be provided by the Company in exchange for compensation under a
Service Plan include:
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(a) Maintaining regular contact with Contract owners and assisting in
answering inquiries concerning the Portfolios;
(b) Assisting in the process of printing and distributing shareholder
reports, prospectuses and other sale and service literature
provided by the Distributor;
(c) Assisting the Distributor and its affiliates in the establishment
and maintenance of Contract owner and shareholder accounts and
records;
(d) Assisting Contract owners in effecting administrative changes,
such as exchanging shares in or out of the Portfolios;
(e) Assisting in processing purchase and redemption transactions; and
(f) Providing any other information or services as the Contract
owners or the Distributor may reasonably request.
The Company will support the Distributor's marketing and servicing efforts by
granting reasonable requests for visits to the Company's offices by
representatives of the Distributor.
5.3. All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Sections 1.4 and 3.1 of this Agreement (or Article VII,
as it may be amended), the Company shall not bear any of the expenses for the
cost of registration and qualification of the Fund shares under Federal and any
state securities law, preparation and filing of the Fund Prospectus and Fund
Registration Statement, Fund proxy materials and reports, setting the Fund
Prospectus and proxy materials and reports to shareholders in type, the printing
and mailing of proxy materials, the preparation of all statements and notices
required by any Federal or state securities law, all taxes on the issuance or
transfer of Fund shares, and any expenses permitted to be paid or assumed by the
Fund pursuant to a plan, if any, under Rule 12b-l under the 1940 Act. The
Company shall bear the cost of printing and distributing the Fund's prospectus
as set forth in Section 3.1, above. The Company shall bear the expenses of
distributing the Fund's reports to Contract holders.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Sub-chapter M and Section 817(h) of the
Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statement under the 1933
Act and the Account's Registration Statement under the 1940 Act from time to
time as required in order to effect the continuous offering of the Contracts or
as may otherwise be required by applicable law. The Company shall register and
qualify the Contracts for sale to the extent required by applicable securities
laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933 Act and
the 1940 Act
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from time to time as required in order to effect for so long as Fund shares are
sold the continuous offering of Fund shares as described in the then currently
effective Fund Prospectus. The Fund shall register and qualify Fund shares for
sale to the extent required by applicable securities laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus offering
a Contract that is a life insurance contract where it is reasonably probable
that such Contract would be a "modified endowment contract," as that term is
defined in Section 7702A of the Code, will identify such Contract as a modified
endowment contract (or policy).
6.5. To the extent that it decides to finance distribution expenses pursuant to
Rule 12b-l, the Fund undertakes to have a Board of Trustees, a majority of whom
are not interested persons of the Fund, formulate and approve any plan under
Rule 12b-l to finance distribution expenses.
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.
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
any Portfolio 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 any Shared Funding Exemptive Order and/or Rule 6e-3(T) of
the 1940 Act, to the extent applicable, 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 or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners
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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 the Fund 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 fan 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 Account's 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 determination by a majority of the disinterested
members of the Board.
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
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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. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Fund, the Distributor and
each person who controls or is associated with the Fund or the Distributor
within the meaning of such terms under the Federal securities laws and any
officer, trustee, 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 they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made; provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by the Fund or the Distributor (or a person authorized in writing to do
so on behalf of the Fund or the Distributor) for use in the Contracts
Registration Statement, Contracts Prospectus 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
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company (other than
statements or representations contained in the Fund Registration Statement, Fund
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 control with respect to the sale or distribution of the Contracts or Fund
shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Fund Registration Statement, Fund 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 in
light of the circumstances in which they were made; or
11
(d) arise out of any material breach by the Company to provide the
services and furnish the materials required under the terms of this Agreement,
including but not limited to any failure to transmit a request for redemption or
purchase of Fund shares on a timely basis in accordance with the procedures set
forth in Article I.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. Indemnification by the Distributor
The Distributor agrees to indemnify and hold harmless the Company and each
person who controls or is associated with the Company 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
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or sales
literature of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission or alleged statement or
alleged omission was made in reliance upon and in conformity with information
furnished in writing by the Company to the Fund or the Distributor for use in
the Fund Registration Statement, Fund Prospectus (or any amendment or supplement
thereto) or sales literature for the Fund or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by the Distributor or the Fund (other than
statements or representations contained in the Fund Registration Statement, Fund
Prospectus or sales literature of the Fund not supplied by the Distributor or
the Fund or persons under their control) or wrongful conduct of the Distributor
or persons under its control with respect to the sale or distribution of the
Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contracts Registration Statement, Contracts
Prospectus or sales literature for the Contracts (or any amendment 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 in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon information furnished in writing
by the Distributor to the Company (or a person authorized in writing to do so on
behalf of the Distributor); or
(d) arise as a result of any material breach by the Distributor to
provide the services and
12
furnish the materials required under the terms of this Agreement.
