Exhibit 3a
WHOLESALING AGREEMENT
AGREEMENT dated as of November __, 1996 by and between FIRST ALLMERICA
FINANCIAL LIFE INSURANCE COMPANY, a Massachusetts 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. STATE - The state of New York and/or the state of Hawaii.
o. 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.
p. ASSOCIATED PERSON -- This term as used in this Agreement shall have the
meaning assigned to it in the 1934 Act.
q. 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.
r. PURCHASE PAYMENT -- A payment made under a Contract by an applicant
or purchaser to purchase benefits under the Contract.
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s. 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.
t. 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.
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
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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.
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
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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 Management, Inc. ("ZIM") pursuant
to the Investment Management Agreement being executed contemporaneously
herewith by the Company and ZIM for so long as such Investment Management
Agreement is in effect.
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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. The Company shall also use its best efforts to
obtain any additional State regulatory approvals necessary for the sale
and issuance of the Contracts. From time to time, the Company shall
notify the Wholesaler in writing of all States in which the Contracts can
then lawfully be offered. To the extent that the Company is not
authorized to issue the Contracts in a State, the Company shall employ
all reasonable efforts to obtain such authorization in such State.
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;
(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 and its affiliate, Allmerica Financial Life Insurance and
Annuity Company ("AFLIAC") notify the Underwriter and the Wholesaler
that they have received approval of (i) "Xxxxxx Gateway Elite" variable
annuity contracts and (ii) "Xxxxxx Gateway Custom" variable annuity
contracts (collectively, the "Contracts") from at least thirty (30)
states or (b) on which both the Company and AFLIAC versions of the
Contracts may be legally distributed under the Federal Securities Laws,
reimbursement (if any) from the Wholesaler for development and
administrative costs of the Contracts shall be computed and paid to the
Company and AFLIAC as provided in Sections 4.h. and 21.a. of the
Wholesaling Agreement between the Wholesaler and AFLIAC being executed
contemporaneously herewith. In accordance with the terms of such
Wholesaling Agreement, Wholesaler shall be responsible for only a
single reimbursement amount, and such reimbursement shall be divided
between the Company and AFLIAC, as they may mutually agree.
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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
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
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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 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 Prospectus; is duly qualified to transact the
business of a life insurance company; and is in good standing in
each State.
(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
each State where 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 laws
of the Commonwealth of Massachusetts, and is duly registered with
the SEC as a unit investment trust under the 1940 Act.
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(ix) The form of the Contracts has been approved to the extent
required by the Insurance Commissioner of each State.
(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 or trust,
or other instrument 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 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
19
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.
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.
20
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 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; and
(iii) to keep such registration, approval and authorization in
effect thereafter so long as the Contracts are outstanding.
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.
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;
21
(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 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.
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
22
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 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
23
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 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
24
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 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 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. 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. 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
25
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 either State 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 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
26
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:
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
27
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, 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:
28
(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
either 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 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 either 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
29
(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
(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:
30
(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 either 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 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.
31
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.
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.
32
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.
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.
33
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.
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.
34
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 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, Assistant Vice President
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Underwriter to:
Xxxxxxx Xxxxxx, President
Allmerica Investments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
35
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.
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.
36
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.
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.
37
21. MISCELLANEOUS
a. For the purposes of Section 9.c.(a), "Aggregate Annual Sales" shall
refer to the total annual sales of the Contracts pursuant both to this
Agreement and to the Wholesaling Agreement with Allmerica Financial Life
Insurance and Annuity Company ("AFLIAC") and "total amount of initial or
renewal fees" shall refer to the aggregate amount of such fees incurred
by the Company and AFLIAC.
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, KD 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.
38
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.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE 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
---------------------
39
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 Investors Fund
Name of Separate Account Portfolios
------------------------ ------------------------------------------
Separate Accounts KG (Xxxxxx XX
Gateway Elite) and KGC (Xxxxxx Gov Sec
Gateway Custom) of First Allmerica Inv Grade
Financial Life Insurance 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 A3025-96 333-10285
Xxxxxx Gateway Custom A3026-96 333-10395
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
For 401(k) contracts:
Option A: 5% and no 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. Alternative sales
commission options involving a combination of both up-front amounts and asset
based trails may be made available by mutual agreement, if permissible under
applicable State laws and regulations.
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 a State which levies an up-front 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.
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.