This indemnification will be in addition to any liability which the Distributor
or the Fund may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is due to
the willful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
8.3. Indemnification by the Fund
The Fund agrees to indemnify and hold harmless the Company and each person who
controls or is associated with the Company 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 they or any of
them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or sales
literature of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission or alleged statement or
alleged omission was made in reliance upon and in conformity with information
furnished in writing by the Company to the Fund or the Distributor for use in
the Fund Registration Statement, Fund Prospectus (or any amendment or supplement
thereto) or sales literature for the Fund or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by the Distributor or the Fund (other than
statements or representations contained in the Fund Registration Statement, Fund
Prospectus or sales literature of the Fund not supplied by the Distributor or
the Fund or persons under their control); or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contracts Registration Statement, Contracts
Prospectus or sales literature for the Contracts (or any amendment 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 in light of the circumstances in which they were made, if such
statement or omission was made in reliance upon information furnished in writing
by the Fund to the Company (or a person authorized in writing to do so on behalf
of the Fund); or
(d) arise as a result of any material breach by the Fund to provide the
services and furnish the materials required under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise, to
comply with the diversification requirements specified in Article VI of this
Agreement).
This indemnification will be in addition to any liability which the Distributor
or the Fund may otherwise
13
have; provided, however, that no party shall be entitled to indemnification if
such loss, claim, damage or liability is due to the willful misfeasance, bad
faith, gross negligence or reckless disregard of duty by the party seeking
indemnification.
8.4 Indemnification Procedures
After receipt by a party entitled to indemnification ("indemnified party") under
this Article VIII of notice of the commencement of any action, if a claim in
respect thereof is to be made against any person obligated to provide
indemnification under this Article VIII ("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 Article
VIII, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying party, upon the
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.5. Limitation of Liability
Notwithstanding anything to the contrary above, Company and its respective
officers, directors, employees and agents shall not be responsible for, and the
Fund and the Distributor shall indemnify and hold harmless the Company from and
against any and all losses, damages, charges, costs, reasonable attorney's fees,
payments, expenses and liabilities arising out of or attributable to the
reasonable reliance on information, records or documents furnished by or on
behalf of the Distributor or the Fund. Without limiting the generality of the
foregoing, the Company shall not be liable for any error, delay, or failures to
provide services under this Agreement attributable, in whole or in part, to the
error, delay, or failure of the Distributor, the Fund or their agents in making
the daily net asset value per share of the Portfolios available to the Company.
Notwithstanding anything to the contrary above, the Fund and the Distributor and
their respective officers, directors, employees and agents shall not be
responsible for, and the Company shall indemnify and hold harmless each of the
Fund and the Distributor from and against any and all losses, damages, charges,
costs, reasonable attorney's fees, payments, expenses and liabilities
14
arising out of or attributable to the reasonable reliance on information,
records or documents furnished by or on behalf of the Company.
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 state of Massachusetts, without
giving effect to the principles of conflicts of laws.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant, and
the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written notice
to the other parties, such termination to be effective no earlier than one year
following the date on which the first Contract is issued to the public; or
(b) at the option of the Company if shares of any or all Portfolios are
not reasonably available to meet the requirements of the Contracts as determined
by the Company. Prompt notice of the election to terminate for such cause shall
be furnished by the Company, said termination to be effective ten days after
receipt of notice unless the Fund makes available a sufficient number of Fund
shares to meet the requirements of the Contracts within said ten-day period; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission 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 the Account, the
administration of the Contracts or the purchase of Fund shares, or an expected
or anticipated ruling, judgment or outcome which would, in the Fund's reasonable
judgment, materially impair the Company's ability to meet and perform the
Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal proceedings
against the Fund by the NASD, the SEC, or any state securities or insurance
commission or any other regulatory body; or
(e) upon requisite vote of the Contract Owners having an interest in
the affected Portfolio and the written approval of the Distributor (unless
otherwise required by applicable law), to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the Contracts are not
registered, issued or sold
15
in accordance with applicable Federal and/or state law; or
(g) by either the Company or the Fund upon a determination by a
majority of the Board, or a majority of disinterested Board members, that an
irreconcilable material conflict exists among the interests of (i) all Product
owners or (ii) the interests of the Participating Insurance Companies investing
in the Fund; or
(h) at the option of the Company if any series of the Fund or the Fund
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code, or under any successor or similar provision, or if the Company reasonably
believes based on an opinion of counsel satisfactory to the Fund that the series
or Fund may fail to so qualify and the Fund does not take reasonable steps to
ensure qualification; or
(i) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(j) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the Code, or
if the Fund reasonably believes that the Contracts may fail to so qualify; or
(k) at the option of either the Fund or the Distributor if the Fund or
the Distributor, respectively, shall determine, in their sole judgment exercised
in good faith, that either (1) the Company shall have suffered a material
adverse change in its business or financial condition or (2) the Company shall
have been the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of either the Fund or
the Distributor; or
(l) at the option of the Company, if (1) the Company shall determine,
in its sole judgment exercised in good faith, that the Fund or the Distributor
shall have been the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations of the Company;
or (2) the Company shall have notified the Fund in writing of such determination
and the basis therefore, and (3) after sixty (60) days after notice the Company
again makes the same determination;
(m) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Account to another insurance
company pursuant to an assumption reinsurance agreement) unless the
non-assigning party consents thereto or unless this Agreement is assigned to an
affiliate of the Distributor; or
(n) at the option of Company, as one party, or the Fund and the
Distributor, as one party, upon the other party's material breach of any
provision of this Agreement.
10.2. Notice Requirement
Except as otherwise provided in Section 10.1, no termination of this Agreement
shall be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore:
16
(a) In the event that any termination is based upon the provisions of
Article VII or the provisions of Section 10.1(a) of this Agreement, such
prior written notice shall be given in advance of the effective date of
termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination; and
(c) in the event that any termination is based upon the provisions of
Section 10.1(e) of this Agreement, such prior written notice shall be given
at least sixty (60) days before the date of any proposed vote to replace
the Fund's shares.
10.3. Except as necessary to implement Contract Owner initiated transactions, or
as required by state insurance laws or regulations, the Company shall not redeem
Fund shares attributable to the Contracts (as opposed to Fund shares
attributable to the Company's assets held in an Account).
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor will, at the option
of the Company, continue to make available additional Fund shares for so long
after the termination of this Agreement as the Company desires for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, if the
Company so elects to continue to make additional Fund shares available, the
owners of the Existing Contracts or the Company, whichever shall have legal
authority to do so, shall 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.
(b) The parties agree that this Section 10.4 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.
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:
Xxxxx Xxxxx Variable Trust
The Xxxxx Xxxxx Building
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to the Distributor:
17
Xxxxx Xxxxx Distributors, Inc.
The Xxxxx Xxxxx Building
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to Allmerica Financial Life Insurance and Annuity Company:
Xxxxxxx X. Xxxxxx
President
Allmerica Financial Life Insurance and Annuity Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to First Allmerica Financial Life Insurance Company:
Xxxxxxx X. Xxxxxx
Vice President
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
ARTICLE XII. MISCELLANEOUS
13.1. All persons dealing with the Fund must look solely to the property of such
Fund, and in the case of a series company, the respective Designated Portfolio
as though such Designated Portfolio had separately contracted with the Company
and the Distributor for the enforcement of any claims against the Fund. The
parties agree that neither the Board, officers, agents nor shareholders of the
Fund assume any personal liability or responsibility for obligations entered
into by or on behalf of the Fund.
13.2. 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.
13.3. 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.
13.4. This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.5. 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.
18
13.6. 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.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. 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.
13.9. A copy of the Fund's Declaration of Trust is on file with the Secretary of
the Commonwealth of Massachusetts. The Declaration of Trust has been executed on
behalf of the Fund by certain Trustees in their capacity as Trustees of the
Trust and not individually. All persons dealing with the Fund must look solely
to the property of the Fund for the enforcement of any claims against the Fund
as neither the Board, officers, agents, or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
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: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
FUND: XXXXX XXXXX VARIABLE TRUST
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
19
DISTRIBUTOR: XXXXX XXXXX DISTRIBUTORS, INC.
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
20
